Glossary
Total value locked (TVL)
Total value locked (TVL) is the total value of the crypto assets that users have deposited in a DeFi protocol’s smart contracts, for lending, trading, staking or liquidity, measured at current market prices. It is the main size metric in DeFi.
Also called TVL, Value locked, Total value deposited, Locked value
See also
Total value locked (TVL) measures the value of all the crypto assets deposited by users in the smart contracts of a decentralized finance protocol or blockchain. It is the most quoted indicator of size in DeFi: when people say a lending app or an exchange “has $5 billion in TVL”, they mean that this amount of assets sits in its contracts.
How TVL is measured
Analytics sites read the balances held by a protocol’s contracts on the blockchain and multiply each asset by its market price. The sum gives the protocol’s TVL, and the sum across protocols gives the TVL of a blockchain or of DeFi as a whole.
Methodology matters. DefiLlama, the most widely used tracker, counts only assets deposited by users in a protocol’s own contracts. It excludes off-chain assets, avoids counting the same deposit twice when a token is re-deposited in another protocol, and shows items such as borrowed funds, the protocol’s own token staked in it, or tokens still vesting as separate options that users can add or remove.
A simple example
A lending protocol holds 10,000 ETH and 50 million USDC deposited by users. If ETH is worth $3,000, its TVL is 10,000 × $3,000 + $50 million = $80 million. If ETH falls to $2,000 tomorrow and nobody withdraws, TVL drops to $70 million: the protocol did not lose users, only value.
Why it matters
TVL shows where users put their capital and how much a protocol is trusted. A deep liquidity pool means lower slippage for traders, and large deposits in a lending market allow bigger loans. Comparing TVL with a protocol’s fees or with its token’s market cap is a common way to judge whether its token is expensive or cheap.
Risks and limits
- TVL moves with prices: a rising market inflates it even without new deposits.
- Incentives can rent TVL: deposits attracted by high token rewards often leave when rewards end.
- Methodologies differ between sites, and double counting is hard to remove fully.
- A high TVL is not a security guarantee. It also makes a protocol a bigger target for hackers.
- TVL says nothing about how active users are; volume, fees and number of users complete the picture.