# What is TVL? Why are DeFi investors paying attention to this metric?

In DeFi, there is a term that cannot be avoided: **TVL (Total Value Locked)**. Simply put, it is the total amount of funds that all users have in DeFi protocols.

The global TVL of DeFi has now surged to **$169 billion**, compared to only $40 million two years ago. This number has skyrocketed, what does it indicate? It indicates that more and more people are earning yields in DeFi.

How is # # calculated?

For example, on a certain Decentralized Finance platform:
- Deposit 1000 dollars to participate in Staking and earn rewards
- Lend out 1000 dollars to earn interest
- Deposit another 1000 USD to provide liquidity and earn trading fees.

The TVL of this platform is 3000 USD. It's that simple.

# # How can investors use this indicator?

**Core Usage**: Market Cap ÷ TVL = Valuation Multiple (similar to the P/B ratio of stocks)

Take **Aave, Uniswap, PancakeSwap** as examples:
- Aave: 0.29x (relatively cheap)
- PancakeSwap: 0.85 times
- Uniswap: 2.40x (relatively expensive)

The lower the multiple, the more worth watching. The entire DeFi market's multiple is currently 0.70, indicating that there is still no excessive speculation.

**Another Use**: To screen whether a project is safe or not. It's best to only engage with platforms that have a TVL of over $1 billion and have been audited by security agencies like CertiK. Even small platforms offering high returns could be scams.

Want to play with Decentralized Finance? This indicator must be understood.