How DeFi Projects Can Increase TVL: A Detailed Explanation of Four Key Strategies

Increasing the total locked value ( TVL ) is one of the core goals of many decentralized finance ( DeFi ) projects. This article will explore four common strategies to enhance TVL and analyze their advantages and disadvantages.

1. Attract liquidity through points activities

This is a cost-effective yet effective strategy. Project teams can attract early users to participate and provide liquidity by holding various points activities and promising potential future token airdrops. This method does not require immediate substantial costs; it only needs to provide users with the expectation of obtaining tokens in the future.

For projects that have not yet issued tokens, this is a very effective marketing strategy. By engaging users through various point reward activities, it can attract participation and build a community, laying the foundation for future token issuance.

2. Cross-Project Collaboration to Enhance Interoperability

This strategy mainly relies on the project's own resources and channels, essentially representing a resource exchange. By collaborating with other projects, interoperability and liquidity between different assets can be achieved, thereby attracting more users and capital.

For example, a certain L2 project may collaborate with a staking protocol to direct liquidity to the partner's platform while limiting the supported L2 networks, achieving a win-win situation for both parties. This collaboration can help both sides expand their user base and increase TVL.

3. Provide Yield Incentives

Liquidity mining is a typical yield incentive method. Project parties establish liquidity pools and attract users to deposit assets into the pools through transaction fees or additional rewards. This method can quickly increase the TVL, but it is necessary to carefully design the reward mechanism to avoid excessive inflation and potential risks.

A reasonable reward mechanism design is crucial, as it needs to attract users while balancing long-term sustainability and risk management.

4. Create New Types of Derivative Assets

Creating new derivative assets through methods such as liquid staking and re-staking not only enhances the liquidity of staked assets but also attracts incremental funds into the ecosystem. For example, the stETH certificate obtained by staking Ethereum increases the liquidity of staked assets while also creating new investment opportunities.

However, this strategy also brings the issue of risk accumulation. If a problem occurs at any link, it may affect the entire related asset chain and application ecosystem.

Strategy Selection and Combination

From the perspective of the project party, the priority of these four strategies may be:

1. The expectation of issuing tokens ( is low cost and effective )
2. Project cooperation ( to exchange resources, lower cost )
3. Yield incentives ( need to share actual earnings )
4. Create new assets ( maintenance costs are high, and risks are relatively large )

However, in practice, projects need to flexibly adjust their strategies based on their own circumstances, market environment, and specific objectives. These methods are not mutually exclusive and can be combined according to different development stages and market feedback to achieve optimal results.