# Tokenized Strategy Vaults

### **Dynamic AMM Strategy Vault**

* Liquidity Vault structure: USDC-only deposits, dUSDC share tokens.
* Counterparty role: vault PnL moves opposite aggregate traders.
* Pricing: oracle mid ± fixed/dynamic spreads.
* Revenue: trading fees, borrowing, funding, spread capture, counterparty PnL.
* Protections: router throttles vault exposure under stress; OI caps limit concentration.
* Distinction vs constant-product AMMs:
  * No x\*y=k curve.
  * No impermanent loss.
  * Operates like an institutional MM, not a passive pool.

### **Funding Rate Vault (frUSDC)**

* Mechanics:
  * Deposit USDC → swap to asset with positive funding.
  * Post as margin → open equal short perp.
  * Net delta ≈ 0; collect funding from longs.
  * Returns increase frUSDC share value.
* Benefits:
  * Stable, direction-neutral yield.
  * Market stability through funding compression.
  * Composable tokenized collateral for DeFi.
  * Institutional analogue: automated cash-and-carry arbitrage.
* Risks:
  * Funding reversals can cause losses.
  * Mitigated by vault’s dynamic exposure controls.
* Use cases:
  * Passive yield for stablecoin holders.
  * DAO treasury allocation.
  * Protocol collateral with embedded yield.
* Distinction vs constant-product AMMs:
  * No impermanent loss.
  * Returns from funding, not swap volume.
  * Operates like an automated hedge-fund vault.

### Additional Structured Strategies

Drake supports composable vault strategies beyond frUSDC, enabling hedging and index-like products.

* Hedge strategies: protect LPs or treasuries from directional risk exposure.
* Index-style strategy vaults: replicate DeFi “equities” through diversified exposure.
* Yield optimization strategy vaults: recycle trading flows into sustainable returns.
* Designed for DAO integration or as building blocks for other protocols.
* Fully on-chain, enabling transparency and composability.


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