# Economic Mechanism

#### How Tumbuh Smart Rebalance Generate Yield

Tumbuh’s smart rebalance are built to automate and optimize liquidity provisioning across DeFi through a two model:

1. Passive Market Making
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   Vaults deploy capital into AMMs like Morpho, Aerodrome, providing liquidity to concentrated liquidity pools. Strategies include intelligent tick placement to maximise fee capture while minimising impermanent loss (IL).
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   These passive strategies benefit from:

* Real-time rebalancing
* Dynamic range management
* Predictive analytics to adapt to volatility <br>

2. Protocol-Managed Market Making
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   In protocol-managed strategies, vaults act on behalf of token issuers or exchanges. Smart vault execute liquidity provisioning to maintain price stability, reduce volatility.
   &#x20;\
   This includes:

* Stablecoin anchors (e.g., BTC/USDT, USDC/DAI)
* Vaults with IL protection for volatile pairs
* Custom cooldown logic for strategic exits

Yield Composition
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Vault APY is driven by:
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Fee earnings from CLMM LP positions
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Spread capture from active trading
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Utilization premiums based on vault demand
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All gains flow back to the vault, increasing the Net Asset Value (NAV). Performance is benchmarked regularly.
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Data Tracking
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To ensure accurate accounting, Tumbuh tracks and records the following information:
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All fee collection events from the DEX.
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Swap transactions occurring within the Vault’s liquidity ranges.
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Conversion of collected fees into IDRX using timestamp-based price feeds.
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Snapshots & Storage
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Data is recorded at fixed intervals (every 10 minutes) and stored at the user level in the database. For each snapshot, the following are tracked:
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User’s Fees Token A Amount
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User’s Fees Token B Amount
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User’s Rewards Token C Amount
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User’s Rewards Token D Amount
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User’s New Rewards (from the last snapshot, in USD)
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User’s Cumulative Rewards (in USD)
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This structured approach ensures transparent and verifiable calculation of user earnings, while providing real-time insights into both token-denominated and IDRX-equivalent rewards.


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