Overview

Vaults serve as the last counterparty to traders if the Stability Fund is depleted. In return, they continuously receive distributions from the Stability Fund, which consists of traders' losses plus 45% of protocol revenues.

Vaults are siloed per collateral asset, which means e.g. your MON pool share is independent from your USDC pool share.

Stability Fund Architecture

The Stability Funds sit between traders and liquidity providers as a capital cushion. Every fee, every trader loss flows into the Stability Funds first. From there, it distributes profits to LPs over an adjustable rolling period, smoothing out volatility and protecting against sharp drawdowns. When the Stability Funds are capitalized, LPs enjoy stable APRs without exposure to sudden swings in trader performance. The architecture prioritizes LP safety: they're the last line of counterparty exposure, not the first. Long-term, accumulated fees and trading losses keep the Stability Funds perpetually funded, creating a self-reinforcing system that benefits all participants.

Risks

Vaults are not risk-free. There can be prolonged periods of time where traders in aggregate make profits, which can deplete the stability funds and the capital you deposit into the pool. Other risks, including smart contract risk and order mispricings, are described in the risk disclosure.

Consider all of these risks before depositing. Only deposit capital you can afford to lose.

Share Calculation

Your vault share is equal to your vault balance divided by the total balance. Deposits by other liquidity providers will dilute your vault share while withdrawals will increase it.

Contract terms

In the contracts, the term 'pool' designates the vaults, while 'buffer' designates the Stability Fund.