With the sheer number of new projects arriving in DeFi (decentralized finance), it can become particularly difficult to verify the “intrinsic” value of the investment products on offer. So today, we’re going to focus on 3 key, accessible indicators for evaluating a DeFi project objectively before investing a single euro. Here’s another free trading & crypto course available to you at no cost! To go further on the subject, also check out our complete guide to DeFi.
A quick reminder as well: none of these indicators is sufficient on its own — it’s exactly the same logic as in traditional trading. Combining them is strictly essential to get as close as possible to a perfectly objective view of a DeFi protocol’s value.
What is a DeFi project (and why evaluate it before investing)?
DeFi (Decentralized Finance) brings together all the financial applications (lending, borrowing, trading, yield) built on the blockchain, with no banking intermediary. In practice, these are open protocols that anyone can access through a wallet to swap, lend or deposit assets in just a few clicks. The flip side: anyone can also launch a project, which multiplies copies, opportunistic forks and outright scams. Hence the value of having a few simple indicators to sort the wheat from the chaff.
1️⃣ Total Value Locked (TVL) and Market Cap: the first health indicator of a DeFi project
Total Value Locked (TVL) represents the amount currently staked or deposited in a DeFi protocol. The argument is simple: the larger the amounts locked in the Dapps, the more the protocol earns the trust of the crypto community.
Naturally, this inspires investor confidence and serves as strong social proof.
Where to find TVL: DeFiLlama, the go-to source
To start your analysis, today’s go-to source is DeFiLlama (defillama.com): it has become the de facto standard for tracking the TVL of every DeFi protocol, chain and category, for free and in real time. The historic pioneer defipulse.com is still mentioned here and there, but it has barely been updated since 2021-2022, so go with DeFiLlama instead. To cross-reference this data with market cap, market cap and TVL tracking tools like CoinMarketCap or CoinGecko round out your monitoring perfectly.
The “locked” column gives you the TVL on the homepage. Then, once you’ve found the product you’re interested in, simply click on it to get: statistics on the product’s growth, clear charts, a summary of the applications provided by the protocol in question, along with all the links you need to learn more about it.
Another must-have classic: CoinGecko (https://www.coingecko.com/en/defi).
With CoinGecko, you’ll also get the TVL figures, which you can export as an XLS file for more in-depth analysis. This also lets you set up your own monitoring system for the projects you care about. Worth noting: to then buy the tokens of the projects you’ve selected, a regulated platform like OKX remains a recognized reference for its security and transparency.
The limits of TVL
Be careful: a high TVL guarantees nothing on its own. It can be artificially inflated by incentives (liquidity “mining”, very high yields) that evaporate as soon as the rewards stop. A TVL growing steadily over several months is far more telling than a sudden spike. This is precisely why you need to combine it with the two indicators below.
2️⃣ The Price-to-Sales Ratio (P/S Ratio) applied to DeFi: measuring a protocol’s valuation
In a conventional market, the P/S ratio is actually the total value of a company’s shares compared to its revenue. It’s a fundamental indicator widely used in traditional stock market analysis.
When it comes to a DeFi protocol, we can see that it also generates revenue (transaction fees, swap fees, interest, etc.).
Incidentally, if you’re interested in the data on the revenue generated by each platform, all of it is available on cryptofees.info, as well as in the Fees and Revenue sections of DeFiLlama, which are even more complete today. You’ll also be able to compare revenue over one day and one week there.
Since a great many protocols now generate revenue, an indicator similar to the P/S Ratio has emerged specifically for crypto. So:
Crypto P/S ratio = (Market Cap ÷ Revenue)
The point is to determine whether a protocol is fairly valued or not. Put simply, the lower the ratio, the more potentially undervalued the protocol is. The higher the ratio, the more likely it is overvalued relative to its fundamentals.
For example, in the case of Ethereum (ETH), a Grayscale report published in early 2021 pointed out that Ethereum appeared undervalued from a P/S ratio standpoint: at the time, it hovered around 0.02.
“A lower ratio indicates that the network generates significant revenue when you look at the history of its market capitalization. It is therefore very likely undervalued.”
👉 Keep in mind that this figure is a historical benchmark: it’s used here to illustrate the method, not to give a current valuation. It’s up to you to recalculate the ratio on today’s data for the protocol you’re interested in.
Where to track the P/S ratio today
Good news: the go-to tool for this fundamental data is still very much active. Token Terminal (terminal.tokenterminal.com) offers an up-to-date Price-to-sales dashboard and has even since become one of the leading references for comparing the fundamentals of crypto protocols. There you can view the kind of chart that highlighted the observation made in the Grayscale report on ETH’s market cap.
