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Deposit & Withdrawal Mechanics

The section below illustrates how deposits and withdrawals work.

When a user invests in a vault, they are issued vault shares, that hold a percentage claim to the assets in the vault. Upon redemption, these shares hold a claim to a proportion of each asset in the vault. Users can withdraw their assets any time.

Deposit

📌 Current beta version of the vault uses a Direct NAV Approach to calculate the amount of newly issued shares. While this approach provides more simplicity and clarity, future versions of the vaults will use a Proportional Contribution Approach which offers a fairer distribution of shares.

When a user allocates funds to a vault, they are issued vault shares corresponding to the increase in Net Asset Value (NAV) that they contribute to the vault. The following sequence of actions takes place:

  1. User initiates a deposit in FUSD.

  2. The vault calculates the NAV: $$ NAV = \sum _ { i = 1} ^ { m } asset_i * price_i $$

  3. User vault share ratio is calculated: $$ DepositRatio = \frac{Deposit}{NAV} $$

  4. New vault shares are issued to the depositor based on the DepositRatio. This ratio determines the proportion of new shares relative to the total existing shares: $$ NewlyIssued = DepositRatio * TotalShares $$

Future advancements

  • Allow the user to deposit funds into a vault with a wider range of assets besides FUSD.
  • Implementing a Proportional Contribution Approach will ensure each depositor's share more accurately reflects their contribution to the vault's total value, especially in cases of significant deposits.

Withdrawal

When a user wishes to withdraw their funds from a vault, the following sequence of calculations takes place:

  1. WithdrawalRatio is calculated as the ratio of user shares to the total shares in the vault: $$ WithdrawalRatio = \frac{UserShares}{TotalShares} $$

  2. The WithdrawalRatio is applied to each asset position in the vault, and the user is sent a proportion of each position in the vault. This means you receive an amount of each asset equivalent to your share percentage in the vault.

  3. When the withdrawal is processed, shares are burnt. Burning shares refers to the process of reducing the total number of outstanding shares by the number of shares you withdraw, effectively removing your stake from the total.

Future advancements

  • Allow the user to decide in which asset he wants to withdraw his share of the vault. The vault will perform the swap before sending the assets to the user. Enabling asset-specific withdrawals will provide users with greater control over their returns, allowing them to choose the asset form in which they wish to receive their investment.