Synth Vaults

A Synth Vault locks users collateral to execute a specific asset management strategy for all its depositors.

Starting in V1, Synth Vaults may be proposed, assessed, and added by the Umoja community - similarly to how Yearn Finance enables their community to propose audited strategies for yield optimization.

What are Synth Vaults

A Synth Vault secures user collateral to implement a specified asset management strategy for its depositors. Initially, the Beta version offers Synth Put and Call Options, with plans to expand the range to include a diverse set of Synths for various automated asset management strategies.

How Synth Vaults work

Synth Vaults operate in the following manner:

  1. Users selects which Synth they want to use, denote their terms, & pay the protocol fee (e.g., they select to use a Synth Put Option, and, upon doing so, indicate the token type, notional amount, strike, and term they need).

  2. Synth Vault transfers user collateral to Global Pool to execute strategy. The Vault receives Pool Tokens as a pro-rata collateral & coverage receipt.

  3. Global Pool trades across CeFi & DeFi liquidity venues.

  4. Global Pool pays back coverage & collateral as needed by Vaults for end-users.

Synth Vault Collateral Management

It's important to note that each Synth comes with its own collateral requirements. The protocol adopts a 'self-insurance' approach, ensuring each user's Synth position is self-sufficient and independent from others within the same Synth. Therefore, the Global Pool, which tracks the collective position of all Synths and their users, does not act as an Insurance Pool. Instead, it supports simultaneous strategies relative to the collateral provided by each Synth Vault, enhancing the protocol's capital efficiency and reducing costs for users.

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