In this article, we are going to talk about the top 5 blockchain’s TVLs along with their protocols, but first we need to explain what is Total Value Locked (TVL).
Total value locked (TVL) refers to the amount of user funds deposited in a DeFi protocol. These funds could be invested in the project for a variety of purposes, including staking, liquidity pools, and lending.
DeFi protocols are customized and self-contained programs that address challenges in the traditional banking business. Uniswap, a leading decentralized exchange that allows investors to trade cryptos without any central oversight, is an example of a DeFi protocol.
TVL does not provide the number of outstanding loans or the interest rate on these deposits. It just reflects the deposit’s current value. As a result, if investors remove or deposit monies into the project, the overall locked-up value will alter. Furthermore, it fluctuates with the value of the US dollar.
The crypto TVL may be calculated with ease. The supply of a DeFi project must first be multiplied by the current price in order to determine an asset’s market capitalization. The TVL is then calculated by dividing the market cap by the maximum supply that can circulate.
The TVL ratio is calculated by dividing the total market capitalization of a locked asset by the entire value locked. The TVL ratio can be used to assess the under or overvaluation of a DeFi asset.
An asset is typically undervalued and more appealing to investors if the ratio is less than 1. The asset may be overvalued and have little to no opportunity for growth if the market cap surpasses the TVL in cryptocurrency.
Top 5 Blockchain’s TVLs
1. Ethereum (ETH):
Ethereum is a decentralized blockchain platform that establishes a peer-to-peer network for safely running and validating smart contract application code. Without the aid of a reliable central authority, participants can conduct transactions with one another via smart contracts.
- TVL: $46.24b
- Protocols: 504
2. BSC (BNB):
Blockchain technology known as BSC was created by cryptocurrency trading platform Binance. BSC is intended to provide a high-performance infrastructure for decentralized trading, dApp development, blockchain interoperability, and support for smart contracts and other DeFi products.
- TVL: $5.94b
- Protocols: 406
3. Tron (TRON):
TRON is a decentralized, open-source blockchain-based operating system with smart contract features, a proof-of-stake consensus process, and its own cryptocurrency, Tronix (TRX). Justin Sun founded it in March 2014, and it has been managed and supervised by the TRON Foundation, a non-profit organization in Singapore founded the same year. It began as an Ethereum-based ERC-20 token before migrating to its own network in 2018.
- TVL: $3.95b
- Protocols: 9
4. Avalannche (AVAX):
Through its Avalanche Consensus Protocol, Avalanche promises to combine scalability capabilities with rapid confirmation times. It has a processing capacity of 4,500 TPS (transactions per second). That figure is 14 TPS for Ethereum.
- TVL: $2.68b
- Protocols: 220
5. Solana (SOL):
Solana is a blockchain network noted for its efficiency and speed. SOL tokens are the company’s native cryptocurrency, and they are used to pay transaction fees. Solana has evolved to become one of the world’s major cryptocurrencies since its inception in 2017.
- TVL: $2.52b
- Protocols: 72
As we can see from the list, Ethereum is leading the way with a huge difference in the TVL, it is almost 8 times bigger than the 2nd ranked blockchain, BSC
In case you wonder how TVL is calculated, TVL covers all coins placed in all of the DeFi protocols’ functionalities, including:
- Liquidity Pools
The yield that these deposits are anticipated to receive is important to note. It only refers to the deposits’ actual present worth.
The TVL of a project might also vary as a result of user withdrawals or fresh deposits. Along with the fluctuating dollar worth of all those assets in the cryptocurrency market, it is always altering. A DeFi protocol may allow deposits in its native token to be used for some or even all of the transactions. The protocol’s TVL increases together with the value of its native coin.
Investors can use TVL to determine the fair value of a DeFi project’s native token. Depending on the project’s TVL, the token’s market cap may be large or low. The token may appear to be overvalued or undervalued more depending on how extreme the relationship is.
Between 2020 and 2021, the cumulative TVL of all DeFi protocols expanded at an astonishing rate. The total TVL across all DeFi platforms was roughly $630 million at the start of 2020.