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 avgF_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
🟦 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
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.
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
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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