Tokenized Strategy Vaults

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.

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.

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.

Last updated 4 days ago