Key Strategy Analysis for Increasing TVL of DeFi Applications

Increasing the Total Value Locked (TVL) is a core objective for many Decentralized Finance (DeFi) projects. To achieve this goal, project teams typically employ the following main strategies:

1. Future Token Incentives

Attracting liquidity through incentive activities is a direct and effective method. This strategy has lower upfront costs and mainly relies on providing users with expectations of future returns. It targets users in the primary market, specifically those who hope to gain potential airdrop opportunities by participating in projects early.

Projects can offer point rewards to early users through various activities, implying that these points may be redeemed for platform tokens or other valuable returns in the future. This approach can attract users before the project has made substantial capital investments, gradually building a community foundation.

2. Cross-Project Collaboration

Establishing partnerships with other DeFi projects can achieve asset interoperability and liquidity. This approach mainly relies on the project's own industry background and resource network, and is essentially a strategy of resource exchange.

For example, allowing users to use tokens from other projects as collateral or payment methods on one platform. In this way, projects can quickly expand the scope and appeal of their ecosystem.

3. Revenue Incentive Mechanism

Establishing a liquidity pool and offering trading fee rewards is a common practice aimed at attracting users to inject assets into the liquidity pool. This is a widely popular incentive mechanism that can quickly boost TVL.

However, this strategy requires careful design of the reward mechanism to avoid inflation issues caused by excessive rewards. At the same time, project parties also need to pay attention to risk management to ensure the overall stability of the system.

4. Innovative Financial Products

By launching new financial products such as liquid staking and re-staking, projects can create new asset types, thereby attracting incremental capital. This not only enhances the liquidity of staked assets but also creates new investment opportunities, attracting more capital into the ecosystem.

However, this strategy also carries risks, primarily reflected in the chain reaction between assets. If a key asset encounters issues, it may affect the stability of the entire ecosystem.

Strategy Priority

From the perspective of the project party, in order to maximize capital efficiency, the priority of these strategies can be roughly ranked as follows:

1. Future Token Incentives: Low Cost, High Returns
2. Cross-project collaboration: lower cost, mainly resource exchange
3. Incentive mechanism: High cost, needs to share platform profits.
4. Innovative financial products: The highest cost, requires maintaining the liquidity of new assets.

It is important to note that this prioritization is not fixed. Project teams need to flexibly adjust their strategies based on their own resources, market conditions, and specific business objectives. Furthermore, these strategies are not mutually exclusive and can be comprehensively applied according to the needs of the project's development stage and market feedback.