Total Value Locked (TVL): An Introductory Guide
Learn TVL what it means, how it is calculated, its practical value, and its common limitations, building a foundation for interpreting DeFi data.
TVL What Is
Total Value Locked (TVL) refers to the total value of all assets deposited in a DeFi protocol or an entire blockchain ecosystem, typically expressed in USD. A single protocol's TVL can be understood as the combined value of the collateral, staked assets, borrowed funds, and other assets currently locked in it.
How to Calculate and Use It
To calculate TVL, different assets must first be converted into a common unit such as USD, and then added together. Data aggregation platforms compile data from multiple protocols, helping users compare the scale of activity across different ecosystems and observe changes in TVL over time.
Interpreting TVL Its Limitations
TVL A higher TVL can generally indicate greater participation and available liquidity, and may also reflect users' trust in the protocol. However, rising prices can also push TVL higher, while falling prices can cause TVL to decline; therefore, it cannot by itself prove that a project's design is sound or that it has long-term value.
Original Tutorial
https://www.binance.com/zh-CN/academy/glossary/total-value-locked-tvl
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