Definition
TVL is the primary metric for measuring DeFi protocol adoption and size. It represents the dollar value of all assets deposited in a protocol's smart contracts. Higher TVL generally indicates greater trust and utility, but can be inflated by recursive depositing and double-counting across protocols. TVL should be evaluated alongside user count, transaction volume, and protocol revenue.
lightbulb Example
A DeFi lending protocol has $3B TVL: $1.5B in ETH collateral, $800M in stablecoins, and $700M in other tokens. This makes it a top-10 DeFi protocol by TVL, suggesting significant user trust and adoption.
verified_user Key Points
- Primary measure of DeFi protocol size
- Dollar value of assets in smart contracts
- Can be inflated by recursive deposits
- Evaluate with user count and revenue for full picture