Decentralized finance (DeFi) presents lucrative opportunities for online investors. However, they carry related risks. Here are some metrics you can use to analyze DeFi coins and their corresponding protocols.
Much of the humiliation of crypto advocates that call for mass blockchain technology adoption, there are multiple ‘digital landmines, existing in the crypto atmosphere, including protocol hacks and rug pulls that might have newbies lost in the vast see in the crypto world.
Crypto investing involves more than gut feelings and technical analysis. The past year saw most crypto analysis platforms launching dashboards with various metrics that provide detailed insights on related fundamentals.
Here are vital factors to consider when analyzing whether a DeFi project of altcoin is worth your investment.
Developer Activity and Project’s Community
One of the ways to gain insights on crypto projects is checking the stats that indicate activity from the network’s developer community and user base. Most top protocols in the industry have analytics that tracks user activity over time. On-chain dashboards such as Dune Analytics have more detailed insights on this metric.
Other data points that you can use to evaluate community activity are the average daily, weekly, or monthly active wallets. Also, investors should consider transaction counts and volumes, plus social media coverages like Twitter mentions.
Total Value Locked (TVL) Growth
The second metric to assess the project’s strength is the total assets on the ecosystem – the TVL. For instance, DeFi Llama data indicates that the TVL on decentralized finance platform DeFiChain (DFI) has risen lately after a vital protocol update, with the total value locked touching new ATHs in December. That shows increased interest and momentum in this project.
DeFi aggregators such as DappRadar and DeFi Llama allow investors access to data and stats for various blockchain platforms like the total value locked on Binance Smart Chain and ETH network, plus individual projects such as Trader Joe and Curve.
Dominant Token Holders
Another factor worth evaluating is rewards that holders enjoy for being active and holding the coin. Market participants should also check the asset’s launch and the current dominant holders.
For instance, SushiSwap allows investors to stake SUSHI, the platform’s native token, and receiver a part of the generated exchange fees. On the other hand, you will not access such an offer with Uniswap.
Though Uniswap has attracted users due to elements like daily users and trading volume, some enjoy holding SUSHI due to its multi-chain trading capabilities and revenue-sharing model.