The total value locked in decentralized finance — a measure of the total value of assets committed to the DeFi ecosystem —has marked a new all-time high close to $40 billion.
According to DeFi Pulse, the figure hit the $39.79 billion mark on the morning of Feb. 10.
While the bullish milestone is undoubtedly a reflection of soaring prices across the crypto markets, as a metric, total value locked, or TVL, gives a somewhat crude picture of what is actually going on in the world of DeFi.
This is because the metric largely ends up tracking the surface impact of the skyrocketing U.S. dollar value of tokens such as Ether (ETH) and related assets that are locked as collateral in various projects and DeFi apps. When tokens’ value soars, TVL logically soars too, Yet, just as logically, a high TVL doesn’t necessarily count as a sign of increased participation or activity in the DeFi ecosystem.
For this reason, it’s worth looking at a parallel metric developed by DappRader, called Adjusted TVL, which tracks the changes in the total value locked in the ecosystem while fixing asset prices to the beginning of the given period under scrutiny. This gives more insight into what’s happening in the ecosystem without the “fog” of wildly volatile and bullish or bearish token prices.
DappRadar’s graph, while less dramatic at first glance than the gross TVL figure, nonetheless shows that there has indeed been a steady increase in the net inflow of assets to the DeFi ecosystem in the first months of 2021. As of Feb. 9, their adjusted TVL figure stood at $19.15 billion, as compared with $14.91 billion on Jan. 1.
2021 has not been short of crypto milestones for partisans to celebrate. Bitcoin (BTC) is currently trading at close to $47,300 and Ether at over $1,800. For tech developers and those invested in the long-term prospects of specific DeFi projects, the more incremental but still healthy growth of total adjusted TVL in the DeFi space will be a less spectacular, but still significant mark of their joint efforts.