Vaults/YOP
YOP = Yield Optimization Platform/Protocol
What is a Vault?
Vaults are investment instruments that employ a specific set of strategies for yield farming. They make use of automation to continually invest and reinvest deposited funds, which help to achieve high levels of compounded interest. By using a Froyo vault to compound your gains, you save thousands of transactions with their associated gas costs, and precious personal time. Instead of manually harvesting and selling rewards, buying more tokens, and reinvesting that continuously, a vault does all that automatically at a high frequency.
Vaults are the core of the Froyo.Farm ecosystem. In a Froyo vault, you earn more of the asset you stake in it, regardless if this is an liquidity pool (LP) token or a single asset. For example, vaults where one can stake CREAM-AVAX LP will result in more CREAM-AVAX LP over time, effectively growing your share in the vault and thus allowing for more and more rewards over time.
Despite the name 'Vault' suggests, user funds are never locked in any vault on Froyo.Farm. One could always withdraw from a vault at any moment in time. Froyo.Farm also does not own user funds staked in vaults. However, it is generally best to view vaults as investment tools to store funds for the medium to long term in order to have the effects of compounding really kick in.
When browsing the vaults on the platform, you will see the annual percentage yield (APY), which takes the frequent compounding into consideration compared to annual percentage rate (APR) which does not. You will also see daily interest percentages and the total amount invested in a vault by all users (TVL). Furthermore, one can see what underlying platform the vault is using as a source of revenue.
Each vault can either refer to a pair of tokens invested in liquidity pools, such as CREAM-AVAX LP tokens within the Avalanche Smart Chain ecosystem, or a single token invested in lending platforms or single stake reward pools. After depositing tokens to a vault, the user is supplied with vault specific froyoTokens which represent their share in the vault. We will elaborate on froyoTokens in the next section.
Summarizing, vaults can:
Efficiently execute yield farming strategies.
Compound rewards into the initially deposited token amount.
Use any asset as liquidity.
Provide one asset as collateral for another.
Manage collateral at a safe level to mitigate liquidation.
Put any asset to work to generate a yield.
Reinvest earned profits.
Users can sit back and relax, and watch their investment grow!
What are froyoTokens?
A froyoToken is an interest-bearing, tokenized proof of deposit that you will receive at the moment you deposit in a Froyo vault. A froyoToken is unique per vault, e.g. you get froyoSundaeFUDGE-DAI tokens when depositing FUDGE-DAI into the FUDGE-DAI vault. One can view froyoTokens as the receipt of your vault deposit.
Froyo.Farm users should hold on tightly to their froyoTokens and not sell or exchange it, since you would lose ownership of your staked vault assets if you did so!
How do froyoTokens earn interest?
Froyo's vaults automatically create more of your deposited asset in the form of compound interest. By holding froyoTokens in your wallet, they are increasing in value against its corresponding vault asset. The number of froyoTokens in your wallet will remain constant, but the quantity of the vault tokens they can be redeemed for increases. This is also the reason why froyoTokens do not 1:1 match with the token amount initially deposited.
How do I redeem froyoTokens for the initially deposited tokens?
Whenever you want to withdraw the tokens that are staked for you in Froyo's vault, you simply initiate a withdrawal transaction to exchange them. The froyoTokens are then taken from your wallet and burned, and your deposited assets plus yield will be given back to you.
What are the advantages of the froyoToken system?
Froyo's froyoToken system has a few major advantages:
froyoTokens allow any user to withdraw their fair share of deposited funds;
the system allows you to deposit the froyoToken receipt to a cold or hardware wallet for ultimate safety;
your privacy is maintained, as you remain anonymous to Froyo. Your funds in the vault are not tied to the wallet address from which you made the deposit, since the froyoTokens are the only evidence of your share in the vault. Therefore, you could withdraw your share of funds from a different address if you moved your froyoTokens to it;
froyoTokens have tax benefits: since you're not selling off rewards, nor getting staking rewards direct to your address, you do not have taxable events when you have funds staked in a vault;
Lastly, froyoTokens can be used as interest-bearing collateral.
How often do the vaults harvest their profits and reinvest?
Vaults are normally harvested multiple times daily and profits are automatically reinvested (compounded) every two hours.
Why can't someone just do this themselves?
They could, but vaults help you save on personal time and transaction fees, maintain healthy collateral to debt ratios, self-optimize for the best possible yields, and automatically reinvest earnings. Attempting to do this manually would result in large inefficiencies. Sit back and relax, while the froyo vault does all the work for you.
What is the vault fee structure?
Most vaults have a performance fee structure, taking 6% of harvest rewards. This 6% on profits is again split up: 3% is buyback and burn for the protocol, 1% is for gas and maintenance fees, 2% is for the DAO allocation and treasury. These fees are already built into the APY of each vault and daily rate. You do not need to calculate these yourself.
The 3% for buyback and burn for the protocol will be used automatically purchase the protocol's native token, and burn it, removing it from the TOTAL supply. A part of it also funds the treasury and DAO which is used to further fund platform development and security and other initiatives. A successful and engaged community is critical for our future growth, which in-turn rewards platform users even more.
Does the vault page show the APY?
Yes. Our displayed APY values reflect the predicted rate earned on a vault in a year. This rate is determined by the underlying platform it uses, the strategy that it is interacting with at the time, the total amount of funds in the vault and also takes into account the effect of compounding. As a unique feature, we have also included all vault fees in the APY calculation. What you see is what you get!
What risks do the vaults have?
Froyo vaults are a fork of Beefy.Finance (which has a CertiK audit) with some little tweaks, but this does not mean that a vault is entirely risk-free. Below are some of the general vault risks:
Assets deposited into the vault have no risk of decreasing in quantity but can decrease in monetary value.
As with any smart contract, the ultimate risk is that an investor's funds can end up stolen or unable to be withdrawn. The team does take steps to quantify the security risks of smart contracts and only will interact with ones that meet a specific set of requirements after excessive testing to make sure the underlying platform does not contain so called 'rug-pull' functions.
What kind of vaults?
Deflationary Yield Optimization Vaults: Takes advantage of the high yield on popular farms by depositing another asset to earn, sell and compound profits of the native reward token, in order to do buy-back and burns, and remove native tokens from the TOTAL supply. This creates truly deflationary protocols and sustainability.
What will I get out when I make a vault withdrawal?
You will always withdraw the token type that you deposited because at Froyo you earn what you stake. You will get the amount you deposited plus the yield generated minus the vault withdrawal fees.
How do LP vaults work?
Liquidity pool (LP) vaults work by reinvesting the fees awarded to LP participants. In return for providing liquidity to the pool, many platforms reward investors with tokens. Our vaults regularly harvest these rewards, sell it, buy more of the LP’s underlying assets, and then reinvest to complete the cycle.
This compounds the rewards gained from a liquidity pool. Froyo.Farm creates strategies that automate this process, saving you time and gas fees in comparison to farming manually.
How often are balances updated in the vaults?
Pending rewards are not reflected in the balance until they are swapped for the initial deposited token. This can vary depending on the strategy running.
How do vaults get added to Froyo.Finance?
New potential vaults can be discussed in our Discord in the #froyo channel. Our strategists then add the potential investment strategy to our strategy list. A priority is assigned to each new, potential strategy based on its APY, TVL and sustainability. Our developers/strategists then attack the list from top priority to bottom. An official form will be posted and pinned in our discord channel.
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