Total value locked (TVL)

Total value locked is the total dollar value of crypto assets currently deposited or staked in a decentralized finance, or DeFi, protocol, such as a lending platform, decentralized exchange, or staking contract. It is the closest DeFi analogue to assets under management in traditional finance, used as a rough proxy for a protocol's scale and adoption.

TVL is calculated by summing the current market value of every asset held in a protocol's smart contracts, using live prices for each token, and is read directly from on-chain analytics data since deposits and withdrawals are recorded on-chain. Because it is priced in real time, TVL moves for two distinct reasons that are easy to conflate: actual deposits or withdrawals of capital, and simple price appreciation or decline, driven by volatility in the underlying tokens already locked, with no capital moving at all.

TVL is widely quoted to compare and rank DeFi protocols and to gauge growth or contraction in the sector overall, much as other alternative data is used to gauge activity before official reporting. Its main pitfalls: the same capital can be double- or triple-counted when it is deposited into one protocol, borrowed against, and redeposited into another; TVL says nothing about actual usage or revenue generated by a protocol; and figures can be inflated by a protocol's own token incentives temporarily attracting deposits that leave once rewards end.