For TLDR in 2023, in addition to technical concepts explained simply, we’re adding topics around how to operate in crypto. After a tumultuous 2022, it’s clear we need to do better in this industry around operations.
Let’s discuss KPI’s and metrics for defi projects (notably, centralized consumer and enterprise crypto companies should track the same data as non-crypto centralized companies)
TVL (total value locked in a protocols’ smart contracts) → revenue is usually proportional to TVL and hence TVL is the most relevant topline measure of the health of a business. It moreover is a marker of market share and hence trust, which is an advantage that can build on itself
Fees → how much money the protocol is generating fundamentally. Don’t forget to subtract what is given back to network participants as incentives to determine how much the protocol actually receives
Active unique addresses → a proxy for active users. You can then analyze retention using i.e. daily active unique addresses/ weekly or monthly active unique addresses
CAC → taking into account both traditional CAC inputs (such as marketing and sales) and adding crypto-specific inputs like airdrops
Depending on the type of defi project, additional metrics should be carefully watched including but not limited to:
L1/L2: network fees (measure of demand), while transaction volume is important and telling, fees are the better proxy for demand on block space
DEX: volume (measure of demand)
Lending: deposits/outstanding loans (measure of demand) and total liquitable based on liquidation thresholds (measure of risk)
This list is by no means complete but it is foundational, so for the new years, it’s good to get the basics down pat.
Thank you Carvas from Lido (@0xCarvas) for the input. Input does not imply endorsement.
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