{"id":451172,"date":"2022-05-22T22:00:00","date_gmt":"2022-05-22T19:00:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/what-is-total-value-locked-tvl-in-crypto-and-why-does-it-matter\/"},"modified":"2022-05-22T22:00:00","modified_gmt":"2022-05-22T19:00:00","slug":"what-is-total-value-locked-tvl-in-crypto-and-why-does-it-matter","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/what-is-total-value-locked-tvl-in-crypto-and-why-does-it-matter\/","title":{"rendered":"#What is total value locked (TVL) in crypto and why does it matter?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a28ff9a47f48\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a28ff9a47f48\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-total-value-locked-tvl-in-crypto-and-why-does-it-matter\/#%E2%80%9CWhat_is_total_value_locked_TVL_in_crypto_and_why_does_it_matter%E2%80%9D\" >&#8220;What is total value locked (TVL) in crypto and why does it matter?&#8221;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-total-value-locked-tvl-in-crypto-and-why-does-it-matter\/#Which_crypto_has_the_highest_TVL\" >Which crypto has the highest TVL?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-total-value-locked-tvl-in-crypto-and-why-does-it-matter\/#How_is_crypto_TVL_calculated\" >How is crypto TVL calculated?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-total-value-locked-tvl-in-crypto-and-why-does-it-matter\/#Why_does_TVL_matter_in_DeFi\" >Why does TVL matter in DeFi?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-total-value-locked-tvl-in-crypto-and-why-does-it-matter\/#What_does_the_total_value_locked_mean\" >What does the total value locked mean?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9CWhat_is_total_value_locked_TVL_in_crypto_and_why_does_it_matter%E2%80%9D\"><\/span>&#8220;What is total value locked (TVL) in crypto and why does it matter?&#8221;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p style=\"float:right;margin:0 0 10px 15px;width:240px\"><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS9zdG9yYWdlL3VwbG9hZHMvdmlldy9hNDM1NDhjYzJkYmQ4MzI1NzU1MmJkMjZlZWI0MjJmNi5qcGc=.jpg\" class=\"type:primaryImage\"><\/p>\n<pre><code>                DeFi participants must be aware of the total value locked (TVL) indicator.Find out here what it is, how it is calculated and why it matters in DeFi.\n                &lt;h2&gt;Largest network by DeFi TVL&lt;\/h2&gt;&lt;p&gt;&lt;\/p&gt;&lt;p dir=\"ltr\"&gt;&lt;em&gt;In 2022, Ethereum <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>eared as the largest network by DeFi TVL, accounting for over half of the total DeFi volume worldwide.&lt;\/em&gt;\n<\/code><\/pre>\n<p>To give some perspective, the Ethereum DeFi network includes just under 500 protocols. It has a TVL of approximately $73 billion, with 64% of the market share, compared with BNB Smart Chain, which is the second-highest TVL at $8.74 billion in value at 7.7% of the market share, Avalanche with $5.21 billion and 4.5% of the market share and Solana with $4.19 billion and 3.68% of the market share.<\/p>\n<p>It\u2019s very easy to read a TVL crypto chart. It represents the TVL for the entire DeFi market is expressed in USD, with the percentage of movement in the last 24 hours and the crypto with higher dominance.<\/p>\n<p>The total value locked metric across all chains clearly indicates that Ethereum is the network with the highest TVL. In essence, TVL is an excellent indicator for the DeFi area of cryptocurrency and probably the most utilized to assess the health and growth of the market. While TVL growth signals a positive outlook for the market, however, its reliability must be taken prudently, as it is nearly impossible to interpret the indicator with precision.\u00a0<\/p>\n<p>Market volatility is one of the main variants that can highly affect the value of locked assets, starting with the price of ETH, whose platform is where most assets sit. The considerable increase in the price value of ETH inevitably affected the TVL of DeFi from 2020, but that means the total value locked can increase without any new users or capital coming into DeFi.<\/p>\n<p>Furthermore, because of the nature of DeFi services, money can easily move around and be counted multiple times, thus miscalculating protocols\u2019 liquidity capacity. As with every indicator, TVL is only an estimate of the market\u2019s condition and because of its flaws and approximation, it should not determine an investor\u2019s strategy.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Which_crypto_has_the_highest_TVL\"><\/span>Which crypto has the highest TVL?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\"><em>Due to the exceptional growth of DeFi in 2020, the combined TVL of all DeFi protocols increased fast and considerably by the end of 2021.\u00a0<\/em><\/p>\n<p>At the beginning of 2020, the combined TVL across all DeFi platforms was around $630 million, according to DefiLlama. In the first quarter of 2022, it had already reached over $172 billion in value.\u00a0<\/p>\n<p>More than half of that was in one protocol, MakerDAO, which remained one of the most prominent protocols together with Curve and Aave. Curve is the crypto with the highest TVL and portion of the market with 9.7% of market share and $17 billion TVL, followed by Lido with a $15.4 billion TVL, Anchor at $12.6 billion and MakerDao at $11.5 billion.<\/p>\n<p>\u00a0<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_is_crypto_TVL_calculated\"><\/span>How is crypto TVL calculated?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\"><em>Due to ceaseless new protocols emerging in the DeFi space, it may be challenging to establish the exact TVL of the overall market and determine if a specific DeFi platform is a safe option for end-users.\u00a0<\/em><\/p>\n<p dir=\"ltr\">However, participants can opt for more established protocols using a TVL metric of $1 billion, which should be a secure enough prospect. A higher TVL is better, as it should indicate a healthy platform in high demand with a strong developers team and a valuable use case. All of which should attract more participants and investors, contributing to the project\u2019s rise of the TVL.<\/p>\n<p dir=\"ltr\">On the other hand, a red alert should be raised when DeFi protocols with lower TVL are offering high yields. These might well be promotions, for example, for new platforms that want to gain market shares, but could also be scams because little or no participants have trusted them with their assets.<\/p>\n<p dir=\"ltr\">Three main factors are considered to calculate a DeFi protocol\u2019s TVL:<\/p>\n<p dir=\"ltr\"><img loading=\"lazy\" decoding=\"async\" width=\"1450\" height=\"952\" alt=\"\" src=\"https:\/\/s3.cointelegraph.com\/storage\/uploads\/view\/d68810c5dfff4510d96d3c9b06ef2ead.png\"><\/p>\n<p dir=\"ltr\">It is straightforward to calculate the crypto TVL. First, the market cap of an asset has to be found by multiplying the DeFi project\u2019s supply by the current price. Then, dividing the market cap by the maximum circulating supply, the TVL is revealed.<\/p>\n<p>When dividing the total market cap of a locked asset by the total value locked, we obtain the TVL ratio. The TVL ratio can help determine if a DeFi asset is undervalued or overvalued. If the ratio is under 1, the asset is usually undervalued and more attractive to investors. When the market cap exceeds the TVL in crypto, the asset might be overvalued, leaving little to no room for growth.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Why_does_TVL_matter_in_DeFi\"><\/span>Why does TVL matter in DeFi?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\"><em>For DeFi platforms to function, they require capital to be deposited as loan collateral or liquidity in trading pools. TVL matters because it indicates the capital\u2019s impact on DeFi applications\u2019 profits and usability for traders and investors.\u00a0<\/em><\/p>\n<p>When the TVL of a DeFi platform rises, it is followed by an increase of liquidity, popularity and usability. These factors contribute to the project\u2019s success. A higher TVL means more capital is locked in DeFi protocols, with participants enjoying more considerable benefits and proceeds. A lower TVL implies lower availability of money, resulting in lower yields.<\/p>\n<p dir=\"ltr\">DeFi protocols&#8217; market share can be easily identified through analytics firms\u2019 platforms like DeFi Pulse and DefiLlama, which provide data on the amount of crypto assets locked in their respective smart contracts.<\/p>\n<p dir=\"ltr\">DeFi participants who track down TVL on DeFi Pulse must know that the platform monitors protocols\u2019 smart contract movements on the Ethereum blockchain only by extracting the total balance of Ether (ETH) and ERC-20 tokens. DefiLlama, on the other hand, calculates the TVL by extracting the total balance of all of the DeFi chains combined or each individual platform separately.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_does_the_total_value_locked_mean\"><\/span>What does the total value locked mean?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\"><em>Since decentralized finance (DeFi) boomed in 2020, financial market experts have come to terms with a new type of investment and have looked at ways to measure its performance.\u00a0<\/em><\/p>\n<p>Other than market capitalization, trading volume and total and circulating supply, total value locked (TVL) is one crypto indicator that is popular among DeFi investors to assess the overall value of assets \u2013\u00a0in United States dollar or any fiat currency \u2013 deposited across all DeFi protocols or in a single DeFi project.\u00a0<\/p>\n<p>DeFi assets include rewards and interest, coming from typical services such as lending, staking and liquidity pools, provided in the form of smart contracts. TVL in staking, for example, is a particularly useful indicator for investors looking to support the DeFi platforms with the highest rewards. It is the total value locked in the DeFi staking protocols and represents the amount of assets deposited by the liquidity providers.\u00a0<\/p>\n<p>In 2022, TVL has reached nearly $2 billion globally, growing from $400 million in the previous two years. With the increasing popularity and value of DeFi in the cryptocurrency space, TVL has become an essential metric for investors who want to assess if the whole ecosystem or a single protocol is healthy and worth investing in.<\/p>\n<p>While TVL is simply defined as the total value of cryptocurrency locked in a smart contract, there are underlying conditions that may affect the value of DeFi projects.\u00a0<\/p>\n<p>Various elements concur on TVL\u2019s worth other than deposits, withdrawals and the amount a protocol is actually holding. The TVL also changes with the value of the fiat currency or the native token. Some protocols\u2019 deposits may be denominated in the project\u2019s native token, so its TVL varies with its value. If a specific token grows in value, so does the protocol\u2019s TVL, too.<\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/explained\/what-is-total-value-locked-tvl-in-crypto-and-why-does-it-matter\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;What is total value locked (TVL) in crypto and why does it matter?&#8221; DeFi participants must be aware of the total value locked (TVL) indicator.Find out here what it is, how it is calculated and why it matters in DeFi. &lt;h2&gt;Largest network by DeFi TVL&lt;\/h2&gt;&lt;p&gt;&lt;\/p&gt;&lt;p dir=&#8221;ltr&#8221;&gt;&lt;em&gt;In 2022, Ethereum appeared as the largest network by DeFi&#8230;<\/p>\n","protected":false},"author":1,"featured_media":451173,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1024_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS9zdG9yYWdlL3VwbG9hZHMvdmlldy9hNDM1NDhjYzJkYmQ4MzI1NzU1MmJkMjZlZWI0MjJmNi5qcGc=.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-451172","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/451172","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=451172"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/451172\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/451173"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=451172"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=451172"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=451172"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}