What is TVL? Why do real assets on the blockchain need to focus on fees to have value

In the blockchain and real-world asset (RWA) space, a common misconception is spreading: high activity data = valuable assets. However, the reality is quite different. Mike Cagney, CEO of financial services company Figure, recently emphasized a key issue: increasing interest in RWA is pointless if it doesn’t generate yields for token holders. This distinction isn’t just a technical detail — it determines whether public blockchain truly revolutionizes finance or is merely copying old systems.

Cagney shared these comments recently in a public discussion, where he outlined fundamental misunderstandings about measuring success in Web3. He pointed out that metrics like Total Value Locked (TVL) only matter if they produce fees that benefit the token community. In other words, what’s the point of TVL if it doesn’t generate cash flow for participants?

Differentiating Activity from Real Value — The Secret of RWA

Markets often confuse “high activity” with “creating real value.” When major financial firms like Visa, Nasdaq, JPMorgan, and DTCC start exploring blockchain, many see this as a sign of widespread adoption and success of crypto. But Cagney insists this misses the crucial point: how real value is actually created on public blockchains.

RWAs attract attention because global financial giants are adopting the technology, but that doesn’t mean the blockchain networks benefit. It’s like saying electric cars are popular because traditional automakers are researching them — but if they make little money from electric vehicles, that “adoption” doesn’t benefit token holders in the network.

Where Does Token Value Come From — Three Key Factors

According to Cagney, token value is built on three sources:

1. Yield — network fees and other cash flows. When users transact, a portion of the fee goes to token holders.

2. Utility — practical benefits tokens provide, such as lower transaction costs or better access to financial products.

3. Governance — the influence token holders have over network rules and outcomes.

Most importantly: TVL only matters if it increases fees paid to token holders. If a blockchain has high TVL but very low or no network fees, that metric is worthless. It’s just a number — not an economic incentive.

Structural Contradictions — Why Traditional Finance Can’t Truly Support Blockchain

Here’s the big issue: if public blockchain is designed to eliminate financial intermediaries, making companies like Visa and DTCC unnecessary, then why would those companies support such networks?

The answer is simple: they wouldn’t. If blockchain truly undermines their business models, they have no reason to pay high fees for a system that could displace them. Take Visa as an example: it owns most of its infrastructure. So, it keeps costs low and has little incentive to pay more fees to a public blockchain. Without significant fees, token holders get very little value — regardless of how much activity occurs on the network.

Similarly, traditional financial firms exist to act as intermediaries in transactions. Public blockchains are built to break that role. The real value of blockchain doesn’t come from supporting these intermediaries but from making them obsolete. Simply moving some infrastructure on-chain doesn’t create economic impact like fully replacing traditional intermediaries with decentralized finance.

Stablecoins and the Future of Payments — The Difference from Credit Cards

The discussion also touched on practical applications: stablecoins and consumer payments. Cagney pointed out that combining stablecoins with biometric wallets and multi-party computation could significantly reduce fraud by eliminating credit card numbers and centralized identity data.

When these vulnerabilities are removed, common payment frauds will decline. Some express concerns about irreversible transactions, wallet breaches, and consumer protection. But Cagney notes that stablecoin payments function like digital cash — settled instantly with no refunds.

With lower fraud risk, blockchain systems don’t need complex fraud prevention solutions like credit card networks. Plus, merchants can directly reward users thanks to faster settlement times and lower fees.

Lessons from Provenance — Blockchain Must Generate Fees, Not Just Increase TVL

Cagney cites Provenance blockchain and HASH token as an example of a proper model. Unlike most RWA projects that focus solely on increasing TVL, Provenance has a clear strategy: generate fees from real activity rather than just issuing tokens.

This means:

• The network focuses on earning fees from actual transactions
• It limits new token issuance to prevent dilution
• It ensures token holders receive both utility and governance rights

This is the difference between a sustainable project and one driven by hype. What’s the point of TVL if it doesn’t produce fees for token holders? Provenance answers this by designing a system that creates real cash flow.

Conclusion — Blockchain as a Replacement, Not an Addition

The final discussion emphasizes a broader point: blockchain’s progress depends not on traditional finance simply joining the system, but on building networks that fully replace old intermediaries.

Misunderstanding TVL and token value is at the root of many RWA project failures. When a blockchain doesn’t generate significant fees for token holders, all activity on the network is just paper numbers. Blockchain truly revolutionizes when it replaces old systems, not when it merely adds to them. This is a lesson every RWA project must remember.