There are mainly four methods to increase the TVL of DeFi applications. This article is derived from a long post by Yue Xiaoyu, translated and organized by PANews. (Background: Aave is a bank) $30 billion in deposits ranks it as the 64th largest globally, surpassing thousands of banks in the United States) (Background supplement: Bank for International Settlements analysis of Uniswap: 80% of liquidity is controlled by a few main players, DeFi is still not decentralized enough) Increasing TVL is the core goal of many DeFi projects and the most critical issue. There are mainly four methods: 1. Token Issuance Expectation Attracting liquidity through incentive activities This method is the most direct, with the highest input-output ratio. Initially, it does not require real monetary costs; it only needs to provide users with future expectations. It is like pulling a rabbit out of a hat. The cryptocurrency space has two core groups: traders and yield farmers. These two groups correspond to the secondary and primary markets, respectively. Traders are secondary market users who make money through trading; yield farmers are primary market participants who contribute data to projects through early involvement and receive airdrop shares when tokens are issued. For projects that have not yet issued tokens, a very effective marketing strategy is to carry out various airdrop activities. By giving early users points as rewards, they are attracted to participate, and the expected points can be exchanged for the platform's tokens or other rewards. This method can attract users before any substantial capital expenditure, building a community. 2. Collaboration with Other Projects Achieving asset interoperability and liquidity through collaboration with different projects This method relies more on the project's background and channels, essentially a resource exchange. For example, users can use other projects' tokens as collateral or payment methods on your platform. A typical case is Merlin and Solv; after Bitcoin L2 Merlin issues tokens, to keep liquidity within its ecosystem, it collaborates with the Bitcoin staking protocol Solv, channeling liquidity into Solv, which then becomes the largest Bitcoin staking protocol. Of course, Solv currently only supports this Bitcoin L2, so liquidity remains within Merlin; this is the cost Solv incurs, ultimately resulting in a win-win situation. 3. Yield Incentives A typical practice is liquidity mining, where liquidity pools are established, and transaction fees are used as rewards to attract users to add assets to the liquidity pool. This is a very popular incentive mechanism where users provide liquidity to designated pools and receive rewards. This method can rapidly increase TVL. It requires a well-designed reward mechanism to avoid inflation caused by overly generous rewards and also needs to pay attention to risk management. 4. Creating More New Assets Liquidity staking and liquidity re-staking create new assets, thereby attracting incremental funds. Issuing new assets is not only to release the liquidity of already staked assets but, more importantly, to attract incremental funds. By creating new financial instruments, such as stETH (staked ETH certificates), not only does it enhance the liquidity of already staked assets, but it also creates new investment opportunities, attracting more capital. Of course, the risk is the accumulation of risks brought about by layered structures. If one of the tokens in the chain fails, then the related assets and applications of that token will also encounter problems. For example, if stETH fails, not only will the stability of the upstream Ethereum PoS mechanism be significantly affected, but various downstream re-staking protocols that accept stETH assets, such as Eigenlayer, will also face risks. In summary, the costs, benefits, and risks of the four methods are listed as follows: If one must prioritize the four methods from the perspective of the project party, to maximize capital efficiency, the order is as follows: Token issuance expectation first: low cost and high return; Project collaboration second: not high cost, just resource exchange; Yield incentives third: relatively high cost, requires real monetary sharing of platform benefits; Creating new assets fourth: highest cost, requires maintaining the liquidity of new assets. However, this prioritization is based on the assumption that the project party wishes to rapidly establish market position and attract users while managing risks effectively and maintaining resource utilization. In practice, project parties need to adjust these priorities based on their own resources, market conditions, and specific business goals. Additionally, these methods are not mutually exclusive; project parties can combine these strategies based on the needs of different phases and market feedback. Related reports HTX in-depth research report: BTCFi ecological growth and future outlook Tether launches tokenized platform 'Hadron' supporting ETH, Avalanche... BlackRock: RWA is the future of finance The bull market is coming) Eight major trends to watch in the DeFi space "In-depth analysis of liquidity acquisition strategies: How do DeFi projects enhance TVL?" This article was first published in BlockTempo (the most influential blockchain news media).