After years of exponential growth, technical innovations and crises that have exposed vulnerabilities, a crucial discussion is gaining strength among developers, analysts and investors: the need for more robust metrics to assess risks beyond the total blocked value (TVL). In an analysis published on CryptoSlate, Vincent Maliepaard, director of marketing at Sentora, argues that DeFi urgently needs a metric for “protected capital” – an indicator that measures not only the volume but the quality and security of the assets deposited in the protocols.
Beyond the TVL: The Search for Quality Indicators
The Total Blocked Value (TVL) has become the standard metric for measuring the success and adoption of DeFi protocols. However, experts point out that this number alone only counts part of the story. A high TVL does not necessarily translate into a more secure or resilient system. Protocols can attract large volumes with high yield promises, but without adequate mechanisms of protection against risks such as smart contract failures, oracle attacks, extreme collateral volatility or excessive asset concentration.
The concept of “protected capital” proposes a more granular assessment. It would consider factors such as: the quality of assets used as collateral (e.g.: trusted reserve stablecoins versus algorithmic stablecoins), the diversification of these assets, the solidity of the mechanisms of sub-collateralization (over-collateralization), the existence and on-chain insurance funds, and the maturity of audit systems. In essence, it would be an indicator of how much of the deposited capital is effectively protected against the main risks of the ecosystem.
The Brazilian Context and the Search for Security
For the Brazilian investor, who often seeks in DeFi alternatives to real volatility and traditional low interest rates, the discussion about risk metrics is especially relevant. The appetite for attractive returns on loan platforms, net staking or yield farming is high, but often bars on the complexity of evaluating the actual security of these protocols.
The popularity of liquid staking, the theme addressed by BTC-ECHO, illustrates this dynamic. Practice allows users to earn income from their cryptocurrencies (such as ETHs) by generating liquidity via derivative tokens (such as stETHs). It is a powerful innovation, but it introduces specific risks – such as the risk of the smart contract of the staking protocol and the possible depeg of the derivative token from the original asset. A protected capital metric could help the investor compare, for example, different net staking pools not only by the promised return, but by the level of security embedded in their structure.
Impact on the market and the future of DeFi
The adoption of a widely recognized metric for protected capital would have a profound impact on the market. First, it could re-align the incentives. Rather than a race for the largest TVL at any cost, protocols would be pressured to compete also in terms of security and robustness, investing in audits, protection mechanisms and high-quality collateral assets. This could lead to a clearer segmentation of the market between high-risk/high-return protocols and those focused on security and capital preservation.
Second, it would facilitate the entry of institutional capital, which is sensitive to standardized risk metrics. Funds and large investors need clear frameworks to allocate resources. A reliable metric of protected capital could be one of the pillars for this assessment, opening the doors to a new capital flow to the sector. Finally, for the end user, it would mean greater transparency and the ability to make more informed decisions, reducing the information asymmetry that is still a big challenge in DeFi.
Conclusion: A necessary step towards maturity
The evolution of the debate on metrics at DeFi, from the exclusive focus on volume (TVL) to a quality analysis and capital protection, is a sign of the industry's maturity. While the traditional digital asset market observes movements such as the recent gold correction – which, according to CoinTribune's analysis, had its worst week since 1983, contrasting with bitcoin's resilience in a tense geopolitical scenario –, the DeFi world faces its own valuation and risk assessment challenges.
Creating and consensual adoption of a metric such as protected capital will not be quick or easy, requiring collaboration between analysts, protocol developers and data aggregators. H, its development represents a key step towards building a more transparent, secure and prepared DeFi ecosystem for the next wave of mass adoption – including in Brazil, where the search for efficient and secure financial alternatives has never been so great.