There are many articles out there explaining TVL in detail, here I aim to bring a concise summary of what TVL is. Think of this as reference notes.Total value locked is a figure that represents the spot value (usually in fiat terms i.e. USD) for all the assets that are currently staked in a specific protocol. The assets can be:Staked in simple yield protocols that allow depositors to receive an equal representation of their deposited tokens.Staked in lending protocols where the deposited assets are collateral for the loans.In the liquidity pools in an AMM (Automated Market Maker) exchange.Act as underlying for synthetic assets, futures contracts, and options.Liquidity for payment protocols facilitating the transfer of assets from l2 (layer 2) to the ETH mainnet.The TVL figure for Defi would be the total value of the assets staked in the entire Defi system. This value does not represent any leverage created from the underlying assets. An analogy for this would be the funds a bank holds in its deposit throughout the fractional lending process.The TVL is a metric used to gauge the health of a Defi protocol. The TVL of an asset can be interpreted as how much of the assets\u2019 capital is utilised across the entire Defi ecosystem giving a rough idea of its utility. To make the metric more comparable across assets with different market caps, a TVL Ratio is used which is defined as:Total market cap of locked asset \/ Total value lockedThe market cap here can either be the total circulating supply or the total supply multiplied by the price of a single unit (token) of the asset. It\u2019s important to note this variability factor in the metric.The calculation above is accurate in a simple scenario where the value of the token deposited is counted once. However, the\u2026<\/p>","protected":false},"excerpt":{"rendered":"
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