Most DeFi TVL figures are only partially verifiable: 10.5% of 939 Ethereum protocols use external servers, and only 23.5% of 400 reconstructed protocols match published values within 5%.
The return of (I)DeFiX
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abstract
Decentralized Finance (DeFi) is a nascent set of financial services, using tokens, smart contracts, and blockchain technology as financial instruments. We investigate four possible drivers of DeFi returns: exposure to cryptocurrency market, the network effect, the investor's attention, and the valuation ratio. As DeFi tokens are distinct from classical cryptocurrencies, we design a new dedicated market index, denoted DeFiX. First, we show that DeFi tokens returns are driven by the investor's attention on technical terms such as "decentralized finance" or "DeFi", and are exposed to their own network variables and cryptocurrency market. We construct a valuation ratio for the DeFi market by dividing the Total Value Locked (TVL) by the Market Capitalization (MC). Our findings do not support the TVL/MC predictive power assumption. Overall, our empirical study shows that the impact of the cryptocurrency market on DeFi returns is stronger than any other considered driver and provides superior explanatory power.
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2025 1verdicts
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Towards Verifiability of Total Value Locked (TVL) in Decentralized Finance
Most DeFi TVL figures are only partially verifiable: 10.5% of 939 Ethereum protocols use external servers, and only 23.5% of 400 reconstructed protocols match published values within 5%.