TVL

TVL stands for total value locked. It is the combined dollar value of every asset deposited in a DeFi protocol's smart contracts, whether that means lending markets, liquidity pools, staking contracts, or vaults. You will also see it quoted for whole blockchains, where it adds up every protocol on that chain.

Mechanically, TVL is a simple sum: the token balances held by a protocol's contracts multiplied by each token's current price. So it moves for two separate reasons. People deposit or withdraw, and prices change. A protocol where nobody has moved a single token can still see its TVL drop by half in a bad market, because the deposited assets are worth less in dollars.

For someone buying or holding small tokens, TVL matters mostly as a liquidity signal. In a DEX pool, a larger TVL generally means you can trade a bigger amount with less slippage and exit a position more easily. A token whose only pool holds a few thousand dollars can look fine on a chart and still be nearly impossible to sell without crashing the price.

TVL is also easy to misread. Protocols often count their own token when it is staked, which inflates the number in a circular way. The same capital can be counted twice when a receipt token from one protocol is deposited into another. Liquidity attracted by temporary reward emissions can disappear as soon as the rewards stop, so a big number tells you little about how sticky it is.

When you look at a TVL figure, check how the dashboard calculates it, since methodologies differ and the same protocol can show different numbers. Look at whether the value is concentrated in a few wallets and whether the liquidity is locked or can be pulled by the team. Comparing TVL with market cap gives a rough sanity check, but it does not tell you whether a project is sound.