Vault Liquidity
For every vault, the LP deposits the necessary liquidity to cover the two potential scenarios for a given vault: 1) Linked Price Reached and 2) Linked Price Not Reached. Since a vault's configuration always includes interest, the LP must deposit the required rewards in both tokens to cover the two possible settlement scenarios.
Buy Low Vault - LP Deposit
In a Buy Low vault, the LP inputs a maximum Quantity of WBTC at the Linked Price. Subscribers then deposit USDC into this vault for the opportunity to buy WBTC at the Linked Price. The LP also deposits USDC to cover the rewards for the Linked Price Not Reached scenario.
Here is the deposit formula for the LP creating a Buy Low vault:
The WBTC covers the Linked Price Reached scenario: Subscribers receive WBTC at the Linked Price based on their deposits, plus rewards in WBTC. LP receives the subscribers' USDC plus any unused liquidity.
The USDC covers the Linked Price Not Reached scenario: Subscribers keep their USDC principal and get rewards in USDC. LP receives WBTC plus any unused liquidity.
Sell High Vault - LP Deposit
In a Sell High vault, the LP inputs a maximum Quantity of USDC at the Linked Price. Subscribers can then deposit WBTC into this vault for the opportunity to sell their WBTC for USDC at the Linked Prince. The LP also deposits WBTC to cover the rewards for the Linked Price Not Reached scenario.
Here is the deposit formula for the LP creating a Sell High vault:
The WBTC covers the Linked Price Not Reached scenario: Subscribers keep their WBTC principal and get rewards in WBTC. LP receives USDC plus any unused liquidity.
The USDC covers the Linked Price Reached scenario: Subscribers’ receive USDC at the Linked Price plus rewards in USDC. LP receives the subscribers' WBTC plus any unused liquidity.
Last updated