What is Total Value Locked (TVL)?
Total Value Locked (TVL) is one of the crypto metrics exclusive to blockchains, applications, or projects that allow staking on their protocols. It is mostly used in DeFi and yield farming markets. DeFi projects even use the metric to show how the protocol is doing. Therefore, you can easily find it on the websites of various services.
In simple terms, Total Value Locked (TVL) represents the amount of tokens that people have locked into the protocol to provide liquidity or security, and earn yield.
It is an important metric for the following two reasons:
It shows the attractiveness of the coin in the market and among the community for staking, either because they want to receive passive income or because they want to operate within the ecosystem through governance or utility. Keep in mind that people who do not believe in a project sell the tokens, they do not use them for staking.
The price of the token is usually more reliable the higher the total value locked is. Since the value of tokens can fluctuate, the total value locked follows that same price fluctuation. If the price of a token goes up, the total value locked will also go up.
