Rebalancing Methodology
VaultCraft employs a sophisticated methodology for rebalancing vaults, focusing on risk management and yield optimization.
Market Allocation Strategy
VaultCraft's models continuously review market allocations and make necessary adjustments to ensure vaults remain risk- and yield-optimized. The key aspects of their market allocation strategy include:
Adding new markets: When a new market is added, the vault APY changes based on the allocation percentage and supply APY rate.
Adjusting market allocations: VaultCraft's models constantly review and adjust market allocations to optimize risk and yield.
Adjusting market caps: Caps are set to limit vault exposure to any single market, representing the total amount of supply that can be allocated.
Strategic Adjustments
VaultCraft continuously assesses and implements adjustments and reallocations once a market is allocated to a vault. These adjustments fall into two main categories:
Risk-off Adjustments
Continuous data checks ensure sufficient liquidity in decentralized exchanges (DEXs) to support potential liquidations without causing significant market disruptions.
This process is crucial for maintaining vault stability and security.
Yield Optimization
Maximizing risk-adjusted yield by analyzing and reallocating assets among different markets.
Yield analysis: Assessing yield in different markets, considering current rates and the shape of the yield curve.
Utilization management: Monitoring utilization rates to avoid over-leverage and ensure optimal risk-adjusted yield.
Adaptive strategy: Understanding time and utilization patterns to make informed decisions on asset reallocation and vault APY management.
Risk-First Approach
VaultCraft employs a risk-first approach in their rebalancing methodology. This involves:
Using Guardrail simulation models tuned to actual market data to predict the impact of alternative parameterizations1.
Optimizing an objective function that balances risk and capital efficiency, considering factors such as insolvencies, liquidations, and borrow usage1.
Agent-Based Security
VaultCraft utilizes Guardrail agents for real-time security audits and monitoring of smart contracts. These agents provide continuous protection beyond traditional one-time security audits.
Key features include:
Customizable Guards: Configurable policies tailored to verify contract behavior, protect against vulnerabilities, and detect anomalies1.
Simulation and Testing: Agents can run in simulation mode to proactively identify and mitigate risks before mainnet deployment1.
Cross-Chain Compatibility: Designed to work across various blockchain environments, including mainnets, rollups, and cross-chain scenarios1.
Modular Approach: VaultCraft's risk assessment strategy is scalable, starting with monitoring guards and simulations, with potential for growth into prevention and on-chain verification1.
Prevention Mechanism: VaultCraft is developing a proactive security policy enforcement system with Guardrail to defend against risky transactions before they occur
By employing this comprehensive methodology, VaultCraft aims to maintain optimal risk-adjusted yields for the vaults they manage while ensuring stability and security in varying market conditions.
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