Total Value Locked (TVL) is the cumulative value of all assets staked or locked in a DeFi protocol, indicating its liquidity and health.

Total Value Locked (TVL) Meaning

Date: Jul 17, 2023 | Updated: Jul 19, 2023

Total value locked (TVL) is a metric that refers to the sum of assets that are staked or locked in a protocol.

What is Total Value Locked In DeFi Protocol?

TVL is a crucial metric in Decentralized Finance (DeFi). It reflects the aggregate value of assets staked or locked in a protocol. These assets are secured with smart contracts. TVL includes initial funds staked by investors and rewards from staking, lending, liquidity pools, and yield markets.

How is TVL Calculated?

To calculate TVL:

  1. Sum the value of all assets locked within the platform.
  2. Convert these values to a standard unit, like USD.
  3. Add up the total value to find the protocol’s TVL.

Data aggregators track TVL across DeFi, offering a dashboard for monitoring the ecosystem’s growth.

The TVL ratio helps assess if a DeFi asset is undervalued or overvalued. A ratio above 1 indicates overvaluation, while below 1 suggests undervaluation.