Total Value Locked

TVL is produced by reading the token balances held by a defined set of contracts and pricing each balance in US dollars. It is a scale measure of how much capital is sitting inside a system at one instant, not a measure of what the protocol owns, earns, or controls. Depositors keep ownership and can generally withdraw without notice.

How it is computed

sum over all tracked contracts of (token balance x token price in US dollars) at the snapshot time

Where it misleads

TVL rises and falls with the price of the deposited assets even when nobody deposits or withdraws anything, so a large part of any move is a price index rather than a flow. Double counting is routine: a deposit that mints a receipt token which is then deposited elsewhere is counted in both places, and a liquid staking token redeposited into a lending market and used again as collateral can be counted three times. Providers disagree over whether staked native assets, borrowed balances, protocol-owned liquidity and the protocol's own governance token belong in the total, and a protocol that supplies its own token into its own pool can raise its TVL without a single external deposit. For layer 2 networks, the value escrowed in bridge contracts on the settlement chain and the value of assets held on the layer 2 itself are different numbers that are quoted interchangeably.

The equity comparison, and why it fails

Assets under management. The analogy fails because there is no client agreement, no manager discretion and no redemption notice period: TVL is self-custodied collateral that can leave in a single block, and part of it can be the protocol's own token.

Reading a high or a low value

A higher figure means more capital is currently deposited in the tracked contracts and a lower figure means less. Because it moves with asset prices, changes are best read alongside the price of the assets that make up the deposits.