Total Value Locked (TVL)

What is TVL?

Total value locked (TVL) is the overall value of crypto assets deposited in a decentralized finance (Defi) protocol [1]. The meaning is the same across different platforms but the way it is calculated is different. Like, for Uniswap being a DEX, the TVL would be the number of fees collected by the platform. For AAVE being a borrow and lending platform, TVL would be the number of assets deposited by the users plus the liquidity in each asset.

How is TVL calculated?

As the definition states, TVL is the overall crypto assets value, usually in USD ($). To calculate the value, we need the amount of each asset and their USD value.
Let’s suppose there is a
  • Platform P,
  • Assets A = {A1, A2, … , An }
  • USD values V = {V1, V2, … , Vn}.
  • Q(a), a function that returns quantity or the number of tokens of the required asset.
TVL = ( Σ Q ( A[i] ) * V[i] ) for i = { 1, 2, …, n}
Example -
Suppose Credy have a money jar with $ 1000 and 10 ETH in it at a point of time. So we can say that Credy has $1000 and 10 ETH as the total value locked. After a while, his friend asked him for the help of $500 and 2 ETH as he wanted to provide liquidity to a pool. So, he unlocked his jar and lent him the money, and locked it again. After this, he had a total value locked of $500 and 8 ETH.
Since TVL is calculated in $ and assuming 1 ETH = $3000, we can say his TVL dropped from $ 31000 to $24500 after helping out his friend.

TVL Modelling

A detailed analysis for the Data modeling can be found here.


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