TVL (Total Value Locked) is a metric used in the DeFi (Decentralized Finance) ecosystem to measure the total value of assets that are currently staked, deposited, or locked in a protocol or platform.

In more detail:

TVL = the total value (in USD or native crypto) of all assets held in a protocol.

These assets could be: 

1. Liquidity provided to decentralized exchanges (like Uniswap or Curve)

2. Collateral locked in lending platforms (like Aave or Compound)

3.  Funds in staking or yield farming pools

Why TVL matters:

1. Indicator of trust and usage: A high TVL often signals strong user confidence and active usage of a protocol.

2. Comparing DeFi protocols: Investors and analysts use TVL to compare the size and growth of different DeFi platforms.

3. Market share insights: TVL can show how much of the DeFi market a protocol controls.

For Example:

If users deposit:

$50M in ETH, $30M in USDC, and $20M in BTC. into a protocol, the TVL would be $100 million.

How it's calculated:

TVL is calculated by summing the value of all assets locked within a protocol, typically expressed in US dollars for easy comparison.

What it's not:

It doesn't represent the outstanding loan amount but rather the total amount of assets secured by a specific DeFi application.

Limitations:

While a valuable metric TVL can be manipulated, and a high TVL doesn't automatically guarantee the success or safety of a platform.

How to interpret TVL:

A stable or increasing TVL may indicate lower risk, while a declining TVL could signal potential issues or reduced user interest.