Bitaigen Research In this article we outline the fundamental differences between Total Value Locked (TVL) and the staking value of Proof‑of‑Stake (PoS) systems, explain why the two should not be summed, and dissect common misconceptions through real‑world examples. By breaking down the concepts clearly, readers can more accurately assess the relationship between on‑chain liquidity and security. The following sections provide deeper analysis and a reference framework worth a careful read.
Why TVL and PoS Staking Value Should Not Be Confused
Recent discussions have seen some participants combine Total Value Locked (TVL) with the staking value of a PoS consensus mechanism, attempting to argue that Cardano’s on‑chain liquidity rivals that of several major public blockchains.
The claim gained traction mainly because a few community KOLs stated that Cardano’s Ouroboros consensus uses “native staking, no lock‑up period, withdrawable at any time,” which they equate with liquid staking. If this staking amount were counted as part of TVL, Cardano’s TVL could even break into the top five.
However, adding the values of these two fundamentally different asset categories is methodologically unsound; the reasons are detailed below.
The Essence of PoS Staking Value
In a Proof‑of‑Stake (PoS) consensus, users lock up tokens to take part in network validation, and the primary purpose is to enhance the security of the blockchain. The staked assets exist solely to support the consensus layer and do not provide liquidity.
Even when there is no mandatory lock‑up period, the security considerations of the network discourage token holders from unstaking at will, because doing so would weaken the chain’s defensive strength. Consequently, these assets have limited practical liquidity and cannot be freely moved across different financial use cases the way DeFi assets can.
What Exactly Does TVL Measure?
TVL is a common metric for evaluating DeFi liquidity. It not only counts how many assets are locked on‑chain, but more importantly, it reflects that these assets are being employed to provide liquidity to DeFi protocols.
Within the four major categories of DeFi infrastructure, the significance of locked capital is as follows:
- Decentralized Exchanges (DEXes): Liquidity providers deposit assets into pools, enabling traders to swap tokens.
- Money Markets (Lending Platforms): Lenders supply capital that borrowers can draw down.
- Liquid Staking: Users mint LSTs (Liquid Staking Tokens) and thereby unlock tradable liquidity while still supporting validators.
- Collateralized Debt Position (CDP) Stablecoins: Users lock collateral to generate stablecoins, again turning the underlying asset into usable liquidity.
These examples demonstrate that assets locked in DeFi contracts typically support two or more financial functions simultaneously, and holders can withdraw at any time, achieving a true “Lock & Release” effect. TVL quantifies the scale of this usable liquidity.
Why the Two Metrics Cannot Be Combined
Conceptually, TVL represents a liquidity indicator, whereas PoS staking value is a security‑guarantee factor. They differ fundamentally in meaning, operational mechanism, and usage scenario:
- Different Asset Purpose
- TVL assets are used across various DeFi protocols and retain liquidity.
- PoS staking assets serve only the network consensus and lack liquidity.
- Incentives for Unlocking
- DeFi lock‑ups can be withdrawn at any moment, releasing liquidity.
- PoS staking, motivated by network security, generally discourages frequent unstaking.
- Distinct Measurement Goals
- TVL gauges the depth and activity of on‑chain financial operations.
- PoS staking value gauges the strength of the network’s defensive posture.
Adding these two figures effectively mixes liquidity with security, two unrelated concepts, leading to a logically unsound metric and a distorted view of a chain’s true on‑chain liquidity.
Conclusion
In summary, TVL and PoS staking value each fulfill a separate role: the former quantifies DeFi liquidity, while the latter reflects consensus‑layer security. Any claim that attempts to merge the two is a case of conceptual confusion and should be treated with caution.
When encountering KOL opinions, maintain a rational stance and verify facts to avoid being misled.
For readers who wish to explore TVL‑related topics further, feel free to follow additional articles published by Bitaigen (比特根).
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Related Reading
- Understanding Bitcoin Staking: Concepts, Benefits, and Implementations
- Definitive DEX: EDGE Staking Cuts Fees & Pays Dividends
- Ethereum Merge: PoS Upgrade, Scaling Boost & $4,954 Peak
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