Importance of Total Value Locked(TVL) in Crypto

Total Value Locked is the net sum of all the cryptocurrencies locked across all Defi protocols. These include all the blockchains; both big and small. This value broadly signifies the total confidence of investors in cryptocurrencies. It is a valuable indicator that is popular in the Defi community to assess the overall value of cryptocurrencies.

Increasing TVL typically means people have greater confidence in cryptocurrencies. Similarly, decreasing the TVL value means a loss of that confidence. Current global TVL in crypto is at $114 Billion.

Locked Where?

To qualify to be calculated as TVL cryptocurrencies must be locked in various Defi platforms such as:

• Lending
• Staking(proof-of-stake)
• Liquidity Pools

The value is locked basically through smart contracts that contain specific instructions to accept or release funds. Other values such as active cryptocurrencies that are being traded in the markets; and coins and tokens in crypto wallets are not included. This is because such funds are highly liquid and can be sold instantly at will.

Current Status of TVL

You can see the current total value locked in all Defi Protocols through a platform such as Defi Llama.

As of now, the current TVL locked across multiple platforms is $114 Billion. At its peak during the crypto rush of Nov-Dec 2021, the TVL was above $250 Billion. The fall in TVL is resonating across multiple blockchains such as Bitcoin and Ethereum. The former has fallen more than 56% from its all-time high.

Please note that this Total Locked value is dynamic and keeps changing with each transaction. To see the current status of this TVL please visit Defi Llama.

Currently, Maker DAO has the highest value locked at almost $10 Billion. It dominates 8.71% of the total market. Interesting to note that Maker DAO only supports one Blockchain, i.e., Ethereum whereas in second place Curve Finance with $9.17 Billion in value and supports 10 blockchains. The third place is currently owned by AAVE Protocol with 3 blockchains supported with $8.9 billion in value. Here is a list of top protocols with their details:

Why does TVL matter?

TVL signifies broad confidence in cryptocurrency but is also critical in maintaining liquidity for multiple platforms and therefore the usability of a liquidity/lending pool. Remember many exchanges use liquidity pools to balance their transactions.

Higher TVL means there is a greater amount of cryptocurrencies that can be traded and hence higher usability of the pool. It is very similar to CASH in a traditional Economy.