Market Cap / TVL

Total value locked is the market value of all assets sitting in a protocol's smart contracts: collateral in a lending market, tokens in an automated market maker pool, deposits in a yield vault, or assets bridged onto a chain. This ratio divides circulating market capitalization by that figure. It answers a narrow question: how much market value the token carries for each dollar of capital users have entrusted to the system. The deposited assets belong to depositors, not to the protocol, and can be withdrawn in a single block.

How it is computed

circulating market capitalization / total value locked

Where it misleads

Total value locked double-counts routinely: ether staked through a liquid staking provider produces a receipt token, which is deposited into a lending market, borrowed against, and redeposited, and each leg can be counted. Because it is denominated in the deposited assets, a broad price decline cuts the denominator while the numerator falls too, so the ratio can be stable through a collapse in real activity or move sharply with no change in user behavior. Deposits chasing a temporary incentive program leave when the program ends, which makes the denominator a poor description of durable usage. For chains rather than applications, providers differ on whether natively staked tokens and bridged assets are included, which changes the figure by large factors.

The equity comparison, and why it fails

Price-to-book. The analogy fails at the first step: book value is the entity's own audited net assets, while total value locked is other people's property held in custody by code, carrying no ownership claim for the token holder and no accounting recognition anywhere.

Reading a high or a low value

A high value means the token's market capitalization is large relative to the capital currently deposited; a low value means it is small relative to that capital. Because deposits can move instantly and are valued at market prices, the ratio describes a moment rather than a stable characteristic.