What is TVL (total value locked)?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 4 min
In short
TVL is the fiat-denominated total of all assets deposited in a DeFi protocol. It is the usual shorthand for scale, but it rises when prices rise even if nobody new deposits anything, and it says nothing at all about how safe a protocol is.
Key points
- The fiat value of everything deposited in a protocol
- It grows on price moves alone, with no new users
- The same capital can be counted twice across protocols
- A large number is not evidence of safety
Definition
Total Value Locked: the quantity of each token held by a DeFi protocol multiplied by its current price, then summed. It is the standard yardstick for comparing the size of protocols and chains.
The arithmetic is simple. If a lending protocol holds 100,000 ETH and $200m of stablecoins, its TVL is the ETH count times the current ETH price plus the stablecoin balance. The price used comes from whichever data provider is doing the counting, so two trackers rarely report exactly the same figure for the same protocol.
The catch is that the number moves on price alone. Deposits can be completely flat, but if ETH doubles, the ETH share of TVL doubles with it. Headlines about TVL 'surging' often describe a market rally rather than any new user. Reading the token-denominated balances alongside the dollar figure avoids that mistake.
Double counting is the other pitfall. Stake ETH through a liquid staking protocol, then post the receipt token as collateral for a loan, and the same capital appears in both protocols' TVL. Adding up a chain's protocols can therefore overstate how much money is actually there. Whether a tracker strips this out is a question of its published methodology.
Watch out for
- · Protocols with very large TVL have still been drained through smart contract flaws, more than once
- · Teams sometimes seed the figure with their own or a partner's capital, so the composition matters more than the headline
- · A sharp fall in TVL can mean a price drop, a bug or a loss of confidence — check which before drawing conclusions