A Complete Guide To TradFi and Blockchain

• Decentralized finance has gained significant traction in the market since its introduction. 
• With this rise, we see a growing interest in TVL (Total Value Locked), which is the amount of money users have stored in a given protocol.

TVL has expanded its branches in the blockchain networks by incorporating tokenized real-world assets along with cryptocurrencies. These tokenized assets on the blockchain network are usually held in smart contracts.

The inclusion of real-world assets in the TVL is becoming more necessary and relevant as we see increasing blockchain adoption in Traditional Finance (TradFi) institutions. This is a step forward in DeFi technology and as big entities get interested in blockchain adoption, adding many RWAs such as real estate, equity, bonds, debts, and other assets such as gold and art is becoming vital to retaining users and investors.

The Distinction Between TVLs of Various Blockchains

Many blockchain TVLs consist only of cryptocurrency and a few real-world assets. While some TVLs are heavily filled with RWAs. An example of this is Provenance Blockchain, which has a TVL of  $9.1 Billion overall, out of which $8.1 Billion are real-world financial assets such as private equities and home equity from credit loans.

However, it is still early for many blockchain networks to integrate real-world assets into their TVLs; many networks and platforms are in the process of doing so and are further expanding the significance and working of TVLs.

The Importance of TVL in TradFi

As the TVL sets to introduce more RWAs from TradFi into their system, it has become vital to identify which blockchain to choose to tokenize these assets. And for that, many factors are involved, such as considering the maintenance, security, and easy boarding of financial assets on the blockchain.

By identifying such factors and doing thorough research on the different TVLs of various blockchain networks, institutes can select the perfect blockchain platform or network to tokenize their assets and support transactions of these tokenized assets.  The blockchains with high integration or involvement of RWAs in their TVLs are probably the best for institutes seeking long-term sustainability and more transparency with their assets and their transactions.

Some Challenges to this Process

The new data set of Blockchains and TVLs makes it difficult to identify what portion of the TVL consists of cryptocurrency assets and what portion holds real-world assets. However, many blockchain platforms are planning to publish their TVL data and inform the institutes about the significant portions. Furthermore, many analytics firms are trying to make this data more accessible and transparent, making it easy for many companies to select the right blockchain.

Conclusion

TVL is an important factor in any blockchain technology or platform to tokenize the real-world assets of many companies. With the growing need and interest in converting the traditional financial system to a decentralized financial system, it is becoming more and more important to access this data.