BA Labs baseline criteria for recommending new ARKs

[BlockAnalitica]

BA Labs baseline criteria for recommending new ARKs

Here we outline the “first rule” checklist BA Labs will use before doing any deeper collateral assessment when recommending new ARKs for Lazy Summer Protocol. Only ARKs that pass these baseline criteria move to a full collateral and risk review, unless we explicitly state why we are making an exception. BA Labs reserves the right to modify or omit any of the below, while providing a clear rationale for any such changes or exclusions. This should also speed up the onboarding process by letting us focus directly on yield sources with stronger potential.

Objective of the TVL / APY requirement

The reasoning behind this rule is that, by adding a yield source as a new ARK, the fleet should benefit from a meaningful APY increase relative to the additional risk from new collateral exposure.

Thus, if the fleet deposits an amount on the same order of magnitude as the protocol’s TVL, and the protocol maintains its APY, the fleet APY should increase by roughly 5 percent or more compared to its current level.

This provides a clear quantitative incentive to go deeper into collateral and protocol risk analysis.

TVL minimum formula

Let:

• TVL_fleet = current TVL of the fleet
• APY_fleet = current average APY of the fleet (30d preferred, 7d fallback)
• APY_protocol = APY of the yield source (same averaging window)

Target after adding the ARK:

• APY_new ≈ APY_fleet * 1.05

Weighted APY after adding the ARK:

• APY_new = APY_fleet * (1 − x) + APY_protocol * x

where x is the share of fleet TVL allocated to the ARK.

Solving for x and expressing it as an implied minimum protocol TVL gives:

TVL_min = 0.05 * TVL_fleet * ( APY_fleet / (APY_protocol − APY_fleet) )

To avoid constant reassessment when the fleet APY moves slightly, we apply a small tolerance and use:

TVL_min = 0.05 * TVL_fleet * ( APY_fleet * 0.9 / (APY_protocol − APY_fleet * 0.9) )

Conditions and interpretation:

• We effectively require APY_protocol > 0.9 * APY_fleet. If this is not true, the formula is not useful and the ARK fails this APY / TVL filter by default.
• If TVL_protocol << TVL_min, the expected effect on fleet APY is too small relative to the added risk and complexity.

This is one quantitative metric in the toolkit, not the only decision input, but it gives a clear numeric accept or reject signal at the first step.

Additional “first rule” criteria

Alongside the TVL / APY filter, a candidate ARK should satisfy:

• Backing liquidity: At least 70 percent of the backing should not be locked or subject to long lockups or vesting. We want a realistic path to unwind positions in stress scenarios without relying on slow unlock schedules.
• Transparent and verifiable backing: Proof of reserves or an equivalent transparency dashboard must exist. We must be able to independently verify the composition of the backing onchain or via credible third party reporting.
• Data and API availability: Basic financial metrics should be obtainable via API, subgraph, or similar. This is needed to plug the ARK into BA Labs internal monitoring and risk models.

If the above points are met we will proceed to a full collateral and risk assessment.

Exceptions and overrides

BA Labs may bypass the previous rules in case:

• Relax or omit specific criteria: For example, we may still propose adding an ARK whose APY is below the fleet APY if there are strong diversification, derisking, or capacity reasons, such as large money markets with bluechip collateral that reduce overall fleet risk and can absorb high TVL.
• Update parameters over time: The 5% uplift target and 10% downwards tolerance, the 70 percent liquidity threshold, and the APY averaging window may be adjusted as fleets grow.

Any such deviations will always be accompanied by a clear written rationale in the corresponding ARK assessment.

Summary checklist (baseline screen)

By protocol, we refer to the external yield source the ARK deploys into, such as a lending market or vault, among others.

Inputs

• Fleet TVL (TVL_fleet): [ ]
• Fleet APY (APY_fleet, 30d preferred, 7d fallback): [ ] window: [30d or 7d]
• Protocol APY (APY_protocol, same window): [ ] window: [30d or 7d]
• Protocol TVL (TVL_protocol): [ ]
• Data sources (links): [ ]

TVL / APY screen

• APY_protocol > 0.9 × APY_fleet
• TVL_min = 0.05 × TVL_fleet × (APY_fleet × 0.9) / (APY_protocol − APY_fleet × 0.9)
• TVL_protocol ≥ TVL_min

Additional baseline criteria

• Backing liquidity: ≥ 70% not locked and not subject to long lockups or vesting. Evidence: [ ]

• Transparent and verifiable backing: proof of reserves or equivalent exists. Evidence: [ ]

• Data and API availability: key metrics accessible via API, subgraph, or similar. Evidence: [ ]

[Eren_DAOplomats]

This sets a transparent “standard of entry” for anyone wanting to propose a new ARK. Having the flexibility to add lower-yielding “blue chips” for diversification and safety is necessary in the longterm and the 5% APY uplift rule is a great benchmark.

[BlockAnalitica]

Risk tier classification (Lower Risk vs Higher Risk)

Below is a rough qualitative classification used to get a clearer picture of which fleet (Lower Risk vs Higher Risk) an ARK belongs to and how conservative caps, rebalance limits, and monitoring are to be set.

Higher Risk (any of the following flags):

• Leverage or looping to earn yield (borrow to supply, recursive leverage, delta-neutral leverage, etc.).
• Cross-chain exposure (bridges, multi-chain allocators).
• Non-instant liquidity where exit depends on unwinding, cooldowns, redemption queues, or processes that can take days.
• Token swaps required before deposit into the yield source (DEX routing introduces slippage risk).
• Backing quality: more than 30% of backing is not bluechip collateral, or backing includes long-tail, hard-to-verify collateral.
• Strategy aggregation: vaults/strategies that can rotate across many downstream protocols and positions, making full collateral exposure dynamic.
• Custom oracles

Lower Risk (typical profile)

Single-chain, non-leveraged, no mandatory pre-deposit swaps, predictable and near-instant exits, transparent backing dominated by low-risk collateral, minimal operational risks, and minimal dependency surface beyond the target protocol.

We note that beyond exposure to less conservative collateral assets on average, as assessed by the BA under its risk framework, the main distinction in how the BA treats “Higher Risk” vaults from “Lower Risk” vaults lies in the application of more aggressive risk parameters (e.g., higher caps, higher maximum % of TVL to onboarded ARKs, etc.) to “Higher Risk” vaults.

In general, this means LR fleets are not necessarily limited to only blue-chip collateral per se, but also to low-to-mid-risk collateral although with conservative caps, thus limiting the exposure on the fleet level. In contrast, HR fleets are intended to accommodate higher-risk collateral and are configured with generally less conservative parameters.