You might've heard the term 'Total Value Locked' a lot in crypto, but do you know what it means? Let us tell you:
. DefiLlama, on the other hand, calculates the TVL by extracting the total balance of all of the DeFi chains combined or each individual platform separately.Due to ceaseless new protocols emerging in the DeFi space, it may be challenging to establish the exact TVL of the overall market and determine if a specific DeFi platform is a safe option for end-users.
When dividing the total market cap of a locked asset by the total value locked, we obtain the TVL ratio. The TVL ratio can help determine if a DeFi asset is undervalued or overvalued. If the ratio is under 1, the asset is usually undervalued and more attractive to investors. When the market cap exceeds the TVL in crypto, the asset might be overvalued, leaving little to no room for growth.
To give some perspective, the Ethereum DeFi network includes just under 500 protocols. It has a TVL of approximately $73 billion, with 64% of the market share, compared with BNB Smart Chain, which is the second-highest TVL at $8.74 billion in value at 7.7% of the market share, Avalanche with $5.21 billion and 4.5% of the market share and Solana with $4.19 billion and 3.68% of the market share.
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