TVL (total value locked) is the aggregate value of assets users have committed to a decentralized protocol — typically counted in USD at current prices.

How it works

Lending protocols sum deposited collateral; DEXs may count liquidity pool balances; staking platforms include bonded tokens. Analytics sites aggregate TVL across chains with methodology differences — double-counting bridged assets remains a known issue. Token incentives (yield farming) can spike TVL temporarily as farmers chase emissions.

Investors compare TVL to revenue (fees generated), unique depositors, and retention after incentives end. Protocols with high TVL but low fee capture may subsidize growth unsustainably. Cross-chain TVL requires careful attribution when same capital loops protocols.

Founders pitching web3 infra should clarify whether TVL is protocol-level or ecosystem aggregate.

Why it matters

• Founders: Report TVL with methodology footnotes — chain, double-count policy, and incentive share. Pair with active addresses and fee growth.
• Investors: TVL alone does not justify token valuation; token allocation and unlock schedules modulate risk.

Common mistake

Treating inflated, incentive-driven TVL as durable product-market fit. When rewards drop, TVL cliffs reveal mercenary liquidity.

Related ideas

See also token allocation, DeFi yield, protocol fees, and on-chain metrics.