What is TVL and why is it not a true measure of the value of RWA

In recent years, TVL (Total Value Locked) has become a popular metric for assessing the health of blockchain ecosystems. However, according to Mike Cagney, CEO of Figure Technologies, what TVL is and what it truly measures are two entirely different questions. He argues that the focus on TVL has obscured the true nature of value on public blockchains, especially in the field of real-world assets (RWA).

Understanding TVL in Blockchain: From Concept to Reality

What is TVL? It’s the total amount of money locked in DeFi protocols, liquidity pools, and other smart contracts on the blockchain. On the surface, this number seems impressive and is widely used to compare project sizes. However, TVL only counts the “amount of money present” and does not reflect whether that money is actually generating profits or value for token holders.

Cagney notes that the market often confuses activity (capital activation) with real value. An ecosystem can have a very high TVL but if it doesn’t generate significant network fees, it still doesn’t deliver value to token holders. That’s why the question of what TVL is becomes less important than how the fees generated from that activity are utilized.

Why TVL Cannot Reflect the True Value of a Public Network

The key difference between high TVL and high yields is crucial to understanding why public blockchains exist. When TVL grows but network fees remain trivial, token holders do not benefit. For example, consider Visa: if the company processes transactions on a blockchain but pays very low fees because it owns most of the infrastructure privately, it will keep costs minimal. In this case, TVL can be very high, but the cash flow to network participants is minimal.

Mike Cagney emphasizes an important point: public blockchains are built to replace traditional financial intermediaries, not to contain them. If a blockchain system merely accommodates large financial institutions without forcing them to pay high fees to sustain operations, it’s not fulfilling its mission.

Three Factors That Create Real Token Value

According to Cagney, a token’s value comes from three specific sources:

Network fee yields: Direct income from transactions on the blockchain. Token holders often share this fee revenue through staking or burning mechanisms.

Practical utility: Beyond fees, tokens must provide tangible benefits to users, such as reduced transaction costs, better access to financial products, or other incentives.

Governance rights: Token holders should have influence over network decisions, from protocol parameter adjustments to future development directions.

If a blockchain only possesses two of these three factors or if they are weak, the token’s value will be limited. The question of what TVL is becomes meaningless if it doesn’t lead to these sources of value.

Structural Contradictions in RWA Stories with Visa, JPMorgan

Cagney points out a fundamental contradiction: if public blockchains truly have the potential to make companies like Visa, JPMorgan, Nasdaq, and DTCC obsolete, why would these firms actively participate in those networks? If they believe blockchain technology will render their business models outdated, there’s no reason for them to pay high fees for these systems.

In reality, these large financial organizations will try to keep costs as low as possible. They are not blockchain pioneers but participants seeking to reduce their operational expenses. Merely moving parts of payment, clearing, or settlement processes onto the blockchain without fully replacing them does not create the economic advantage needed to break their monopolies.

Provenance: A Blockchain Model Focused on Fees Rather Than TVL

To illustrate his point, Cagney cites Provenance blockchain and its HASH token as a real-world example. Unlike most RWA projects that focus solely on increasing TVL, Provenance concentrates on generating profit from network fees. This strategy includes:

• Limiting new token issuance to prevent inflation
• Ensuring HASH holders earn profits from actual transaction fees
• Providing holders with both practical benefits (lower fees, better access) and governance rights

Provenance does not aim to attract the largest TVL but instead builds a sustainable model where network fees flow to those supporting the network. This approach differs from many other RWA projects and reflects a deep understanding of how real value is created on public blockchains.

Stablecoins and Payments: Practical Applications Beyond TVL

Cagney’s discussion also touches on stablecoins as tools to generate real value in consumer payments. When combined with biometric wallets and multi-party computation, stablecoins can reduce fraud by eliminating vulnerable elements like credit card numbers and centralized identity data.

As payment fraud (such as credit card theft) diminishes, blockchain systems won’t need complex fraud mitigation solutions like those in current card networks. Instead, stablecoins act as digital cash settled instantly without the possibility of chargeback.

This creates opportunities for both merchants and consumers: merchants can lower transaction costs and fraud risks, while users benefit from faster payments and lower fees. This is the kind of value blockchain can truly generate—not just large TVL, but better economics for all parties involved.

Correct Perception of Blockchain: Replace, Not Support

Finally, the discussion emphasizes an important insight: blockchain technology only creates real value when it replaces old intermediaries, not when it supports them. The fact that traditional financial giants like Visa, Nasdaq, JPMorgan, and DTCC are exploring blockchain does not necessarily mean public networks will benefit. If they only use blockchain to cut some costs while maintaining control and profits, the original goal of decentralization and disintermediation will not be achieved.

To measure the true success of RWA on blockchain, we shouldn’t just look at what TVL is—a hollow number. Instead, ask: Are network fees distributed fairly among participants? Do users receive real utility? And is governance genuinely decentralized? Only when these questions are affirmatively answered does RWA on public blockchain hold genuine value.