Strategies

Strategy Reports

Reports detailing the vault's allocations to specific strategies will be updated weekly, including their Ongoing and Pending APR contributions. These can be found on the vault web UI.

Additionally, look for the “Debank” and “Zerion” links on the vault details page to view onchain positions at any given time.

Strategies Overview

Strategies are the techniques strategy managers employ to generate returns on the assets deposited in the vault. They are varied and dynamic, evolving in response to new innovations in DeFi, new chains and capital flows.

Partner Protocols can specifically include or exclude strategies they prefer; or leave the strategy selection to the Strategy Manager

Below are some examples of strategies to give an idea of some of the common ones a Strategy Manager may employ.

Example Strategies

Leveraged Looping

Especially popular for ETH or LSTs, leveraged looping involves depositing the asset on a lending platform such as Aave, minting an LST (which generates a return), depositing that LST in the lending protocol, to then borrow more ETH, to then mint more of the LST until the health factor of the loans approaches the risk threshold of the vault.

• Pros: Delta neutral if borrowing is in the same asset, such as ETH

• Cons: Returns can evaporate if borrow rates turn negative; liquidation and capital loss can occur if ETH/LST prices depeg

Incentive Farming

New chains, or new protocols on existing chains, face a "cold start" problem. Offering incentives for user's to bring assets, such as ETH, to the chain or protocol help provide liquidity, activity and get the "flywheel" started. Because vaults can control large blocks of assets, they may be able to negotiate superior rates for "LP deals" that can be passed on as "alpha" to the vault depositors.

• Pros: Can offer significant returns

• Cons: Higher risk from new protocols and may involve soft or hard lockups

Liquidity Provision (LP)

Protocols will often incentivize liquidity providers to provide liquidity for assets. An example is a DEX that is able to offer its users better swap rates for larger volumes the more assets LPs provide. The same protocol may offer additional incentives for "concentrated liquidity".

• Pros: Well understood and sustainable rewards

• Cons: Requires very active management to avoid impermanent loss