Value locked in DeFi is nuanced

TLDR; For better or worse, the crypto industry has fixated on Total Value Locked (TVL) in DeFi protocols as the unit of measure to benchmark the traction / adoption of this nascent industry. In this post, we make the case that it’s neither and the metric tracks factors irrelevant to traction/adoption. The entirety of this metric depends on the ETH-USD market.

Total Value Locked (TVL) is akin to Assets Under Management (AUM) — a common metric in finance that measures the size and “success” of an investment management firm. Investment firms generally charge a fee as a percentage of AUM, so there’s a tendency to bloat your AUM.

In the case of DeFi, it functions as a rallying cry for Ethereum fans to showcase DeFi adoption. If Ethereum were a startup, a chart that goes up and to the right is exactly what investors and the press want to see.

But as the title alludes to, this metric has its nuances.

Simply put, the entirety of this metric depends on the ETH-USD market.

For the complete explanation on this, go on https://www.covalenthq.com/blog/2004-value-locked-defi-nuanced/