What is TVL and why does it not automatically generate token value on public blockchains

Many people confuse TVL — the total value locked on blockchain platforms — as an indicator of token value. In reality, Figure Technologies CEO Mike Cagney has pointed out an important truth: What is TVL really? It’s simply a number representing the amount of assets sent into the system, but this figure can be meaningless if it doesn’t generate fees or cash flow for token holders.

Misconceptions about RWA and the Rise of TVL

Growing interest in real-world assets (RWA) on public blockchains seems like good news as giant financial companies like Visa, Nasdaq, JPMorgan, and DTCC begin exploring this technology. However, Cagney emphasizes that what TVL is — or how people measure system success — often doesn’t reflect true value. The market often confuses activity with value, and metrics like TVL only matter when they generate fees that benefit token holders.

The Three Factors Truly Determining Token Value: Yield, Utility, Governance

Instead of just tracking TVL, Cagney proposes a three-dimensional framework to understand the real value of tokens:

Network fee yield: This is the most important. When TVL increases without corresponding fees, token holders don’t earn profits. For example, if Visa processes transactions on blockchain but pays very low fees, a high TVL doesn’t bring value to the community.

Practical utility: Tokens must offer tangible benefits such as lower transaction fees, better access to financial products, or other concrete perks.

Governance rights: Token holders should have a voice in setting rules and guiding the network’s development.

Structural Contradiction: Blockchain Cannot Both Eliminate and Support Financial Intermediaries

Cagney points out a logical contradiction in the RWA mindset: public blockchain is built to replace traditional financial intermediaries, not to contain them. But if blockchain truly makes companies like Visa, DTCC, or exchanges unnecessary, those companies would have no incentive to use those networks. Paying high fees to a system that eliminates competitors would be counterproductive. Token value simply comes from making old intermediaries obsolete, not from supporting their continued existence in a new form.

Stablecoins and Payments: Where Blockchain Truly Makes a Difference

The discussion also focuses on the most practical application of blockchain in payments. Cagney notes that stablecoins combined with biometric wallet technology could reduce fraud by eliminating traditional attack points like centralized card data and identity information. When payments are settled instantly like digital cash, with no refunds or disputes, fraud risk drops significantly. Merchants can also benefit directly from lower fees and faster transactions.

However, critics raise valid concerns about irreversible transactions, wallet breaches, smart contract exploits, and consumer protection. These are real challenges that must be addressed before stablecoins can truly replace traditional payment systems.

From Theory to Practice: Provenance and Purpose-Driven TVL Models

To illustrate the right approach, Cagney cites Provenance — a blockchain focused on generating fees rather than endlessly increasing TVL. This network limits new token issuance, ensuring that network fees are actually distributed to HASH token holders. This is a purpose-driven TVL approach: the number should reflect real cash flow, not just an empty system size.

Data from Solana also supports this trend — Solana’s RWA ecosystem is projected to reach $873 million by 2025 with a 325% growth rate, indicating that the market is beginning to recognize the importance of RWA. But this figure is only meaningful if it’s accompanied by fees and cash flow, not just hollow TVL.

Conclusion: Blockchain Value Comes from Replacement, Not Addition

Blockchain progress depends not on traditional finance simply participating in the system, but on building networks that fully replace old intermediaries. TVL can be used effectively only when it generates real fees, utility, and governance for the community. That’s when true token value is genuinely created.