# TVL: A Key Metric for Measuring Decentralized Finance Ecosystem

Have you heard of TVL (Total Value Locked)? In simple terms, it's the total amount of money that all users have deposited in DeFi protocols. Two years ago it was only $400 million, and now it has skyrocketed to $169 billion, with an outrageous growth rate.

How is it calculated? Suppose you staked 1000 USD on a DeFi platform for mining, then borrowed 1000 USD to earn interest, and then deposited 1000 USD to provide liquidity and earn trading fees—this platform's TVL would be 3000 USD.

How to use this indicator? The key is to look at the **market cap/TVL ratio**. For example, Aave is 0.29, Uniswap is 2.40, PancakeSwap is 0.85— the lower the number, the cheaper the token and the more solid the fundamentals. The overall ratio of the DeFi market is 0.70, which is still healthy, and there is no need to worry about a bubble (unless it soars to 3-4, then it's dangerous).

There is another use: to filter reliable platforms using TVL. Most of the small projects that promise high returns are scams. It is best to only use protocols with a TVL exceeding 1 billion USD and that have passed security audits by organizations like CertiK—just like how the financial reports of public companies must be audited.

In short, if you want to strike it rich in Decentralized Finance, you need to understand the number TVL first.