Revenue Strategies

Revenue Strategies

The deposits made to the vault can be utilized in whitelisted DeFi strategies to earn yield. The various types of assets deposited in the vault can either be held idle, or be deployed to external protocols that offer safe, risk minimized yield.

The vault’s liquidity management can also be delegated to certain sophisticated actors while ensuring the security of the funds.

For example, the vault can whitelist professional DeFi risk managers to manage a specific strategy—such as LRT lending markets—and allow the strategist to continuously lend and withdraw from multiple whitelisted lending pools to optimize yield while minimizing risk for the depositors. While the strategist can conduct specific actions such as lend/withdraw that can optimize yield, the strategist would not be able to send malicious transactions such as transferring liquidity to a malicious contract.

For more details on security assumptions, see Manager in Vault Framework.

Yield Accrual

When the vault is deployed on the L1 and the L2, the liquidity can be transferred to and from each network and also be deployed for unique opportunities on the respective chains. This means that the total value of the vault must account for liquidity in multiple network states. Because a smart contract cannot atomically query the state of another network, Nucleus uses an offchain oracle to query the total balances of unutilized assets and tokenized DeFi positions to report the aggregate value of the vault. This value, divided by the aggregate total supply, is the exchange rate that is updated on-chain.

This system is analogous to how many liquid staking providers such as Lido keep track of their exchange rates, where the staking provider's offchain daemon queries the total balance of ETH on the execution layer as well as the total value of ETH staked across its validators on the beaconchain. The daemon then combines these two values and updates the staking contract, either increasing or decreaseing the exchange rate of the `lstETH` contract. If the staking protocol's validators accrue yield, the exchange rate increases. If the validators suffer a loss greater than the earnings via slashings, then the exchange rate would decrease. Similarly, as the Nucleus vaults earn yield, the exchange rate would increase, but also decrease if the vault suffers a loss. For example, if a validator that the vault lent its liquidity is slashed, the exchange rate would go down.

For more details on exchange rates, see Accountant in Vault Framework.