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Vault Guardians

The objective of the vault guardian

The vault guardian for each vault aims to submit operations in a way that increases the objective function performance of the vault. While the objective function performance is not currently measured on-chain and tied to any form of performance fees, objective function performance is measured off chain and used to keep the vault guardian accountable.
The vault guardian should also strive to do this in a way that:
  • Mitigates risk. Stability of objective function performance can be more important than taking highly volatile positions
  • Facilitates explainability of their actions (which will build trust with the vault owner).

Submission flow

When a vault guardian makes a submission with submit, it goes through the following lifecycle of steps:
  • The vault guardian submits a set of operations
  • The beforeSubmit hook is executed
  • The set of operations are executed 1-by-1 in order. If one of them reverts, the whole chain of transactions reverts.
  • The afterSubmit hook is executed.

How oracles are used to price assets

ERC20 tokens
Each ERC20 token has a corresponding oracle that provides the price of that asset with respect to the numeraire. The price of the numeraire asset itself is trivially fixed at 1.
ERC4626 tokens
For ERC4626 tokens, the convertToAssets function is used to convert a given number of ERC4626 vault shares into an equivalent amount of underlying token. Note that this amount of underlying token may not be immediately withdrawable and represents an estimation. Each underlying token is also an ERC20 token in the vault and from there the oracle is used to further express the ERC4626 share value into numeraire terms.
More details on using convert functions as price oracles can be found in the ERC4626 specification.

How to submit operations

Operations can be initiated by calling submit on the vault. There are no other actions that the vault guardian is expected to take.

Off-chain intelligence

The vault guardian will be expected to develop appropriate off-chain intelligence to make submissions that maximize objective function value while mitigating execution costs. We highlight a few high-level capabilities we expect the vault guardian to develop:
  • Objective function measurement / estimation, allowing the vault guardian to consider various scenarios and predict objective function evolution in each of the scenarios. Note that some important of the objective function such as short-term asset prices may not be as predictable as others
  • Estimation of rebalancing costs
  • Adding appropriate slippage bounds with off-chain price intelligence to protect the vault
  • Breaking up strategies across multiple epochs to mitigate the price impact of large trades
  • A deep understanding of custom strategies represented in the enabled ERC4626 vaults, their liquidity characteristics and risks
  • Risk management monitoring techniques enabling reactions to adverse market circumstances, depeg scenarios, etc.
Please see the Contact Usto express interest being a Vault Guardian.