> For the complete documentation index, see [llms.txt](https://docs.adrena.trade/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.adrena.trade/technical-documentation/tvl-management.md).

# TVL Management

## Why TVL is Managed

LP returns are mechanically a function of fees divided by capital deployed. When TVL grows faster than trading volume, every LP earns a smaller share of the same fee stream - the pool dilutes its own yield.

ALP operates with a **soft cap on TVL that grows in step with realized fees**. The protocol commits to a target LP yield band, and the cap is adjusted upward - only on rule, only when justified - such that yield stays inside that band.

This is not a yield guarantee. Fees can fall and APY can dip. What the framework guarantees is that the protocol won't make things worse by allowing fresh capital to dilute already-stressed yields, and won't squander high-fee periods by leaving capacity frozen.

## Reference APY

Every TVL decision anchors to a single, publicly computable metric.

```
                   (F_W × 365/W × 0.75) - TraderPnL_W - ULP_W
Reference APY  =  ────────────────────────────────────────────
                                  TVL_W avg
```

* **F\_W** - total fees over the trailing window (W = 30 or 15 days)
* **0.75** - LP share of protocol revenue
* **TraderPnL\_W** - net trader P\&L impact on the pool (positive = pool drag)
* **ULP\_W** - Assets Unlocked Performance, the impact of price moves on assets not currently locked in trader positions
* **TVL\_W avg** - time-weighted average TVL over the window

The formula captures realized LP return, not headline fee yield. A pool can generate strong fees while losing capital to trader PnL or market drift on unutilized assets - Reference APY accounts for both.

The metric is computable from on-chain data, so any LP can verify the protocol's reported number.

## Operating Bands

| Band            | APY       | Action                                       |
| --------------- | --------- | -------------------------------------------- |
| 🟦 Critical     | < 5%      | Pause new minting                            |
| 🟨 Below-Target | 5% - 25%  | No protocol action                           |
| 🟢 Green        | 25% - 35% | Normal operation; lifts considered above 30% |
| 🟥 Blue         | > 35%     | Lift cap per formula                         |

Green is the design target. There is no mechanism for protocol-driven TVL reduction - at 20% APY the pool is still productive, and forcing capacity contraction would signal unwarranted distress. The mint pause trigger sits at <5%, the level at which the pool is genuinely unviable.

## Cap Lift Formula

```
                                                    F_run-rate
New Cap  =  min (  Current Cap × 1.30  ,  ─────────────────────  )
                                                    APY_target
```

Where **F\_run-rate** : annualized fee run rate net of trader PnL and ULP drag, after the 75% LP share (USD per year); computed as (F\_30 × 365/30 × 0.75) - TraderPnL\_30 - ULP\_30, **APY\_target = 27%** (Green band midpoint, buffered against downside drift).

Two triggers:

* **Standard** - first Monday of each month. Trailing 30-day Reference APY above 30% across two consecutive reviews.
* **Expedited** - 15-day trailing Reference APY above 35%. Upward only.

The expedited path exists because fee growth can outpace a monthly window, especially at relaunch.

## Why +30% Per Lift

The step-size cap is the most important parameter for LP experience.

| Pre-lift APY | Post-lift APY (constant fees, +30% TVL) |
| ------------ | --------------------------------------- |
| 30%          | 23.1%                                   |
| 35%          | 26.9%                                   |
| 40%          | 30.8%                                   |

A lift from 35% lands at 27% - the middle of Green. A larger step (e.g., +50%) would land that same pre-lift reading at 23%, a meaningful negative LP experience. +30% is the constraint that prevents this.

## Notice and Transparency

* Cap adjustments announced at least 7 days before taking effect
* Current TVL, cap, trailing Reference APY, and band are displayed on the ALP page
* A historical log of every cap adjustment is maintained
* Parameter changes require a governance proposal with at least 14 days' notice

## Parameter Summary

| Parameter                | Value                                   |
| ------------------------ | --------------------------------------- |
| LP fee share             | 75%                                     |
| Target band              | 25% - 35% APY                           |
| Lift trigger (standard)  | > 30% for 2 consecutive reviews         |
| Lift trigger (expedited) | 15-day > 35%                            |
| Max lift per adjustment  | +30%                                    |
| Post-lift APY target     | 27%                                     |
| Reference window         | 30 days (standard), 15 days (expedited) |
| Review cadence           | Monthly, first Monday                   |
| Mint pause trigger       | < 5%                                    |
| Notice period            | 7 days                                  |


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