How Much TVL Will Your Incentives Bring?

"How much TVL will my incentives bring?" is the question every campaign creator asks before launching a program. It is also the hardest one to answer honestly, because the answer depends on things no one controls.

What you can do is estimate it, with a simple formula and what the market actually pays for liquidity today. This deep dive explains how, based on data from 50,000+ campaigns on Merkl.

In short

• No one can guarantee a TVL figure, but you can estimate it from what liquidity costs today.
• Expected TVL ≈ yearly rewards / the reward APR the market requires.
• On Merkl, stablecoin lending usually needs a reward APR of around 1 to 4%.
• Work backward from a TVL target to a budget, start small, and adjust with real data.

The honest answer: it depends, but it can be estimated

If someone promises you a specific TVL figure before your campaign starts, ask how they know. They can't control what other protocols pay, how markets move, or where capital flows next. A promise is not a measurement.

Liquidity goes where it earns the most for the risk it takes. The TVL your rewards attract depends on how your opportunity compares with every alternative an LP could choose instead, at the moment your campaign runs. That changes every week.

What you can know in advance is the price the market is paying for comparable liquidity today. From there, a reasonable estimate takes one line of math.

How to estimate the TVL your rewards can attract

LPs compare opportunities on APR. So the TVL a budget can attract is roughly the TVL at which your rewards produce the APR the market requires:

Take a budget of $1,000 of rewards per day, or $365,000 a year:

• If comparable opportunities need a 2% reward APR, you can expect around $18M of TVL.
• If they need 4%, around $9M.
• If they only need 1%, around $36M.

The reward APR here is the part of the APR paid by your rewards, on top of the native yield your product already earns. The higher your native yield compared with the alternatives, the less you need to add to stay competitive.

This is an estimate, not a forecast. It tells you the order of magnitude to expect and whether your budget matches your target. The first days of a campaign then tell you the real number.

What liquidity costs on Merkl

The required reward APR is not a guess: it can be read from what campaigns actually pay. Across live opportunities on Merkl with more than $1M of TVL, here is the reward APR most of them run at, and what $1,000 of daily rewards buys at that rate.

The ranges are wide for a reason: within each category, the cost of liquidity depends on the factors below. Use the low end if your opportunity is safer, bigger, or better distributed than most, and the high end if it is new, riskier, or competing for the same liquidity as many others.

Five factors that move your cost of liquidity

Two campaigns with the same budget can attract very different TVL. Five factors explain most of the gap:

• What others pay: Your rate competes with every comparable opportunity. When the protocols around you raise their rewards, the same budget buys you less liquidity.
• The underlying asset: BTC liquidity is usually cheaper to attract than USDC or ETH, because its holders have fewer ways to earn on it.
• The type of opportunity: A concentrated liquidity pool costs more than a lending market, because LPs take on more risk and work.
• The perceived risk: A newer chain, a protocol without a long track record, or a less established asset needs a higher APR to attract the same liquidity, because LPs price in the risk of losing funds. A dollar of liquidity on a blue chip like Aave or Morpho costs less than on a brand new protocol.
• Your distribution: The more qualified LPs see your campaign, the less you need to pay to reach your target. On Merkl, campaigns are visible to more than 200,000 LPs every month on the Merkl App and to more than 5 million users through partner frontends.

The first four are mostly set by the market and by your product. Distribution is the one you can act on directly. For more on what makes that liquidity stay, see how to turn incentives into lasting liquidity.

From a TVL target to a budget

Most teams start from the other end: they know how much liquidity they need, and want to know what it will cost. The same formula works backward:

To attract $20M of stablecoin lending liquidity at a 2% reward APR, plan for around $1,100 of rewards a day, or roughly $15,300 for a first two-week campaign.

Then let the market correct your estimate:

1. Pick a benchmark: Find comparable opportunities on the same asset and type, and note the reward APR they pay.
2. Size a first campaign: Use the formula for a short test, two weeks is usually enough to see how LPs respond.
3. Cap the APR: A capped APR protects your budget while TVL is still low, so early depositors don't capture an outsized share.
4. Adjust with real data: If TVL stays below target, raise the rate or widen distribution. If it overshoots, you can lower the rate on the next campaign.

What "pay for performance" really covers

Some platforms offer to be paid only on the TVL they bring you. It sounds like the risk is on them. Look at what the fee actually covers.

Say your program spends $500,000 of rewards over three months, and the platform takes a fee on the TVL it says it brought in. If the campaign underperforms, the platform's fee shrinks. Your $500,000 of rewards is distributed to LPs either way. The performance model applies to the platform's commission, not to your budget, which is by far the largest cost of the program.

Two questions are worth asking before signing:

• Who decides which TVL counts? If the platform measures its own attribution, it is grading its own work.
• What is the total cost? Add the rewards budget and the fee, and compare the cost per dollar of TVL with what the same budget would buy on an open marketplace.

How Merkl helps

Merkl doesn't promise you a TVL figure. It gives you what you need to estimate it before launch and to measure it after.

• Benchmarks: What comparable opportunities pay today, across 50,000+ campaigns run on Merkl.
• Reach: Your campaign is live on the Merkl App and partner frontends from day one. Reaching more qualified LPs is what gets you the lowest cost of capital: you pay less for the same TVL.
• Rates that protect your budget: Capped APR keeps early depositors from capturing an outsized share, and Target APR only pays the gap between your native yield and the APR you set.
• Measurement: TVL, APR, and rewards distributed for every campaign, in Merkl Studio and through the Merkl API.
• Guidance, with you in control: With Merkl services, our team helps you size your budget and calibrate your rates. Your team keeps the final call.

To set up your first program, see how to launch a liquidity incentive campaign in 6 steps.

Key takeaways

No one can promise you a TVL figure, but you can estimate it: expected TVL ≈ yearly rewards / the reward APR the market requires. Read that APR from what comparable opportunities pay, adjust for your asset, risk, and distribution, then test with a first campaign and let real data refine the number.

FAQs

How much TVL will my incentives bring?

It depends on what comparable opportunities pay, on your asset, on perceived risk, and on how many LPs see your campaign. A good estimate is your yearly rewards divided by the reward APR the market requires. On Merkl, $1,000 of daily rewards typically attracts between $9M and $36M of stablecoin lending liquidity.

How do I calculate the incentive budget for a target TVL?

Multiply your target TVL by the reward APR comparable opportunities pay, and divide by 365 to get a daily budget. To attract $20M of stablecoin lending liquidity at a 2% reward APR, plan for around $1,100 of rewards a day.

What reward APR do I need to attract liquidity?

On Merkl, most stablecoin lending opportunities run at a reward APR of around 1 to 4%, ETH lending usually below 2%, and volatile liquidity pools around 1 to 6%. New protocols, riskier assets, and crowded markets sit at the high end.

Can a platform guarantee the TVL my incentives will bring?

No. The TVL you attract depends on market conditions and on what every other protocol pays, which no one controls. A platform can help you estimate it, reach qualified LPs, and measure the results transparently.

Why does the same budget attract different TVL on different assets?

Because each asset has its own alternatives. BTC holders have fewer ways to earn than stablecoin holders, so BTC liquidity is usually cheaper to attract. Risk, opportunity type, and competition from other protocols also change the rate LPs require.

Is it better to use a fixed budget or a capped APR?

A fixed budget gives you cost certainty, but your APR falls as TVL grows. A capped APR stops LPs from earning above a set rate, which protects your budget while TVL is still low, and returns anything not distributed. For a first campaign, a capped APR is usually the safer choice.