Total value locked (TVL) is the total of all crypto assets held in decentralized finance (DeFi) protocols. TVL has emerged as a key metric for measuring health and growth in the DeFi sector. It includes all the tokens deposited in DeFi protocols offering services that include staking, lending, and liquidity pools. A protocol’s TVL changes when investors or users deposit or withdraw in the DeFi pools.
TVL is used to determine whether the value of a DeFi project’s token is undervalued or overvalued. The token’s market cap is compared to its TVL. If the comparison leaves a lot to be desired, then there is a chance that the project’s token is not trading within its range. Ethereum used to claim the lion’s share of the DeFi market; however, the gap is closing as protocols such as Terra, Solana, Tron, Avalanche, Fantom, and others have joined the competition.