What Is TVL (Total Value Locked)?

TVL covers tokens added to liquidity pools, collateral deposited in lending protocols, assets locked in staking contracts and similar balances. These balances are multiplied by the current prices of the relevant tokens and are usually expressed in U.S. dollars. For example, the dollar value of all the ETH and stablecoins that users deposit as collateral in a lending protocol is added to that protocol's TVL. Data platforms such as DefiLlama track TVL by protocol and by network.

A high TVL shows that users have entrusted a significant amount of assets to the protocol and gives an idea of liquidity depth. However, the metric has limits. When token prices rise, TVL increases even if no new money has entered. When the same asset is used in more than one protocol, for example when a liquid staking token is used as collateral on another platform, double counting can occur. Liquidity attracted by high-yield incentives can also leave quickly once the incentives end.

For this reason, TVL should be evaluated together with other indicators such as trading volume, fee revenue and the number of active users. A high TVL does not mean a protocol is secure.