What does TVL represent in crypto and DeFi?

TVL represents the total value of assets locked or committed to decentralized apps (dApps), smart contracts, and other blockchain-based protocols, such as staking, liquidity provision, and yield farming.

How is TVL calculated?

TVL is calculated by aggregating the value of assets locked in various DeFi protocols. This involves listing all the assets, determining their quantity, calculating their value based on current market prices, and summing up the values.

Why is TVL important in crypto and DeFi?

TVL is important because it indicates user trust and confidence in a protocol’s security and reliability, reflects liquidity within a protocol’s pools, signals growth and adoption, and influences staking rewards.

What are some limitations and criticisms of TVL as a metric?

Some limitations and criticisms of TVL include liquidity misrepresentation, inflated TVL, protocol-specific bias, market volatility, lack of context, cross-chain comparisons, and TVL concentration.

What is the future of TVL as a crypto metric?

The future of TVL as a crypto metric will likely be shaped by growing interoperability, emerging use cases, regulatory clarity, the rise of decentralized exchanges (DEXs) and automated market makers (AMMs), and sustainability considerations. As the crypto and DeFi landscapes evolve, so too will the role and importance of TVL.

What is Total Value Locked (TVL) in Crypto and Why It Matters

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