Total value locked (TVL)

Total value locked, or TVL, sums the value of tokens held in a protocol’s smart contracts, such as collateral in lending markets, liquidity in exchange pools and assets in staking or yield vaults. Data providers calculate it for individual protocols, chains and the DeFi sector as a whole, usually in dollar terms.

TVL is a rough gauge of capital commitment and user trust, but it has limitations. It moves with token prices even if no new deposits occur, it can double count when the same assets are reused across protocols, and it can be inflated by incentive programs that attract short-term capital. Analysts therefore pair TVL with fees, revenue, active users and trading volume to judge real activity.

For allocators, TVL is a starting point for comparing protocols and chains but not a valuation measure on its own. Example: a lending protocol’s TVL rises 30% in a month, but analysis shows most of the gain came from higher token prices rather than new deposits.