Total Value Locked for each Crypto project & blockchain revealing user trust & demand

What is Total Value Locked in Crypto?

Total Value Locked (TVL) is a metric used primarily in the context of decentralized finance (DeFi) platforms and applications built on blockchain networks. TVL represents the cumulative value of digital assets, such as cryptocurrencies or tokens, that are currently being held or “locked” within a DeFi platform. These assets are often locked by users to participate in various DeFi activities, such as:

Providing liquidity: Users deposit their assets into liquidity pools to facilitate decentralized trading on platforms like Uniswap, SushiSwap, or Curve. In return, they receive trading fees or other rewards.

Staking: Users lock their tokens in DeFi platforms to earn rewards, such as interest, governance tokens, or other incentives. This can be part of lending protocols like Aave or Compound, or staking in yield farming opportunities.

Borrowing and lending: In borrowing and lending protocols, users lock their assets as collateral to borrow other assets or earn interest by lending their tokens to other users.

Governance: Some DeFi platforms require users to lock their governance tokens to participate in decision-making processes, such as voting on proposals or changes to the platform.

Total Value Locked as a Valuation Metric for Defi Platforms in Crypto

Total Value Locked (TVL) is a metric primarily used to evaluate decentralized finance (DeFi) platforms and applications rather than individual cryptocurrencies.

A high TVL for a DeFi platform indicates that a large amount of assets are locked in the platform, which can suggest several things:

Trust: Users have confidence in the platform’s security and stability, as they are willing to lock significant amounts of assets in it.

Utility: The platform offers compelling use cases, such as attractive yields or valuable services, that encourage users to deposit their assets.

Adoption: A high TVL signals that the platform has achieved some level of adoption within the DeFi ecosystem, as more users are participating in its various activities.

A low TVL, on the other hand, can suggest that a DeFi platform is still in its early stages, lacks user trust, or has limited utility compared to other platforms.

Total Value Locked as a Valuation Metric for Blockchains

The TVL of DeFi platforms built on a specific blockchain or using a particular cryptocurrency can indirectly impact the perceived value and utility of that cryptocurrency.

While TVL itself is not a direct valuation metric for individual cryptocurrencies, it can indirectly influence their value. For example, if a DeFi platform built on the Ethereum network has a high TVL, it can increase the demand for Ether (ETH) to pay for transaction fees or to participate in the DeFi activities on the platform. This increased demand can subsequently drive up the value of Ether.

In addition staking in proof-of-stake (PoS) cryptocurrencies can contribute to the Total Value Locked (TVL) in the context of decentralized finance (DeFi) platforms and applications. When users stake their PoS tokens within a DeFi platform for various purposes, such as earning rewards, participating in governance, or providing liquidity, the value of these staked tokens becomes part of the platform’s TVL.

Does TVL include Staked Tokens for running Validator nodes on Proof of Stake Blockchains?

As a metric, TVL typically does not include tokens staked for running validator nodes on proof-of-stake (PoS) blockchains, as it is a separate activity from DeFi.

However, there are instances where staking in PoS blockchains can indirectly contribute to the TVL of DeFi platforms built on those blockchains:

DeFi platforms offering staking-as-a-service: In cases where users stake their PoS tokens through a DeFi platform to participate in the consensus process without running their own node, the value of those staked tokens would be included in the platform’s TVL.

Staking within DeFi platforms for other purposes: PoS tokens staked within DeFi platforms for purposes like providing liquidity, earning rewards, or participating in governance can be included in the platform’s TVL.

In general, TVL focuses on assets locked in DeFi platforms and applications, not on assets staked for running validator nodes on PoS blockchains

To assess the amount of staked tokens being used by validators to run nodes on a particular proof-of-stake (PoS) blockchain, you can visit the blockchain explorer for the specific cryptocurrency. Most PoS cryptocurrencies have dedicated blockchain explorers that provide detailed information about the network, including the number of validators, amount of tokens staked, and other relevant data. Examples of blockchain explorers include Etherscan for Ethereum, CardanoScan for Cardano, and Tezos Block Explorer for Tezos.

You can also look at blockchain analysis platforms that provide data on blockchain and crypto technology such as Chainparrot.