Vaults
Vaults are an essential part of the SYNTHR Protocol, serving as plugand-play entry points to the overall ecosystem. Due to their userfriendly experience, vaults will play a critical role in onboarding the next billion users to DeFi. 1-Click Vaults will enable users to seamlessly earn yield on their deposited assets.
- 1.Long-Farm Vault
The Long-Farm Vault will maximize capital efficiency by allocating capital to liquidity-starved syAssets. The DRASR framework will automatically adjust rewards so that there is always an incentive for the Long-Farm Vault to allocate its deposits towards the most capitaldeficient syAssets. By toggling incentive programs, the SYNTHR Protocol will be able to achieve high pricing stability.
Figure 6: Long Farm Vault buys syAssets trading at a discount and deposits them into an LP pool on a partner DEX to earn rewards for depositors.
Depositors of the Long-Farm Vault will have 50% of their liquidity routed to partner DEXs to buy an syAsset that is trading at a discount compared to its oracle price. The remaining 50% will be used to add liquidity to the syAsset trading pair on the partner DEX.
Rewards accumulated from trading fees will be distributed to depositors. Once the syAsset is brought back to parity with its oracle price, the Long-Farm Vault liquidity will be pulled from the LP position and converted back to stablecoins.
This process will be repeated for all partner DEXs and syAssets to ensure capital efficiency across all syAssets trading pairs. Long-Farm Vault depositors will be rewarded in SYNTH tokens depending on the extent of the variation between oracle and DEX prices. The bigger the spread between the oracle and DEX prices, the larger the SYNTH token rewards. The SYNTH token rewards will be set to a maximum by the DAO but will dynamically reduce to zero once parity is attained.
2. Short Farm Vault
Like the Long-Farm Vault, the Short-Farm Vault will help the protocol maximize capital efficiency and achieve price stability. At times, an syAsset may trade at a premium when demand for the asset is higher than normal. The Short-Farm Vault will seamlessly rotate liquidity to prevent premiums across all syAssets. By arbitraging syAsset premiums, syAsset prices will become more stable, and depositors will earn rewards by keeping syAsset prices pegged.
Figure 7: Short-Farm Vault mints syAssets trading at a premium and sells them on a partner DEX to generate arbitrage profits and earn rewards for depositors.
3. Delta-Neutral Vault
As previously discussed, minting syAssets creates new debt, which, when subjected to volatility based on the price movements of the underlying assets of the Debt Pool, creates liquidation risks for Debt Pool owners. The Delta-Neutral Vault will enable users to leverage yield-generating opportunities provided by the SYNTHR Protocol without exposing themselves to any Debt Pool risk.
Figure 8: Delta-Neutral Vault mirrors the Global Debt Pool to eliminate Debt Pool risk and generates delta-neutral returns using the Stability Pool.
Users will be able to deposit stablecoins into the Delta-Neutral Vault, which will swap the deposits for syUSD using a partner DEX. The syUSD will then be swapped, via the SynthSwap module, for Delta-Neutral Vault Tokens that will mirror the Debt Pool composition. These tokens will rebalance every 2 days to maintain accurate representations of the Debt Pool composition.
These syAssets will then be deposited into the Stability Pool to generate returns from platform liquidations while bolstering protocol solvency and health.
4. User-Created Vaults (Strategies)
Like Yearn Vaults, user-created vaults will have the flexibility of parameter customization, enabling SYNTHR users to create and manage their own strategies to maximize returns.
Custom vaults can be created with different syAsset mixes and can involve automated yield farming, lending, and borrowing activities to maximize the return on assets. These vaults can interact with other vaults or modules, not limited to the SYNTHR ecosystem. Vault creators will earn a performance fee from other users depositing funds into their vaults.