How Does Token Standardization Influence the Calculation of Total Value Locked (TVL)?
Token standardization, primarily ERC-20, is crucial for TVL calculation. Since all compliant tokens share the same basic interface, a TVL aggregator can easily identify and track the balances of all supported tokens locked within a protocol's smart contracts.
This allows for a uniform, reliable method of calculating the total economic value secured by the protocol.
Glossar
Token Standardization
Interoperability ⎊ Token standardization involves establishing common technical specifications for creating and managing digital tokens on a blockchain.
Tvl
Value ⎊ The total aggregate worth of all assets deposited into a specific decentralized finance protocol, typically denominated in a stable unit for consistent measurement.
Total Economic Value
Value ⎊ Within cryptocurrency derivatives and financial engineering, Total Economic Value (TEV) transcends traditional valuation metrics by encompassing all quantifiable benefits and costs associated with a particular instrument or strategy, extending beyond mere price discovery.
Total Value Locked
Collateralization ⎊ Total Value Locked, within decentralized finance, represents the aggregate value of crypto assets deposited in smart contracts, functioning as collateral for various protocols.