Vaults
What are Circuit Vaults?
Our protocol uses a modular design approach. Each position uses a vault and strategy pair for yield farming. At this time, one vault has one strategy. In the future we may focus on developing a multi-strategy vault.
The vault contract accepts user deposits, sends those deposits to the strategy contract (who puts them to work) and in return mints a receipt to the user. When the user wants their funds back, the vault accepts the receipt token from the user, burns it, then withdraws the appropriate amount of funds and sends those back to the user.
Our vaults use automation to determine optimum compounding frequency. This allows the user to avoid lengthy and tedious tasks. It also socializes the gas cost of compounding.
A typical process of compounding involves these steps:
Get LP token.
Deposit LP token.
Claim rewards.
Sell rewards for token0.
Sell rewards for token1.
Create new LP token with new token0 and token1.
Deposit LP token
These steps are repeated the entire duration of farming, sometimes multiple times a day! And each of these steps costs gas and time.
With Circuit Protocol, the user only needs to make one step!
Deposit LP in vault.
Thats it!
Our vaults allow users to avoid all that and instead simply deposit the LP into the vault. We handle the rest. Users only need to make one transaction, saving time and gas fees.
Vaults Expanded
Vaults can handle any asset. In the example above, it supposes an LP token similar to Pancakeswap or Sushiswap. But our strategies can involve more than just a masterchef and a DEX. We can make strategies for Money Market protocols like Compound or AAVE or Perpetual Futures protocols like GMX.
Vaults do not 'lock'. Users can withdraw at any time, though some vaults may have a tiny 0.1% withdraw fee. Keep in mind that this fee is distributed to other users in the vault, not Circuit Protcol's dev team. This is only in place to prevent potential abuse of depositing-earning-withdrawing in a single transaction.
What are cvTokens?
A cvToken (circuit vault token) is a receipt from the vault. It is essentially interest-bearing, as the quantity of assets it represents increases overtime as the vault compounds. That means that there is no 1:1 ratio of assets and cvTokens, as the value of the cvToken increases with each compounding event in the vault.
cvTokens are prefixed with 'circuit'. A typical format is: "circuit - token name - platform".
For example "circuit-LEND-MNT-Lendle".
How often are vaults harvested?
Our harvester bot checks for the profitability of harvesting a vault every 15 minutes.
Profitability is determined by:
if (cost to harvest < calling fee) { harvest}
The calling fee is accounted for as part of the 4.2% profit fees deducted from yield profit. Anyone who calls the harvest function will earn this fee.
If the cost to harvest is greater than the calling fee, it will not harvest the vault.
Vaults that have not been harvested in 24 hours will automatically be harvested anyway. The maximum wait time is 24 hours.
Profitability will increase based on more TVL being in the vault, as this will generate more collective farming rewards.
How do I redeem cvTokens?
When a user wishes to redeem the cvToken for the underlying crypto asset, they simply need to withdraw. Our contract will automatically burn the cvToken in exchange for the appropriate underlying asset. You get back the same number of tokens deposited + any gained yield.
Are there fees?
Short answer, yes.
Circuit Protocol takes a modest 4.2% fee on profits. We never take a deposit fee from the deposited assets. We do this in order to pay for the cost of compounding the vault, as well as ensure the longterm sustainability of the protocol. We are actively developing this protocol! This fee percent is quite low in contrast to other protocols.
The profit fee is already built into the APY% you see. So if your vault is earning 100% APY, that's the number! You don't need to calculate anything else because our API is already doing that math for you.
What risks are there?
No DeFi protocol is without risk.
Our vaults use battle-tested code. But there are still inherent risks that all users should consider before interacting with DeFi.
The value of the asset deposited in the vault may decrease over time. The quantity will always increase, but the $ value may decrease.
As with all smart contracts, the ultimate risk is that funds can end up stolen or unable to be withdrawn. We take steps to ensure this wont happen. But you should always consider the risk of failure with smart contracts.
External risks. Our vaults and strategy contracts may work perfectly well, only for the third party protocol we integrate with to have a bug of their own. This can, ultimately, lead to a loss of funds. We will do our best to ensure that the protocol we integrate with meets a level of standards, but ultimately those contracts are not ours, and we have no control over what other protocols do.
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