What Is A TVL In Cryptocurrency?

In the realm of crypto, there are numerous indicators that help to assess the market's condition and understand which projects are worthy of investment. Today, we will discuss one of the key elements: TVL, or Total Value Locked. We will explain why moneymen primarily pay attention to this metric in the first place. What TVL is, how to calculate it, and which coins are suitable for this purpose–you’ll learn about everything in our article.

Meaning Of TVL In Cryptocurrency

TVL is the total amount of assets, such as tokens, that providers of capital lock in the smart contracts of a platform or protocol. You have the ability to allocate these sums for staking, farming, or participating in other DeFi programs. Typically, the higher the TVL of a project, the more secure and valuable it is.

In simplistic terms, Total Value Locked is a measure of users' trust in a platform. The more funds users lock, the more they trust the platform with their assets. To evaluate the significance of TVL in the cryptocurrency market, it’s essential to understand that this metric holds importance not only for the platforms themselves but also for investors. A high TVL indicates that users are willing to "freeze" their funds while anticipating potential profits. This can also reflect the liquidity of the protocol and its resilience to market fluctuations.

In real numbers, TVL can reach billions of dollars, depending on the platform's popularity. For example, the total blockchain value in the decentralized finance market has grown steadily in recent years. It reflects the growing interest in DeFi services and cryptocurrencies in general. The value fluctuates based on the price movements of the underlying token. When it becomes more expensive, TVL increases, and vice versa.

How To Check TVL?

If you want to follow the changes and choose the best projects for investment, it’s important to know how to check the current TVL of a particular one. You calculate the total value locked on the blockchain by summing the overall value of digital assets. They can reside on a decentralized platform or in an app. Among the most popular tools, you can find specialized websites for monitoring crypto and DeFi protocols.

To calculate TVL, follow these simple steps:

1. Determine the total value of all assets currently locked on the platform. This includes all locked assets, such as collateral, staked assets, and borrowed assets.
2. Convert the asset value into a standard unit, such as USD or another fiat currency.
3. Sum the total cost of all assets to determine the TVL.

Great job! You've successfully calculated the data.

Why Does TVL Matter?

TVL plays a crucial role in the crypto world, not only as an indicator of activity in DeFi but also as a benchmark for ordinary users and investors. This metric holds multifaceted significance for all market participants, from individual traders to major players. Market value reflects the valuation of a protocol by both active and passive investors. They allocate funds to the protocol for long-term profit but do not use it.

In addition, TVL is one of the important indicators of the ecosystem's and the market's overall condition. Essentially, it shows the amount of funds that users have locked in various protocols and smart contracts. The higher the TVL, the more investments get attracted to the cryptocurrency space.

For ordinary users, TVL is essential because it indicates how much demand specific crypto and platforms have. When a large amount of savings gets locked, it may signify high popularity and security of the project. So, it means that the user can trust it.

For investors, TVL serves as a useful tool for analyzing opportunities in the market. A high TVL demonstrates demand and may signal strong investment potential. Investors often look at TVL to assess the profitability of certain crypto projects and their future prospects.

Increasing the amount of coins allows projects to maintain high liquidity and stability, especially during market fluctuations. Platforms with high TVL can offer better conditions for staking and farming, as well as attract new assets and users, which fosters further ecosystem development. Choose reliable platforms, and Cryptomus could be one of them.

Top Tokens By TVL

At the time of writing, several cryptocurrency projects stand out as leaders in terms of total value locked. They hold billions of dollars within their protocols. Here they are:

1. Ethereum — The undisputed leader by TVL, thanks to its widespread use in dApps and interaction with smart contracts. ETH continues to hold the top position as the foundation for numerous DeFi projects.
2. Binance Coin — The native token of Binance Smart Chain, widely used in staking and farming. High TVL in the Binance ecosystem reflects significant interest in deals on this platform.
3. Tron — A popular coin due to its high transaction speed. Recently, its TVL has been steadily increasing.
4. Avalanche — A crypto rapidly gaining popularity due to its scalability.
5. Polygon — A network with high operation speeds and low fees, making it attractive for DeFi developers. Also, its coin, MATIC, is growing quickly thanks to many programs utilizing Polygon.
6. Solana — One of the fastest-growing networks, gaining attention due to its high throughput.
7. Arbitrum — A Layer 2 solution for ETH that reduces gas costs and speeds up transactions.
8. Optimism — Another Layer 2 solution for Ethereum. It focuses on increasing efficiency and reducing operations costs.
9. Fantom — A smart contract platform offering high performance and low commissions.
10. Cosmos — Enables blockchains to interact with one another, creating a scalable ecosystem.

These projects highlight the importance of TVL as a key indicator for assessing platform stability and popularity. A high TVL shows that these projects attract significant capital, which may indicate successful development and long-term potential.

In both traditional finance and digital asset markets, financial metrics are vital indicators that help investors evaluate the prospects of stocks, projects, or crypto assets in general. Total Value Locked reflects the health and growth of the decentralized finance ecosystem, offering valuable insights into investor interest, network security, and dynamic.

Which token with the highest TVL would you choose? Share your thoughts in the comments.