What is TVL

TVL, which stands for Total Value Locked, is defined as the total value of crypto assets locked in a smart contract. It's a commonly used metric to measure the development of a single or a class of DeFi protocols, typically measured in US dollars.

What are smart contracts? What is DeFi? Please refer to the "What is Smart Contract" and "What is DeFi" chapters.

Typically, the service of DeFi protocol is based on crypto assets locked in the protocol's smart contracts, and the TVL is somewhat reflective of the DeFi protocol's liquidity. A higher TVL generally represents a better user experience. For example, the higher the liquidity of the LP pool in AMM DEX, the lower the slippage loss suffered by users when trading.

What is DEX, and what is LP? Please refer to "What is DEX" and "What is Liquidity and LP Pool" chapters.

At the same time, the liquidity locked in DeFi protocols is usually provided by the users, so the TVL also reflects the active users of the DeFi protocol to some extent. A higher TVL generally represents a larger group of active users.

Popular TVL data website: DeFiLlama