TVL (total value locked)
TVL (total value locked) is the total US-dollar value of crypto assets deposited in a DeFi protocol or blockchain — the collateral, liquidity and staked funds its smart contracts hold. It is the standard proxy for how much capital a protocol has attracted and, loosely, how much users trust it with their funds.
How it is calculated
TVL sums every asset deposited in a protocol's contracts and multiplies by each asset's current US-dollar price. Because it is denominated in dollars, TVL moves both when users deposit or withdraw and when the price of the deposited assets changes — a rally can lift TVL with no new capital arriving.
Why it matters
TVL is the closest thing DeFi has to an assets-under-management figure. A protocol with deep TVL has more liquidity for swaps, more collateral backing loans, and more skin in the game. Growing TVL suggests inflows and confidence; rapidly draining TVL is often the first sign of lost trust or a better yield elsewhere.
How to read it
Compare market cap to TVL: a low mcap/TVL ratio can suggest a protocol is cheap relative to the capital it secures. Watch for mercenary TVL that arrives for token incentives and leaves when they end, and for double-counting where a staked asset is re-deposited elsewhere and inflates the total.
Common misreads
TVL is not revenue and not profit — a protocol can hold billions and earn little. It is inflated by the price of its own token when that token is a large share of deposits, and leverage or looping can count the same dollar several times. Treat TVL as traction, not value.