Aegis Use Cases: Total Value Locked (TVL) Tracking

Lossless
4 min readSep 22, 2023

Lossless Aegis ranks as one of the most advanced smart contract monitoring systems on Web3. But while many rely on Aegis capabilities to track malicious on-chain activity, not everyone is taking advantage of its numerous other features.

“Aegis Use Cases” uncovers the hidden potential of our AI-powered tool. In this article series, we explore how individual investors and project teams can leverage our flagship product for maximum utility, from setting up alerts on team wallet transactions to automatically blocking flash-loan attacks, blacklisting known malicious actors, and backtesting past security breaches.

This article will detail how Aegis can be used for tracking Total Value Locked (TVL) and how investors who adopt this measure for routine operations can make better investment decisions.

Key Takeaways

Total Value Locked (TVL) is a way to quantify the overall volume of crypto assets secured within a particular DeFi ecosystem. TVL measures the volume of all locked assets.

Lossless Aegis enables users to set up automated alerts for certain TVL thresholds, providing up-to-date insight into the overall health of a particular DeFi platform or dApp.

A high TVL is typically a positive sign associated with high levels of economic activity, yet sudden fluctuations may signal inflated project valuations and other malicious activity.

Similarly to market capitalization or trading volume, Total Value Locked (TVL) is a popular metric among investors for assessing the health of any DeFi project or dApp. The measure encompasses the total value of all locked digital assets, including those that are staked, used as collateral, or borrowed.

Although different data aggregators may offer slightly different TVL formulas, they all seek to assess the level of economic activity within a particular DeFi ecosystem. At its core, TVL is all about protocol usage. A high TVL generally indicates greater user adoption and is a sign of good reputation since users are entrusting their assets to the DeFi platform.

For Proof-of-Stake (PoS) blockchains, TVL may be used to track their overall performance and level of security. In decentralized exchanges (DEXes) like Uniswap, TVL also serves as an indicator of the available liquidity. Higher liquidity, meanwhile, is associated with lower slippage and better trading experience. In other money markets, TVL acts as a gauge for borrowing and lending activity, usually associated with better interest rates and more economic opportunities.

Naturally, there are some limitations. TVL only measures the volume of locked assets but does not take into account other forms of user activity. A platform with high TVL but low user engagement should be considered a red flag. So should sudden swings in TVL. Although a change in market conditions, souring investor sentiment, or certain media coverage may contribute to TVL fluctuations, wide discrepancies may also be a sign of malicious activity. Project teams may be artificially inflating the TVL to feign user activity or be readying for a rug pull.

These drawbacks suggest that TVL should never be used as the only criterion for assessing the quality of DeFi projects. Nevertheless, certain TVL discrepancies or milestones often signal substantial market changes that investors may wish to react to. That is why we recommend users set up automated alerts for certain TVL thresholds. While TVL is not the best possible guide towards the health of a project, it can serve as a good way to raise questions over questionable moves made by owning teams.

Aegis offers highly customizable alerts based on certain triggers — i.e., observable on-chain events. Investors can receive up-to-date notifications about the latest TVL swings, with these actions being the most common signals that suggest something is wrong or not functioning properly. Simply register on aegis.lossless.io, add the address you wish to monitor, and set up the preferred notification channel.

From there, you’ll be able to select which tokens to track, as well as the percentage threshold in the desired direction that should trigger an alert. For example, setting up a tolerance of 3% change over a 5-minute period in the “down” direction will notify you if there is a sudden drop in TVL. You may also wish to add additional notifications for, say, a 5% and 8% change in the same period to notify you of a clear downward direction.

Alternatively, you could track fluctuations in “both” directions or experiment with different timeframes and tolerance levels to suit your needs. Aegis TVL tracking is a highly customizable feature that adapts to your individual or business needs, with the goal of giving more tools to handle due diligence independently and hold project teams accountable.
Give TVL tracking a go at aegis.lossless.io.

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Lossless

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