💰USDC Vault
Empower traders, customize your risk-return profile, and earn real yields
Last updated
Empower traders, customize your risk-return profile, and earn real yields
Last updated
Liquidity providers are the life-blood of Avantis, and for that, they earn organic yield from all trades on the platform.
Currently, anyone can stake their USDC in the vault to supply trading liquidity to the platform. In exchange, they receive a percentage of fees generated via market-making vaults on Avantis. As you can see, Avantis is an ecosystem of onchain, margin-based primitives, and LPs will be eligible for all rewards accruing to this ecosystem.
The vault serves as the counterparty to all trades made on the platform:
When traders win (positive PnL), their winnings are received from the vault.
When traders lose (negative PnL), their losses are sent to the vault.
In exchange, the vault receives a portion of trading fees. These fees are proportionally split among avUSDC shares in each risk tranche, incentivizing stakers to stay in the vault. Investing in the vault is not risk-free, which is why we've created different risk buckets (or "tranches"). The senior and junior tranche earn (and share losses) in a different percentage, allowing users to self-select into different risk buckets. Currently, we have two risk buckets users can choose from:
Senior Tranche (Low Risk): Our lower risk product, which receives ~35% of the fees going to LPs. However, it also only shares in ~35% of the losses
Junior Tranche (Higher Risk): Our higher risk product, which receives ~65% of the fees going to LPs. However, it also only shares in ~65% of the losses
As long as fees earned (trading fees + traders' losses) is greater than PnL payouts (trader profits), stakers earn a positive return. This has proven to be the case based on our back-tests, and the protocol has various risk management measures in place to ensure LPs are always protected first.
Pnl vs Fee distributions
Note: the protocol does not distribute trader PNL. Historically, this was done and lead to rapid share price increase, but at the expense of added volatility.
Trader losses accumulates in a buffer , and are held there to be paid out eventually (to winning traders). On average, we expect the protocol to be delta neutral (i.e traders win and lose equally on average), which means LPs mostly benefit from fees, not PNL. This is better for LPs looking for a steady stream of earnings while being principal protected.
