May 26, 2023
By Murtuza Merchant
As the decentralized finance (DeFi) space continues to expand, investors are increasingly interested in understanding and taking advantage of the various opportunities it presents.
One crucial metric in the DeFi world is Total Value Locked (TVL), which represents the combined value of tokens staked in different DeFi products, such as liquidity mining, farming, staking, and lending.
In this article, we will explore the significance of TVL, how it can impact investors’ earnings, and the various ways to capitalize on staking.
TVL serves as an indicator of the effectiveness of decentralized finance in a specific network, such as Ethereum, Binance Smart Chain, or Arbitrum. As TVL grows, investor interest is piqued, leading to increased demand for tokens.
Currently, the total TVL across all blockchains is approximately $50 billion, with Ethereum leading the pack at around $29 billion and Tron trailing behind at approximately $5 billion. You can monitor TVL changes at DefiLlama.
High TVL for a particular token makes it easier to sell its price, as a large number of tokens are not traded, and small volumes can be more easily manipulated. In the short term, this may result in a supply shock, a situation where the supply is scarce, and the demand is high, leading to a price increase.
Another area of interest for investors in the DeFi world is hunting for airdrops.
Airdrops involve distributing free tokens to holders of specific cryptocurrencies, and many people are keen on finding and capitalizing on new airdrop opportunities.
To find new airdrops, one can follow the activities of drop hunters, individuals, or teams that constantly search for new drops and participate in various activities to receive tokens. By tracking the transactions and smart contracts these drop hunters interact with, investors can identify potential airdrop opportunities.
Staking is another popular method for crypto enthusiasts to earn rewards by holding specific cryptocurrencies. Staking involves locking a token in a contract, allowing the blockchain to utilize the token in various processes, similar to a bank deposit. In return, stakers receive rewards during the lock-in period.
There are several ways to stake tokens:
Staking with Voting in DAO: For example, on Uniswap, by staking UNI, users can vote for or against different proposals in the DAO.
Revenue Sharing: This mechanism involves distributing a portion of the revenue generated from an activity or product among network participants based on their contribution. One example is GMX, where users can stake the native GMX token and receive rewards.
Launchpool: Binance Launchpool is a staking program developed by Binance exchange, enabling users to stake tokens and receive rewards in new project tokens, which can be sold on Binance or held as an investment.
Staking yields can vary widely, depending on the chosen protocol, staking duration, and the number of staked tokens. Staking Rewards offers information on returns for different blockchains.
For long-term token holders, staking can be a profitable option, allowing them to earn additional income from their tokens.
However, it is essential to be aware of the risks, including the potential loss of investment due to protocol failure or technical issues, and the volatility of the cryptocurrency market, which can lead to significant fluctuations in token prices.
About the author
Murtuza Merchant is a senior journalist and an avid follower of blockchain and cryptocurrencies.