DeFi 10101 September 2021

What is TVL in Decentralized Finance?

TVL in Decentralized Finance

Summary

  • TVL represents the money held in a decentralized exchange, ecosystem, or app
  • TVL ratio is calculated using circulating supply, maximum supply, and the currency price
  • TVL measure’s a DeFi protocol’s success

TVL is a common term used in DeFi reference points. What exactly does it mean?

TVL is an acronym for Total Value Locked. It is a term used to represent the number of assets currently staked in a specific DeFi protocol or the amount of money currently held in an exchange, decentralized application, or an entire DeFi ecosystem. It represents the total amount of underlying token supply secured by a given decentralized finance protocol.

TVL is also a number that is used to assess the overall health of a yielding and DeFi market. Factors considered when calculating the TVL ratio include the circulating supply, maximum supply, and currency price. In the ‘DeFi summer’ of 2020, the total value locked for the DeFi ecosystem grew from $662 million in January to over $11 billion in November. TVL is often used to show the success of decentralized finance.

Kibet Elikana
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