GLOSSARY · BLOCKCHAIN & WEB3
TVL (Total Value Locked)
What TVL (total value locked) is: how much value is deposited in a protocol, how it is measured, what it is for and its traps as a metric.
WHAT IS IT? · FOR DUMMIES
TVL (total value locked) measures how much money is deposited in a protocol: collateral, liquidity, staking. It is the most quoted thermometer of DeFi and RWA — useful as an order of magnitude, treacherous as an exact figure.
WHAT IS IT? · PRO
TVL adds up the market value of deposited assets, which makes it sensitive to prices (the token rises, TVL "rises" without a euro coming in), to double counting between stacked protocols and to mercenary liquidity that arrives with incentives and leaves with them. Comparing TVL between protocols requires looking at the methodology — just as we do with tokenized-asset figures, where aggregators such as RWA.xyz publish theirs, as we tell in the analysis of Ondo.
Well used, TVL answers one concrete question: how much real economic trust does this protocol carry? — and its trend says more than its level.
01 / Key points
- Market value of the assets deposited in a protocol
- Sensitive to prices, double counting and incentivised liquidity
- Comparing requires a consistent methodology
- The trend tells more than the absolute level
02 / Advantages
- Quick thermometer of economic adoption
- Verifiable on-chain with public aggregators
- De facto standard for comparing protocols
03 / Disadvantages
- Inflates and deflates with prices without real flows
- Double counting between composed protocols
- Mercenary liquidity: TVL rented with incentives