How Allocation Works

Lulo allocates capital through a systematic process informed by TVL and lending rate, rather than relying on discretionary judgment. The S&P 500 approach, applied to stablecoin yield.

Systematic Allocation

Each integrated protocol receives a weighting that reflects its TVL and the rates it offers to depositors. Protocols that hold more value locked and present competitive rates are designed to receive a proportionally larger share of your deposit, while the systematic framework minimizes discretionary decisions and relationship-driven selection.

As protocol conditions change, the allocation is designed to rebalance accordingly. When a protocol grows in TVL or its rates shift, the weighting adjusts so that your deposit continues to reflect the current state of the market rather than a static snapshot taken at the time of entry.

Why TVL and Rate Matter

TVL serves as the DeFi equivalent of market capitalization, representing the aggregate confidence that participants have placed in a given protocol. Lending rates, in turn, reflect real-time supply and demand dynamics. Together, these two inputs provide a robust foundation for systematic allocation:

• Scale-proportionate positioning. Your capital is directed toward protocols where the broader market has already demonstrated sustained confidence through meaningful deposits.
• Built-in diversification. Spreading allocation across multiple protocols is designed to ensure that no single point of failure can materially impair your deposit.
• Responsive adjustment. If a protocol experiences a decline in TVL or a shift in rates, your exposure is designed to decrease systematically, without requiring manual intervention.

How It Differs from Active Management

Most yield products rely on active managers who allocate capital based on their own judgment, personal relationships, and subjective assessments of opportunity. In those arrangements, depositors have limited ability to verify why one protocol was selected over another, or to observe how the decision-making process evolves over time.

Lulo's allocation methodology is designed to be systematic and transparent. The weighting logic applies uniformly to every depositor and is informed by observable on-chain inputs, producing consistent, verifiable results rather than outcomes that depend on the discretion of an individual manager.

Protocol Selection Criteria

Before a protocol becomes eligible for inclusion, it must satisfy four requirements that are designed to establish a baseline of security, credibility, and operational maturity:

1. Open-source smart contracts that can be independently reviewed
2. Completion of independent security audits by recognized firms
3. An experienced team with a demonstrated track record in the space
4. Substantial total value locked with no history of fund losses

On-Chain Verification

Every allocation position is recorded on-chain, which means you can verify exactly which protocols hold your capital and in what proportion at any time. The weightings, the methodology, and the resulting positions are all publicly observable and independently auditable by anyone, not just by Lulo.