Four Strategies for DeFi Applications to Increase TVL

In the field of Decentralized Finance, increasing the total locked value ( TVL ) is a core objective for many projects. Here are four common methods to increase TVL:

1. Expectations for Points Activity

This is a cost-effective yet impactful method. The project attracts user participation and locks in funds by conducting points activities that offer early users the opportunity to earn tokens or other rewards in the future. This approach does not require immediate actual costs but can quickly establish a user base and community.

2. Cross-Project Collaboration

Achieve asset interoperability and liquidity by collaborating with other Decentralized Finance projects. This approach relies on the networks and resources of the projects and is essentially a resource exchange. For example, allowing users to use tokens from other projects as collateral or payment methods on the platform, thereby increasing the platform's appeal and practicality.

3. Yield Incentive Mechanism

The most typical approach is liquidity mining. Projects establish liquidity pools and attract users to add assets to the pool through transaction fee rewards. This method can quickly increase TVL, but it requires careful design of the reward mechanism to avoid excessive inflation and potential risks.

4. Create New Types of Financial Assets

Creating new financial assets through methods such as liquidity staking and re-staking not only increases the liquidity of staked assets but also attracts incremental funds into the ecosystem. For example, the issuance of staking certificates (such as stETH) provides investors with new investment opportunities. However, this approach also brings about the issue of risk accumulation; if a problem arises at any point, it may affect the entire chain.

Strategy Comparison

From the perspective of the project party considering capital efficiency, the priority of these four strategies can be ranked as follows:

1. Points activity expectation: low cost high return
2. Cross-project collaboration: low cost, mainly resource exchange.
3. Incentive Mechanism: High cost, requires sharing platform profits
4. Create new types of financial assets: highest cost, requires maintenance of new asset liquidity.

It is important to note that this priority is not absolute. In practice, the project team should flexibly adjust strategies based on their own situation, market environment, and specific goals. At the same time, these methods are not mutually exclusive and can be combined according to the needs of different stages to achieve the best results.