Srikumar Misra, a prominent entrepreneur and founder of the on-chain asset management platform aarnā, has ignited discussion within the decentralized finance (DeFi) community by asserting that the widely used "Total Value Locked" (TVL) metric significantly distorts the market's true depth. In a recent social media post, Misra argued that "With stacked and looped structures becoming the norm, TVL gives a distorted picture," advocating instead for "Total Value Redeemable" (TVR) as a more accurate representation of the DeFi ecosystem's actual financial health.
Misra's critique centers on the "double counting" issue inherent in TVL calculations, where assets are counted multiple times as they are re-hypothecated or wrapped across various protocols. He highlighted a stark discrepancy from the DeFi market's 2021 peak, stating, "At the 2021 peak, reported TVL was almost 2× TVR - a $140B gap in actual redeemable value." This suggests a substantial overestimation of the capital genuinely underpinning the decentralized financial landscape.
The proposed TVR metric aims to provide a clearer view by focusing on the underlying, non-derivative assets that can ultimately be redeemed. Misra emphasized TVL's instability during market downturns, noting, "Under stress, TVL also exaggerates the fall: a 25% ETH drop translated into ~$1B more TVL drawdown than TVR exposure." This observation underscores the potential for TVL to mislead stakeholders about the true resilience and liquidity of DeFi protocols.
The concept of TVR aligns with academic research, including the paper "Piercing the Veil of TVL: DeFi Reappraised," which formalizes this alternative framework to address the limitations of TVL. This research introduces a "DeFi multiplier," mirroring traditional finance's money multiplier, to quantify the extent of double counting and leverage within the multi-layered collateral systems of DeFi.
Misra concluded his call for greater transparency with a direct appeal to leading data aggregators. "My view: dashboards and audits should start reporting TVR or DeFi-multiplier metrics," he stated, specifically tagging DeFiLlama, a major TVL aggregator, with the question, "@defilama - views? Can you get this on a dashboard." While DeFiLlama acknowledges the double-counting issue and offers a toggle to filter some inflated figures, the push for TVR represents a demand for a more standardized and fundamentally sound metric to assess the rapidly evolving DeFi market.