What is Total Value Lock (TVL) in DeFi?
TVL or Total Value Locked is a metric to measure the success and growth of decentralized finance (DeFi) protocols. Focus on this metric and its importance in the blockchain and cryptocurrency ecosystem.
What is TVL?
Total locked valueor “Total Value Locked” for TVL in English a metric used to measure the amount of cryptocurrency allocated to a particular protocol, platform, or smart contract. This metric is often abbreviated “TVL” in reference to the English term.
First, it can be used for TVL Measure the popularity and adoption of the DeF protocoli. The more value attached to the protocol, the more popular and popular it can be. Indeed, investors are more likely to use a protocol or platform if a large amount of cryptocurrency is invested in it. This can show the confidence of the cryptocurrency community.
Second, TVL can be used as a way to measure protocol liquidity. The larger the value locked in the protocol, the more fluid it can be. Indeed, the greater the value locked in the protocol, the more capital is available for activities such as trading, lending and borrowing.
Third, TVL can be used as a means of measuring the overall health and stability of a given DeFi platform. The larger the value locked in the protocol, the more stable and secure it can be. In fact, this means that there is more at stake for the people who use it, which may motivate them to act in the interests of the protocol and ensure its long-term success.
In general, TVL is an important metric to watch in the DeFi world, as it helps measure the popularity, liquidity, and stability of a protocol. By tracking the total locked value of a protocol or even a blockchain, it is possible to better understand the state of the DeFi ecosystem and the relative success of the various platforms within it.
Overview of TVL distribution on the Ethereum blockchain (December 13, 2022):
Figure 1 – Top 5 protocols with the largest TVL on the Ethereum blockchain
? What is Decentralized Finance (DeFi)?
Calculation of TVL coefficients
Calculation of TVL ratios a way to compare the relative strength of different protocols within a single blockchain or across an entire decentralized financial ecosystem. This is typically done by dividing the total value locked in a protocol (TVL) by the total value locked across all protocols on the blockchain.
For example, if the TVL value of a protocol on the Ethereum blockchain is $100 million, and the total TVL of the entire DeFi ecosystem on this blockchain is $10 billion, the TVL ratio of this protocol will be 1%.
TVL ratios can be useful for comparing the relative size and popularity of different DeFi protocols. For example, if 2 protocols from 2 different blockchains have the same TVL, but one of them has a higher TVL ratio, this may be a sign that the latter protocol is more used.
There are a number of websites and tools that can be used to verify the Total Value Lock (TVL) of projects and blockchains. Here are some of the most popular.
Defiance
DefiLlama is a reference platform for tracking the evolution of decentralized financial protocols and their TVL.. The latter offers many other very interesting tools for free to follow the evolution of the ecosystem: a reference to the best DeFi strategies, potential future token airdrops, bridges, liquidation history, etc.
This platform is often used to source articles related to TVL of self-proven protocols with reliable and fast-updating information.
Dune Analytics
Dune Analytics is a platform that provides a range of data and analytics tools for the DeFi ecosystem. Its peculiarity comes from the fact that everyone can create himself dashboards using specially designed tools. For example, in addition to tracking TVL, the number of wallets connected to Dune Analytics, the volume of transactions, the number of interactions with smart contracts, etc. it is possible to check all indicators related to the protocol.
DeFi Pulse
DeFi Pulse is a website that tracks the total locked value of most DeFi protocols. It also provides a number of other metrics and information about the DeFi ecosystem.
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Source: Figure 1: Defiling
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Editor-in-chief of Cryptoast, I discovered Bitcoin and blockchain technology in 2017. Since then I have been trying to share quality content to make the sector more democratic for all.
Klement Vardzala
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