Total Value Locked (TVL) is the total value of assets locked in a DeFi protocol like staking, yield farming, and lending collaterals. TVL has been used to assess how useful and popular the entire DeFi ecosystem or a specific project is. It can also be used as an indicator for general DeFi market circumstances. This post will explain what TVL is, why it is essential, and how to apply this helpful indicator.

What is TVL?

To begin, the decentralised finance (DeFi) ecosystem is built on the blockchain network, which has no central authority. This signifies that the system's contributors are part of a decentralised network. Contributors lock their assets in a liquidity pool in order to establish a functioning decentralised financial system. The liquidity pool may comprise funds staked, farmed, or used as loan collateral. The entire value of these locked assets is measured by TVL.

So how is TVL determined? It is a rather simple mathematical method. TVL is computed by multiplying the assets locked up as collateral in an ecosystem by their current value. In a short, we may say:

Total Value Locked = invested assets * the asset's price.

Why is TVL important?

New projects are offered on a regular basis as investor interest in DeFi rises. With so many new ideas popping up, hearing about scam projects is unsurprising. To guarantee that a project is trustworthy and healthy, various signs must be checked. When investing in a DeFi enterprise, consider market capitalisation and transaction volume.

Yet, TVL is another component that has a unique relevance in the world of DeFi. The higher the TVL, the more dependable and healthy the project. Furthermore, it may be utilised as a signal for the overall DeFi market circumstances.

In addition, some investors use TVL to see if the project they intend to invest in is overvalued or undervalued. This can be done by calculating the TVL ratio. Three factors are critical for calculating the TVL ratio: 

project’s supply

maximum circulating supply

current price

To get the TVL ratio of a DeFi project, do the following two steps:

Multiply the project’s supply by its current price. This gives you the total market capitalization of that project.

Divide the market cap by the maximum circulating supply.

If the final amount is less than one, the project is undervalued and hence appealing to investors. But, if it is more than one, the market is likely overpriced and less appealing for investment.

Conclusion

TVL is the entire asset value that is locked in the universe of DeFi. TVL can serve as a benchmark for the general state of the DeFi ecosystem and particular initiatives. Moreover, TVL is a reference measure for a DeFi protocol's utilisation, value, and legitimacy.

-Alok S K

#DeFi #dyor #tvl

Introduction:

In the dynamic world of cryptocurrencies, decentralized finance (DeFi) has emerged as a revolutionary concept, enabling individuals to access financial services in a transparent and permissionless manner. One crucial metric that showcases the success and popularity of DeFi projects is Total Value Locked (TVL). This article aims to provide a comprehensive understanding of TVL and explore some notable projects with higher TVL.

What is Total Value Locked (TVL)?

Total Value Locked, commonly referred to as TVL, is a metric used to measure the total amount of cryptocurrency tokens or assets locked within a specific DeFi protocol or smart contract. TVL represents the cumulative value of funds deposited, borrowed, or utilized within the protocol, providing insights into the overall adoption and user activity.

Importance of TVL:

TVL plays a crucial role in evaluating the success and growth of DeFi projects. Higher TVL indicates the confidence and trust of users in a particular protocol. It reflects the extent of funds being deployed, highlighting the attractiveness and utility of a platform.

Prominent DeFi Projects with Higher TVL:

1. Compound Finance:

Compound Finance is one of the pioneering DeFi platforms, offering lending and borrowing services. It allows users to earn interest by depositing their cryptocurrencies as collateral and enables others to borrow against these collateralized assets. Compound Finance has consistently ranked among the projects with higher TVL, reflecting its popularity and trust within the community.

2. Aave:

Aave is a decentralized lending platform that facilitates lending and borrowing activities. It stands out for its unique features like flash loans, which allow users to borrow assets without collateral, provided the borrowed amount is returned within the same transaction. Aave has achieved significant TVL figures, demonstrating its ability to attract users seeking lending and borrowing services.

3. MakerDAO:

MakerDAO is a decentralized autonomous organization responsible for the development and governance of the stablecoin Dai. It operates on the Ethereum blockchain, allowing users to lock their cryptocurrency assets as collateral and generate Dai stablecoins. MakerDAO’s TVL has witnessed considerable growth, showcasing its status as a trusted decentralized stablecoin provider.

4. Uniswap:

Uniswap is a decentralized exchange (DEX) built on the Ethereum blockchain, enabling users to swap ERC-20 tokens directly from their wallets. Uniswap employs an automated market maker (AMM) model and provides liquidity through liquidity pools. Its TVL has been consistently high, emphasizing the popularity of decentralized exchanges and the demand for seamless token swapping.

5. PancakeSwap:

PancakeSwap is a decentralized exchange and Automated Market Maker (AMM) platform running on the Binance Smart Chain (BSC). It offers similar functionalities to Uniswap but with lower transaction fees due to its integration with BSC. PancakeSwap has rapidly gained traction, resulting in a significant TVL figure on the Binance Smart Chain.

Conclusion:

Total Value Locked (TVL) serves as an essential metric for assessing the success and adoption of decentralized finance projects. It reflects the amount of cryptocurrency tokens locked within a specific protocol, demonstrating user trust and activity. Projects like Compound Finance, Aave, MakerDAO, Uniswap, and PancakeSwap have consistently achieved higher TVL figures, showcasing their significance and contribution to the DeFi ecosystem. As the DeFi space continues to evolve, monitoring TVL will remain an integral part of evaluating the performance and popularity of various projects.#tvl #defiprotocols #BinanceTournament #Ethereum

Introduction:

The Web3 ecosystem is experiencing continuous growth and innovation, with decentralized applications (dApps) playing a vital role. These disruptive software programs, running on blockchains and free from centralized control, aim to address privacy and censorship concerns prevalent in Web2 applications. As the dApp landscape evolves, industry analysts closely monitor its progress and impact on Web3 adoption. Recently, DappRadar, a global dApps tracking platform, published a report shedding light on the state of dApps in Q2 2023.

Growing Engagement and Market Shifts:

The report highlighted a significant development in the form of an almost 8% increase in daily Unique Active wallets (dUAW) compared to the previous quarter. The rise in engagement signified the resilience and recovery of the market, which had faced regulatory challenges throughout Q2. While gaming retained its dominance in the dApp industry, accounting for 36% of the market share, decentralized finance (DeFi) witnessed substantial growth, capturing 32% of the market. This shift was attributed to the memecoin frenzy and increased activity by AirDrop hunters during April-May.

Challenges in the DeFi Landscape:

However, the DeFi sector faced headwinds during the quarter. The total value locked (TVL) in DeFi smart contracts experienced a 7% decline from the previous quarter. After a remarkable recovery in Q1, this drop raised concerns. Regulatory clampdowns by U.S.-based agencies could be one reason behind the decline, as indicated by the 19% TVL drop in the BNB Chain due to the lawsuit against parent company Binance. Additionally, extended periods of low market volatility deterred users from engaging in lending and borrowing activities, impacting DeFi volumes across decentralized exchanges (DEX).

NFT Market Downturn:

The NFT market also felt the impact of the market downturn, with a 38% drop in total trading volume, amounting to $2.9 billion in Q2. However, the decrease in sales was relatively mild, indicating sustained interest in NFTs among individual traders despite a decline in large-volume trades. The report highlighted the growth of Ordinals, the protocol facilitating the minting of fungible and non-fungible tokens on the Bitcoin network. Ordinals experienced an impressive 2834% increase in trading volume during Q2, driven by growing interest from retail traders and the BRC-20 token mania in May.

Conclusion:

The Q2 report from DappRadar provides valuable insights into the evolving dApp landscape. The rise in daily Unique Active wallets signifies market resilience, while shifts in dominance from gaming to DeFi highlight the sector's growth. However, challenges such as regulatory pressures and low market volatility affected the DeFi landscape and decentralized exchanges. The NFT market also experienced a downturn in trading volume, although sales remained relatively stable. The remarkable growth of Ordinals demonstrates the growing interest in minting tokens on the Bitcoin network. As the Web3 ecosystem continues to mature, monitoring these trends is crucial to understanding the trajectory of decentralized applications and their impact on the decentralized web.

#trending #dapps #nfts #gaming #tvl