Web3's TVL Obsession Is Killing Innovation: Here's a Better Way

Imagine this scenario – you walk into a typical bank and are offered an opportunity to put your money in savings. You can only use that money at their own retail branches! Sounds ridiculous, right? That’s exactly what’s going on in Web3—unproductive capital deployment toward the boom and bust cycle. There is extreme focus on Total Value Locked (TVL). In the process, we’re celebrating locked-up assets as a mark of our success, while the true economic engine hobbles.

Are We Measuring The Right Thing?

Let's be blunt: TVL is a vanity metric. It’s the digital equivalent of counting bricks rather than determining how strong or useful the overall building is. We’re particularly interested in the billions of dollars of assets that are piled up in different DeFi protocols. It’s this obsession that leads to us being completely blind to the true usefulness of those assets. The current system rewards protocols to turn into digital roach motels – simple to enter, difficult to exit.

Think about it. When a protocol inflates its TVL by pumping yields artificially high, it can draw in a tsunami of capital. Great! Numbers go up. But the real question is whether that capital is doing anything productive. Is that actually harnessing the power of innovation to create new opportunities or merely driving to the next short-lived APY? More often than not, it's the latter. It’s a game of musical chairs, and the music is going to stop at some point.

This hyperfocus on TVL has created an ideal environment for a disconnected patchwork of siloed liquidity pools. Each pool gets treated like a walled garden, where it’s legally and technologically difficult and risky to move assets in and out. This fragmentation is a tax on innovation. It creates a lot of unnecessary friction, complexity, and, at the end of the day, deters users from engaging with the larger Web3 ecosystem. It would be as if the whole internet was global, but you could only reach those global websites from a very few internet service providers. Absurd.

L2s Aren't The Savior We Think

The boom of Layer 2 bridges, meant to help Ethereum scale, has unfortunately made this even worse. Each L2 just becomes another silo, deepening value lock-in. Sure, they provide increased speed of transactions and reduced price per transaction, surely a good thing. We’re all creating this multi-chain future, but it certainly looks and feels more like a broken archipelago than a connected land mass right now.

Cosmos, Polkadot and other interoperability solutions — where do they fit into the mix? Though they show promise, they’ve so far failed to fulfill the promise of truly seamless cross-chain composability at scale. We’re still waiting for the “internet of blockchains” to actually appear. The goal of a genuinely interoperable Web3 seems more elusive than ever. Instead, we all continue to chase TVL, but only at the expense of real interoperability.

TVU: A Metric That Actually Matters

There is a better way. We need to shift our focus from TVL to something that actually measures the value created within the Web3 ecosystem: Total Value Unlocked (TVU).

TVU isn't about how much capital is locked up. It's about how much usable, verifiable, and interoperable value is unlocked. It’s about empowering universal access to liquidity, data, smart contracts and infrastructure between all chains.

Picture this—no matter what chain an asset is on, you can easily hop across different protocols with it, trading, lending and borrowing assets from various native chains. So, you can pull the data from any blockchain which is cool. Integrate it into your apps without anxiety, sure about the credibility or security being an issue. That's the promise of TVU.

Rather than incentivizing value hoarding, TVU instead rewards systems that focus on composability, reach, and usability. It pushes developers to create more interoperable solutions, and it steers infrastructure architects to design the connecting infrastructure.

The secret to TVU’s full potential is establishing a universal base layer of verifiability and interoperability among these verifiers. We require a neutral settlement layer that ensures validity of data, transactions and smart contracts across different public, permissioned and private operated environments.

A Verifiable Future Is The Only Future

So this isn’t a matter of trust based integrations – it’s going beyond that to use mathematical proofs to guarantee that smart contracts are correct and secure. Picture this – verifying a smart contract’s behavior on one chain. Then, deploy it easily and seamlessly on a third, confident it will work precisely as you released it.

This verifiable settlement layer opens a new world of possibilities. It gives developers the power to “verify once, use anywhere.” It allows for the cross-chain deployment of liquidity without integrity loss and cross-chain referencing of smart contracts. Even better, this feature allows AI models themselves to be cryptographically verified. It makes off-chain computations more versatile so they can be used by many applications and chains!

It’s not only about convenience, it’s about creating a stronger, safer and more inventive Web3 environment. It’s about the larger connected, passable agenda of moving beyond liquidity islands and building a truly interconnected network.

We need begin to end our culture of bragging about the largeness of our digital gulags and instead create connections. It’s high time we moved on from the TVL fixation and into a world where this value is actually unlocked. Let’s turn our attention to TVU, and create a Web3 that is indeed valuable, and more importantly, truly useful. If we don't, we risk becoming a footnote in the history of technological innovation – a cautionary tale of squandered potential. Are we seriously going to allow that to happen?

We need to stop celebrating the size of our digital prisons and start focusing on building bridges. It's time to ditch the TVL obsession and embrace a future where value is truly unlocked. Let's shift our focus to TVU, and build a Web3 that is not only valuable, but also useful. If we don't, we risk becoming a footnote in the history of technological innovation – a cautionary tale of squandered potential. Are we really going to let that happen?