Total Value Locked (TVL) is a metric used to measure the overall value of crypto assets deposited in a decentralized finance (DeFi) protocol. It represents the sum of all assets staked in platform smart contracts, including collateral, borrowed funds, and liquidity pool reserves. TVL encompasses user deposits and accrued interest/rewards from activities like lending, staking, and yield farming.
It is denominated in USD or another fiat currency for standardization. TVL helps assess a protocol’s adoption and health – growth indicates rising popularity and liquidity, while declines may mean falling yields. It also aids valuation by comparing market capitalization to total locked deposits. Higher TVL can mean more revenue potential for the platform. Tracking services aggregate TVL data across protocols to gauge expansion of the broader DeFi sector. Changes in asset prices and token values directly impact TVL, alongside user deposit/withdrawal activity. Fundamentally, TVL highlights capital inflow supporting DeFi networks.