Total value locked (TVL) is the total value of crypto assets stored and used in smart contract applications. This value refers to the amount of assets set aside in a DeFi protocol
What are the benefits of Total Value Locked (TVL)?
Total value locked (TVL) can provide benefits to DeFi users and developers, such as:
Measuring liquidity
TVL can indicate how easily you can trade crypto assets on a particular DeFi protocol. The higher the TVL, the more assets are available in the liquidity pool, so you can make transactions quickly and at a fair price.
Identify trends
TVL can reflect market interest and sentiment towards a particular DeFi protocol. If the TVL increases, it means there are more users and funds coming into the protocol, which could signal high demand or significant growth.
Conversely, if the TVL is decreasing, it means there is a lack of users and funds leaving the protocol, which could signal a decline in interest or stagnation.
Comparing protocols
TVL can help you choose a DeFi protocol that suits your needs and preferences. You can compare TVL between protocols that offer the same service, such as lending, exchange, or insurance, and see which is more popular, more stable, or more innovative.
How to Calculate Total Value Locked (TVL)?
Total value locked (TVL) can be calculated in a simple way, namely by adding up the total value of crypto assets stored in a particular DeFi protocol. Crypto assets can be coins, tokens, or stablecoins used as collateral, liquidity, or rewards.
For example, if there are 10,000 ETH, 5,000 DAI, and 2,000 UNI stored on the Uniswap protocol, then the TVL of Uniswap is the sum of the dollar values of those three assets.
However, there are several factors that can affect the accuracy and consistency of TVL, such as:
Price fluctuations
Crypto asset prices can fluctuate quickly and significantly, so the dollar value of assets held in DeFi protocols can also fluctuate. This can cause TVL to rise or fall without any change in the amount of assets held.
Asset doubling
Some DeFi protocols may use the same assets as collateral or liquidity for other protocols, resulting in those assets being counted twice or more in the TVL calculation. This can cause TVL to increase artificially, without the addition of new assets.
Calculation method
Each DeFi data or analysis platform may have a different calculation method for measuring TVL. Some platforms may use spot prices, while others may use weighted average prices.
Some platforms may also calculate TVL based on different times, such as 24 hours, 7 days, or 30 days.
Conclusion
Total value locked (TVL) is the total value of crypto assets stored and used in smart contract applications. TVL can provide benefits to DeFi users and developers, such as measuring liquidity, identifying trends, and comparing protocols.
However, you also need to be careful about factors that can affect the accuracy and consistency of TVL, such as price fluctuations, asset multiplication, and calculation methods.
How To Buy Crypto From Bittime
You can buy and sell crypto assets in an easy and safe way via Bittime. Bittime is one of the best crypto applications in Indonesia and is officially registered with Bappbeti.
To be able to buy crypto assets on Bittime , make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet. For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application.
Monitor price chart movements of Bitcoin (BTC) , Ethereum (ETH ), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Read also:
What is Aave? DeFi Platform Pioneer
What Is De.Fi: A Decentralized Security Revolution for Safe DeFi Investments
DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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