Research Phases

Markov Labs conducts research in phases to capture alpha at multiple scaling levels while maintaining controlled risk exposure. Each research phase focuses on establishing a set strategy based on a maximum amount of total value locked (TVL), allowing the team to understand the dynamics and optimize allocations before increasing the TVL.

To ensure that the vault does not overextend, caps are applied in parallel with each research phase. These caps limit the TVL allocated to a given strategy, preventing it from exceeding the capacity that the current model can manage effectively. By doing so, the protocol maintains operational integrity and avoids liquidity strain or performance degradation while testing new strategies.

Research for the next phase begins while the previous phase is still active, creating a rolling cycle of development and evaluation. This approach allows Markov Labs to continuously refine algorithms, gather market data, and assess risk without exposing the vault to uncontrolled scale-up events.

Over time, as a strategy matures and the model becomes well-understood, the role of the algorithms may evolve. If Markov Labs were to absorb a substantial portion of a market, the algorithms would shift from purely alpha-generating strategies to more of a market-making function, supporting rate discovery while still managing risk. This evolution is currently observed in the interaction between Morpho and Fira, where Markov Labs is seeks alpha in a highly-competitive environment within Morpho while focusing more on rate discovery and efficiency in Fira.

This phased approach allows Markov Labs to scale strategies prudently, preserve alpha generation, and maintain flexibility to respond to market conditions as models transition toward broader market impact.