Simple Valuation Metrics for Protocols and Apps

May 30, 2024

Overview

Evaluating blockchain protocols involves key metrics: Total Value Locked (TVL), Transactions Per Second (TPS), and number of users, to assess performance, adoption, and growth potential.

3 min. read

3 min. read

3 min. read

Evaluating the value of blockchain protocols and applications involves several key metrics. These metrics provide insight into an application’s performance, adoption, and potential growth. Here, we’ll explore four fundamental metrics: Total Value Locked (TVL), Transactions Per Second (TPS), and number of users.

Total Value Locked 

Total Value Locked (TVL) measures the amount of assets staked or locked within a protocol. It indicates the level of trust and adoption the protocol has garnered. A higher TVL signifies significant user engagement and confidence, often displaying a protocol's perceived value and potential for growth.

Transactions Per Second 

Transactions Per Second (TPS) is a critical metric that evaluates a protocol’s scalability and efficiency. A higher TPS means the network can handle more transactions in a given time frame, which is crucial for ensuring smooth and swift operations, especially during peak usage periods. It serves as a benchmark for the protocol's capacity to support large-scale applications and user bases.

Users

The number of users is a straightforward metric indicating how many people are actively using a protocol or app. More users usually means more activity, more popularity, and a potentially more valuable platform. It’s similar to counting customers in a store; more customers generally means better business.

Disclaimer: The information provided in this research paper is for educational and informational purposes only. It does not constitute financial advice, investment guidance, or any solicitation to buy or sell financial instruments. The views expressed herein are those of the authors and do not necessarily reflect the opinions of Kollectiv.

2024