What is TVL in crypto?

TVL in crypto stands for total value locked, the value of all assets deposited in a decentralized finance protocol or on a blockchain's DeFi apps. It is one of the most quoted DeFi figures because it gives a rough sense of how much capital users trust to a protocol. It is a snapshot of deposits, not revenue or profit.

What is total value locked?

Chainlink's explainer defines TVL as the fiat value of crypto assets deposited in a DeFi protocol, usually in dollars. Deposits can sit in lending markets, exchange liquidity pools or staking contracts. People use it as a gauge of adoption and liquidity. If you are new to the space, start with what is DeFi.

TVL can be measured for a single protocol, a whole blockchain, or all of DeFi. Analytics sites such as DefiLlama track these figures across many chains.

How is TVL calculated?

The basic method is simple. Take the amount of each token held in the protocol's smart contracts, multiply it by the token's current price, and add everything together. Chainlink's example: 10,000 tokens at $10 each contribute $100,000.

The details are where trackers differ. DefiLlama's documentation says it prices most tokens through CoinGecko and, where that is missing, through on-chain market data. Its rules include:

• Tokens that are unissued or held in team vesting contracts are not counted.
• Native staking that secures a blockchain is not counted.
• Liquid staking protocols are tracked but left out of chain TVL by default.
• Bridges are tracked, but their TVL is not credited to any chain.
• A receipt token deposited elsewhere in the same protocol is counted once.

DefiLlama also offers optional filters for categories such as borrowed funds, staking of a platform's own token and "pool2" liquidity, so users can choose what to include.

What is the TVL ratio?

The TVL ratio divides a protocol token's market cap by the protocol's TVL. Chainlink notes that some analysts read a ratio above 1 as a sign the token is valued more highly than the capital actually using the protocol, and a ratio below 1 as the opposite.

It is a rough comparison, not a valuation method. Market cap and TVL are both driven by prices, and protocols with very different business models can produce similar ratios.

What are the limits of TVL?

Chainlink lists several. When users deposit a receipt token from one protocol into another, the same underlying assets can show up in both, inflating totals across DeFi. TVL also moves with prices, so a market rally can raise it with no new deposits and a fall can shrink it with no withdrawals. Sharp drops can trigger liquidations that pull value out further.

Looking at token quantities as well as dollar values gives a clearer view of whether capital is really flowing in or out.