Towards Verifiability of Total Value Locked (TVL) in Decentralized Finance

TL;DR

The paper tackles the verifiability of Total Value Locked (TVL) in DeFi, revealing that current TVL figures are often derived from self-reported methods with limited reproducibility and notable reliance on off-chain data. It introduces verifiable TVL (vTVL), an on-chain, standard-balance-query–driven metric, and demonstrates its use through a case study of 400+ protocols where vTVL aligns with published TVL for a substantial subset, while exposing potential double counting and methodological discrepancies. A large-scale measurement on 939 Ethereum DeFi projects quantifies the prevalence of external data sources (10.5%), the use of non-standard balance queries (68 alternative functions), and repeated balance queries (240 instances across protocols), guiding design guidelines toward on-chain computation, standardized token categorization, and transparent protocol versioning. The work contributes concrete steps toward standardized, auditable TVL computation, with broad implications for user trust, investor decision-making, and regulatory accountability in DeFi.

Abstract

Total Value Locked (TVL) aims to measure the aggregate value of cryptoassets deposited in Decentralized Finance (DeFi) protocols. Although blockchain data is public, the way TVL is computed is not well understood. In practice, its calculation on major TVL aggregators relies on self-reports from community members and lacks standardization, making it difficult to verify published figures independently. We thus conduct a systematic study on 939 DeFi projects deployed in Ethereum. We study the methodologies used to compute TVL, examine factors hindering verifiability, and ultimately propose standardization attempts in the field. We find that 10.5% of the protocols rely on external servers; 68 methods alternative to standard balance queries exist, although their use decreased over time; and 240 equal balance queries are repeated on multiple protocols. These findings indicate limits to verifiability and transparency. We thus introduce ``verifiable Total Value Locked'' (vTVL), a metric measuring the TVL that can be verified relying solely on on-chain data and standard balance queries. A case study on 400 protocols shows that our estimations align with published figures for 46.5% of protocols. Informed by these findings, we discuss design guidelines that could facilitate a more verifiable, standardized, and explainable TVL computation.

Figures (9)

• Figure 1: Analysis pipeline. For each protocol, we execute the plugin code provided by the TVL aggregator and record all interactions with both on-chain and off-chain sources.
• Figure 2: Projects using off-chain in addition to on-chain sources. Projects are categorized based on their reliance on external hosts and whether any errors occurred during data collection. While for $729$ projects, on-chain calls were executed without errors and without the use of external sources, $99$ projects depend on external servers.
• Figure 3: Pairwise Jaccard similarity, computed for each protocol on the set of balanceOf calls queried in the main and four older commits. Each line reports the values relative to one specific commit. Projects are ranked in descending order based on their similarity score (ranging from 0 to 1). A value of 1 indicates no changes among the compared sets.
• Figure 4: Verifiable Total Value Locked (vTVL). We query on-chain information for relevant DeFi protocols --- Aave v2 and v3 (\ref{['fig:aave2_stack']}), Compound v3 (\ref{['fig:compound_stack']}), dYdX (\ref{['fig:dydx_stack']}), Maker (\ref{['fig:maker_stack']}), Uniswap v3 (\ref{['fig:uniswap_stack']}) --- and compare it to published off-chain TVL data. Each plot represents the evolution in time of their vTVL as a stacked plot, divided in seven categories: Ether and wETH, wBTC, governance tokens, non-crypto-backed stablecoins, crypto-backed stablecoins, and uncategorized tokens. Panel (\ref{['fig:dc_stack']}) shows instead the evolution in time of the value of $240$balanceOf and get_ethBalance queries called on the same contracts and tokens but associated with different protocols (see Subsection \ref{['sec:dc']}), potentially contributing to double counting.
• Figure 5: Differences between vTVL and published TVL. Projects are dots ranked in descending order based on the Discrepancy ratio, i.e., the ratio of on-chain estimations to off-chain data, normalized by subtracting one.