<figure class="wp-block-image size-large"><img width="325px" height="183px" srcSet="https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/21002948/Total-Value-Locked-in-Liquid-Loans-375x211.webp 375w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/21002948/Total-Value-Locked-in-Liquid-Loans-662x372.webp 662w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/21002948/Total-Value-Locked-in-Liquid-Loans-768x432.webp 768w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/21002948/Total-Value-Locked-in-Liquid-Loans.webp 688w" sizes="(max-width: 425px) 150px, 450px" src="https://ll-blog-dev.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2023/09/21002948/Total-Value-Locked-in-Liquid-Loans.webp" alt="Total Value Locked in Liquid Loans" class="wp-image-4020"/></figure>



Total Value Locked (TVL) can be a misunderstood figure.



Just like market cap.



In the article, I will show you how to properly think about TVL within <a rel="noreferrer noopener" href="https://www.thecoinzone.com/blockchain/explained-liquid-loans-defi-protocol-on-pulsechain" data-type="URL" data-id="https://www.thecoinzone.com/blockchain/explained-liquid-loans-defi-protocol-on-pulsechain" target="_blank">Liquid Loans</a>.



<h2 class="wp-block-heading tablecontent">What is Total Value Locked in Liquid Loans?</h2>



In the context of Liquid Loans, <a href="https://www.thecoinzone.com/defi/what-is-total-value-locked-tvl-in-defi" target="_blank" rel="noreferrer noopener">Total Value Locked</a> refers to the total dollar value of PLS locked in vaults.



Therefore, TVL= Total # of PLS in Vaults X Price of PLS provided by <a href="https://www.fetchoracle.com/" target="_blank" rel="noreferrer noopener">Fetch</a>.



This figure does not include the total value of USDL in the <a rel="noreferrer noopener" href="https://www.thecoinzone.com/liquidloans/stability-pool" data-type="URL" data-id="https://www.thecoinzone.com/liquidloans/stability-pool" target="_blank">Stability Pool</a>, nor does it include the value of <a rel="noreferrer noopener" href="https://www.thecoinzone.com/pulsechain/loan-token-ultimate-guide" data-type="URL" data-id="https://www.thecoinzone.com/pulsechain/loan-token-ultimate-guide" target="_blank">LOAN token</a> in the <a href="https://www.thecoinzone.com/pulsechain/the-loan-staking-pool" target="_blank" rel="noreferrer noopener">staking pool</a>. 



<h2 class="wp-block-heading tablecontent">Why TVL Can Be Misleading (Much Like Market Cap)</h2>



TVL and <a rel="noreferrer noopener" href="https://www.thecoinzone.com/tradfi/market-cap-vanity-metric" target="_blank">Market Cap</a> can both be misleading because of how they are calculated.



For example, if there is one <a href="https://www.thecoinzone.com/defi/liquidity-pools" target="_blank" rel="noreferrer noopener">liquidity pool</a> with 1 PLS and 1 USDC from Ethereum, then the price of PLS equals 1 USD.



Consequently, if there are 1 Billion PLS in existence, then the market cap of PLS will be 1 Billion USD. 



However, if somebody sells 1 PLS for the 1 USDC in that liquidity pool, the price and the market cap go to zero.



This is an extreme example, but the principle applies at all levels of liquidity. Just because the price of PLS is 1 USD now, does not mean that every token can be sold at 1 USD.



Liquidity is more important than both market cap and TVL.



<h2 class="wp-block-heading tablecontent">How To Think About TVL (for USDL)</h2>



It would be normal to think that if there are 1 Billion USDL in existence, then there is at least 1.1 Billion USDL worth of PLS backing it. 



Even though this is the case within the Liquid Loans protocol, the backing may be limited due to liquidity across the rest of PulseChain.



For example, if there is only one liquidity pool set up on PulseX, and it contains only 1 PLS and 1 USDC from Ethereum, then technically there is only 1 USD of value backing all of 1 Billion USDL in existence.



Therefore, to best support the health of USDL, we need to have thick liquidity pools set up for both USDL and PLS.



This can be on pairs such as USDL:PLS, USDL:CST, USDL:Bridged Stables, PLS:Bridged Stables, ETC.



To encourage liquidity bonding on PulseChain, Liquid Loans is running an LP Rewards Program to allow liquidity providers for the USDL:PLS pair on PulseX v2 to earn LOAN tokens by staking their LP tokens. 



This program will only be available for the first 42 days after launch, click the link in the text to learn more about the <a href="https://www.thecoinzone.com/liquidloans/lp-rewards" target="_blank" rel="noreferrer noopener">LP Rewards Program</a>.

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<figure class="wp-block-image size-large"><img width="325px" height="183px" srcset="https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/21002948/Total-Value-Locked-in-Liquid-Loans-375x211.webp 375w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/21002948/Total-Value-Locked-in-Liquid-Loans-662x372.webp 662w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/21002948/Total-Value-Locked-in-Liquid-Loans-768x432.webp 768w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/21002948/Total-Value-Locked-in-Liquid-Loans.webp 688w" sizes="(max-width: 425px) 150px, 450px" src="https://ll-blog-dev.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2023/09/21002948/Total-Value-Locked-in-Liquid-Loans.webp" alt="Total Value Locked in Liquid Loans" class="wp-image-4020"/></figure>



Total Value Locked (TVL) can be a misunderstood figure.



Just like market cap.



In the article, I will show you how to properly think about TVL within <a rel="noreferrer noopener" href="https://www.thecoinzone.com/blockchain/explained-liquid-loans-defi-protocol-on-pulsechain" data-type="URL" data-id="https://www.thecoinzone.com/blockchain/explained-liquid-loans-defi-protocol-on-pulsechain" target="_blank">Liquid Loans</a>.



<h2 class="wp-block-heading tablecontent">What is Total Value Locked in Liquid Loans?</h2>



In the context of Liquid Loans, <a href="https://www.thecoinzone.com/defi/what-is-total-value-locked-tvl-in-defi" target="_blank" rel="noreferrer noopener">Total Value Locked</a> refers to the total dollar value of PLS locked in vaults.



Therefore, TVL= Total # of PLS in Vaults X Price of PLS provided by <a href="https://www.fetchoracle.com/" target="_blank" rel="noreferrer noopener">Fetch</a>.



This figure does not include the total value of USDL in the <a rel="noreferrer noopener" href="https://www.thecoinzone.com/liquidloans/stability-pool" data-type="URL" data-id="https://www.thecoinzone.com/liquidloans/stability-pool" target="_blank">Stability Pool</a>, nor does it include the value of <a rel="noreferrer noopener" href="https://www.thecoinzone.com/pulsechain/loan-token-ultimate-guide" data-type="URL" data-id="https://www.thecoinzone.com/pulsechain/loan-token-ultimate-guide" target="_blank">LOAN token</a> in the <a href="https://www.thecoinzone.com/pulsechain/the-loan-staking-pool" target="_blank" rel="noreferrer noopener">staking pool</a>.&nbsp;



<h2 class="wp-block-heading tablecontent">Why TVL Can Be Misleading (Much Like Market Cap)</h2>



TVL and <a rel="noreferrer noopener" href="https://www.thecoinzone.com/tradfi/market-cap-vanity-metric" target="_blank">Market Cap</a> can both be misleading because of how they are calculated.



For example, if there is one <a href="https://www.thecoinzone.com/defi/liquidity-pools" target="_blank" rel="noreferrer noopener">liquidity pool</a> with 1 PLS and 1 USDC from Ethereum, then the price of PLS equals 1 USD.



Consequently, if there are 1 Billion PLS in existence, then the market cap of PLS will be 1 Billion USD.&nbsp;



However, if somebody sells 1 PLS for the 1 USDC in that liquidity pool, the price and the market cap go to zero.



This is an extreme example, but the principle applies at all levels of liquidity. Just because the price of PLS is 1 USD now, does not mean that every token can be sold at 1 USD.



Liquidity is more important than both market cap and TVL.



<h2 class="wp-block-heading tablecontent">How To Think About TVL (for USDL)</h2>



It would be normal to think that if there are 1 Billion USDL in existence, then there is at least 1.1 Billion USDL worth of PLS backing it.&nbsp;



Even though this is the case within the Liquid Loans protocol, the backing may be limited due to liquidity across the rest of PulseChain.



For example, if there is only one liquidity pool set up on PulseX, and it contains only 1 PLS and 1 USDC from Ethereum, then technically there is only 1 USD of value backing all of 1 Billion USDL in existence.



Therefore, to best support the health of USDL, we need to have thick liquidity pools set up for both USDL and PLS.



This can be on pairs such as USDL:PLS, USDL:CST, USDL:Bridged Stables, PLS:Bridged Stables, ETC.



To encourage liquidity bonding on PulseChain, Liquid Loans is running an LP Rewards Program to allow liquidity providers for the USDL:PLS pair on PulseX v2 to earn LOAN tokens by staking their LP tokens.&nbsp;



This program will only be available for the first 42 days after launch, click the link in the text to learn more about the <a href="https://www.thecoinzone.com/liquidloans/lp-rewards" target="_blank" rel="noreferrer noopener">LP Rewards Program</a>.

How To (Properly) Think About Total Value Locked within Liquid Loans

Total Value Locked can be a misleading figure within the Liquid Loans protocol. Learn how it is calculated and how to think about it.