Total Value Locked (TVL) Explained: A Comprehensive Guide 📚✨
Crypto investors and traders often encounter the term “Total Value Locked” (TVL) in the cryptocurrency space.🔒🪙
Key Points:
What’s TVL? 🤔 TVL measures the value of cryptocurrency or assets staked in a decentralized application (dApp). It’s a metric investors use to gauge the worth of decentralized finance (DeFi) applications and protocols.
How TVL Works: TVL encompasses all crypto or tokens deposited into a DeFi protocol for functions like lending, staking, or liquidity pools. The TVL is dynamic 📈📉 and fluctuates based on the price or worth of the token in the DeFi project.
Calculating TVL 🧮: The formula is straightforward. Multiply the price of the crypto assets in USD by the total number of staked, locked, and tokens in the liquidity pool of the protocol. It differs from a token’s market capitalization.
Importance of TVL 💡: TVL is crucial because:
Indicates a DeFi protocol’s health.
Helps in growing a DeFi protocol’s user base.
Gives insights into a DeFi protocol’s activities.
Aids in identifying potential DeFi scams.
A Glimpse into TVL’s History 🕰: The DeFi industry, and consequently TVL, witnessed remarkable growth after the 2020 pandemic, with a surge in users, investors, and DeFi protocols.
Current TVL Data 📊: As of the article’s date, TVL across all blockchains is $44.32 billion. Ethereum dominates with over 50% of the TVL. Leading DeFi protocols include Lido, MakerDAO, AAVE, Uniswap, and Curve Finance.
Where to Check TVL 🔍: Platforms like DeFi Lama and DeFi Pulse are popular for checking TVL across multiple blockchains and protocols.
TVL’s Extended Metrics 💼: If we consider additional details like staking, borrows, and rewards, TVL can see a significant increase, even reaching figures like $77.68 billion.
In summary, TVL is a pivotal metric in the DeFi space, guiding investors and users alike in understanding the value and potential of a DeFi protocol. 💰🌐🚀
To dive deeper, check out the complete article: https://droomdroom.com/total-value-locked-explained/
