Crypto glossary
What is double counting in DeFi TVL?
KriptoMeta Editorial Team
- Added:
Double counting in DeFi occurs when underlying collateral and a token representing a claim on it are included more than once in an aggregate. Adding TVL figures across protocols requires checking which exposures overlap.
Example
A user deposits $1,000 worth of ETH into hypothetical protocol A and receives a token representing a claim on that position. The token is then pledged as collateral in protocol B. Adding the two $1,000 positions does not establish that $2,000 of fresh capital arrived. The second exposure depends on the first deposit. Both positions can exist; treating them as independent capital is the mistake.
Is double counting always a data error?
No. Measuring assets exposed to one protocol is different from measuring independent capital across an ecosystem. Data services such as DeFiLlama provide filters for receipt tokens and liquidity-pool tokens. Comparisons need consistent filter settings.
The repeated collateral also reveals a dependency. A loss in protocol A can damage the value of the token accepted by B. A large combined total does not guarantee security or immediately withdrawable cash.
Sources
DeFiLlama: doublecount explanation · DeFiLlama: TVL methodology
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