TVL (total value locked) measures how much value is deposited in a protocol or pool. Liquidity measures how easily a token can be bought or sold without moving its price. They are related but not the same — a pool can show high TVL and still be illiquid for your token. Confusing the two leads teams to celebrate a big number while traders quietly struggle to fill orders.
What TVL measures
TVL is the total value of assets sitting in a protocol, pool, or contract. It's a scale metric — useful for comparing the size of protocols, but it says nothing on its own about how tradable any single token is. See the glossary for the formal definitions.
What liquidity measures
Liquidity is about tradability: can someone buy or sell your token near the quoted price without heavy slippage? It depends on depth near the current price and how tightly the market is quoted — not on the raw total locked.
Why they diverge
A pool can hold a lot of value (high TVL) but still be a poor market for your token if:
- the liquidity is in the wrong pair for how people actually trade it,
- it's spread across a price range far from the current price (on concentrated-liquidity AMMs), or
- it's passive and unmanaged, so it doesn't stay near the price as the market moves.
Meanwhile, a smaller but well-placed, actively managed pool can trade far better than a large idle one.
Which matters for your token
Both have a place, but liquidity is what traders experience. Optimize for real, well-managed depth in the pairs that get traded — that's what keeps slippage low and the market healthy. Size it correctly with How Much Liquidity Does Your Token Need Before TGE?, and keep it consistent across venues per CEX vs. DEX Market Making.
A big TVL number is nice to show; tradable liquidity is what actually holds your market together — and that's what we build.
