// GLOSSARY -- DEFI

What is TVL (Total Value Locked)?

1 min read Updated

Total Value Locked (TVL) is the aggregate value of cryptocurrency assets deposited in a DeFi protocol's smart contracts — the primary metric for measuring a protocol's adoption and size.

WHY IT MATTERS

TVL measures how much capital users have trusted to a DeFi protocol. Higher TVL means deeper liquidity, more utility, and greater user confidence. It's the DeFi equivalent of 'assets under management.'

TVL is tracked across protocols and chains by aggregators like DeFiLlama. It fluctuates with token prices (ETH price drop reduces ETH-denominated TVL) and user flows (capital moving between protocols).

While useful, TVL has limitations. It can be inflated through recursive depositing (deposit, borrow, redeposit). TVL doesn't capture revenue, usage, or sustainability — a protocol with $1B TVL and no fees may be less healthy than one with $100M TVL generating real revenue.

FREQUENTLY ASKED QUESTIONS

What's a healthy TVL?
Context-dependent. For major lending protocols: $1B+. For DEXs: $100M+. For newer protocols: even $10M+ shows meaningful adoption. Compare TVL relative to peers.
Where to check TVL?
DeFiLlama is the standard — tracks TVL across all chains and protocols with methodology transparency. CoinGecko and DeFi Pulse also track TVL.
Does TVL = quality?
Not necessarily. TVL can be inflated through incentives, recursive strategies, and double-counting. Look at TVL alongside revenue, unique users, and organic growth.

FURTHER READING

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