Deflationary Yield Optimizations Protocol
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!
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'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.
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.
Froyo's froyoToken system has a few major advantages:
- 1.froyoTokens allow any user to withdraw their fair share of deposited funds;
- 2.the system allows you to deposit the froyoToken receipt to a cold or hardware wallet for ultimate safety;
- 3.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;
- 4.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;
- 5.Lastly, froyoTokens can be used as interest-bearing collateral.