Total Value Locked (TVL) is one of the main indicators that the current money deposits in the cryptocurrency and DeFi (Decentralized Finance) ecosystem are evaluated by. It is a total that involves the total worth of all assets, whether they are cryptocurrencies, stablecoins, or liquidity pool tokens, on which the users have staked, lent, or locked up with the platform. TVL is mainly calculated using U.S. dollars as the common and easily comparable figure.
The TVL is first to consider by the analysts and the public when assessing the strength and credibility of a protocol. High TVL in a DeFi platform means that a greater number of users are brave enough to invest their money there. TVL growth can signal increased demand, improved liquidity, and strong community participation. On the other hand, a sudden drop in TVL might speak of fear in the market and thus users withdrawing funds with the possible concerns about the platform’s safety or competition with better yields elsewhere.
TVL is used by lending protocols, non-custodial exchanges, yield farms, and staking platforms. It serves as a tool for investors to conduct a comparative analysis of different projects in the DeFi industry in terms of their sizes and healths.
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In a nutshell, TVL gives quantitative proof of the real value that is frozen in a protocol at any particular time therefore, it becomes one of the main indicators of the DeFi platform’s adoption and overall stability.