  Total value locked (TVL) is widely used to measure the size and popularity of
decentralized finance (DeFi). However, the prevalent TVL calculation framework
suffers from a "double counting" issue that results in an inflated metric. We
find existing methodologies addressing double counting either inconsistent or
flawed. To solve this, we formalize the TVL framework and propose a new
framework, total value redeemable (TVR), to accurately assess the true value
within DeFi. TVL formalization reveals how DeFi's complex network spreads
financial contagion via derivative tokens, amplifying liquidations and
stablecoin depegging in market downturns. We construct the DeFi multiplier to
quantify the double counting, which mirrors the money multiplier in traditional
finance (TradFi). Our measurement finds substantial double counting in DeFi.
During the peak of DeFi activity on December 2, 2021, the difference between
TVL and TVR was \$139.87 billion, with a TVL-to-TVR ratio of about 2. We
further show that TVR is a more stable metric than TVL, especially during
market downturns. A 25% decline in the price of Ether (ETH) leads to a \$1
billion greater non-linear decrease in TVL compared to TVR. We also observe a
substitution effect between TradFi and DeFi.
