'Total Value Locked’, Here’s What It Means in DeFi

The magnitude of the TVL is basically a metric that shows how popular a lending or swapping DeFi app is.

By Radhika Parashar | Updated: 12 August 2022 18:25 IST

Highlights

TVL is considered an important metric for crypto investors
TVL reflects popularity of lending and swapping DeFi apps
Ethereum has most amount of TVL

'Total Value Locked’, Here’s What It Means in DeFi

The Ethereum blockchain has the most amount of total value locked

Photo Credit: Pixabay/ Sergei Tokmakov

The last few months, several cryptocurrencies have found themselves on the roller-coaster ride of the market. In the midst of this volatile period, several crypto assets saw a pull-out from their investments in decentralised finance (DefI). The total value held by any DeFi platform within its smart contracts is called the Total Value locked or TVL.

The magnitude of the TVL is basically a metric that shows how popular a lending or swapping DeFi app is, in-terms of gaining attention from active and monthly transacting users.

TVL is the amount of user funds deposited in a DeFi protocol. These funds could be vested in the project for several functions like staking, liquidity pools, or lending.

How Diverse Web 3.0 Opportunities Can Accelerate India’s Digital Economy

The metric allows investors to understand which DeFi platforms are more lucrative for investments. The higher the TVL of a DeFi platform, the better it is considered.

While the market cap is indicative of the appreciation of a DeFi from active, passive investors – TVL denotes the popularity of a project with the number of active users. It is a good measure to evaluate the robustness of a project.

If someone wishes to measure the future potential of a DeFi project, then one needs to check its market cap. But if someone wishes to check the current scenario of a project, TVL is the indicator you want to consider.

Oasis DeFi App Banishes High-Risk Wallet Holders, Withholds App Access

Industry body Nasdaq says that it's best to only use platforms with a TVL greater than $1 billion (roughly Rs. 7,969 crore) and audited by blockchain cybersecurity firms like CertiK.

The Ethereum blockchain has the most amount of total value locked in decentralised exchanges and lending protocols, as per CoinDCX.

What should you make of Realme's three new offerings? We discuss them on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.

Affiliate links may be automatically generated - see our ethics statement for details.

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.