๐ฐ #TVL101: What does Total Value Locked mean in DeFi?
If you want to assess the strength of a DeFi protocol, TVL (Total Value Locked) is one of the key indicators to watch.
๐ What is TVL?
๐น It is the total value (in USD) of all assets locked in a DeFi protocol
๐น Represents the trust and adoption of users in that ecosystem
๐น Includes tokens used for staking, liquidity, loans, and collateral
๐ก Why does TVL matter?
๐ธ The higher the TVL, the greater the liquidity and utility of a protocol
๐ธ Increasing TVL = users are allocating more capital
๐ธ Can indicate migration trends between blockchains (e.g., Ethereum โ Arbitrum)
๐ Examples:
๐ธ Uniswap, Curve, Aave, PancakeSwap
๐ธ Ethereum still leads, but other networks like BNB Chain, Arbitrum, and Solana are growing fast
โ ๏ธ Notes:
โ High TVL does not guarantee security โ check the history and audits
โ Can be inflated by short-term incentives
โ Use alongside other data like volume, users, and yield
โก๏ธ TVL is like the bank balance of a protocol. But what really matters is what it does with it.