TVL (Total Value Locked)

When people want a quick read on how a DeFi protocol is doing, they check TVL first. It tells you how much user capital is sitting in that protocol's smart contracts—whether for lending, providing liquidity, staking, or anything else. A protocol with $5 billion in TVL has that much real money entrusted to it by users.

TVL works as a rough proxy for trust, usefulness, and adoption. Higher TVL generally means more people trust the protocol with their assets, the protocol offers enough value (yield, features) to attract capital, and the smart contracts have been stress-tested with serious money on the line.

That said, TVL can be misleading. The same dollar can get counted multiple times across connected protocols. For example, you deposit ETH in Lido (counted toward Lido's TVL), then use the stETH in Aave (counted toward Aave's TVL too). This "rehypothecation" inflates the aggregate DeFi TVL numbers.

TVL also swings with crypto prices since it's measured in USD. If ETH drops 20%, every ETH-heavy protocol's TVL drops by roughly the same amount—even if nobody withdrew a single token. That's why some analysts look at TVL in native token terms or adjust for price changes.

Major DeFi protocols by TVL include Lido (liquid staking), Aave (lending), MakerDAO (stablecoin), Uniswap (exchange), and Eigenlayer (restaking). Watching how TVL shifts across protocols gives you a feel for where capital is flowing in DeFi and which use cases are gaining or losing traction.