TVL (Total Value Locked) is a key metric in DeFi that represents the total value of all cryptocurrencies locked in a protocol, a DApp, or a blockchain.

A Measure of Trust and Adoption

TVL is a powerful indicator of a DeFi project's health and popularity. It represents the total amount of digital assets that users have committed to a protocol for purposes such as lending, staking, or providing liquidity. A high TVL suggests that a project is highly trusted by investors, who are willing to lock their assets into a smart-contract for a period of time.

TVL is a useful metric for comparing the size and influence of different DeFi protocols. For example, a lending-protocol with a high TVL is more likely to offer a wider range of loans and have a higher degree of liquidity. A high TVL can also indicate a high degree of user engagement and a strong sense of community.

Why TVL is a Key Metric

While a high TVL can be a sign of a successful project, it is not the only metric that matters. It is a good starting point for research but should be used in conjunction with other factors, such as a project's tokenomics, security audits, and the reputation of its team. Some projects can use a variety of strategies to artificially inflate their TVL, so it is important to be cautious.

For new investors, TVL can be a valuable tool for identifying popular and trusted projects in the DeFi ecosystem. It provides a quick and easy way to see where the majority of capital is being allocated.