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Swaap Vaults Overview

  1. What is a Swaap Strategy Vault and how does it work?

Each Swaap Strategy Vault is a smart contract powered by Swaap Protocol. It is designed to run DeFi strategies, such as recursive staking, lending, and market making. These strategies generate high yields by maximizing efficiency and managing collateral. Users deposit funds into the vault, which then allocates them across established DeFi protocols. We optimize continuously. This gets us the most from interest, staking rewards, yield farming, and trading fees. The vault adjusts its strategy to seize new opportunities. It gives users a simple, hands-off way to earn passive income in DeFi.

  1. What are the tokens such as “swpETH” (vault share token) I received in the wallet once deposited into respective vaults?

The ERC-20 tokens signify your ownership stake in the vault. These tokens can be redeemed for an equal amount of the vault's base asset, which may be ETH, USDC, and others.

  1. What will I get in return when I make a vault withdrawal?

When withdrawing from a Swaap Strategy Vault, you'll receive the same base asset token you initially deposited. This includes your original deposit plus any earned yield, after deducting all applicable fees. This structure ensures you directly profit from the growth of your chosen asset.

User Experience and Operations

  1. Is there a withdrawal window?

Yes, withdrawals are possible at any time, following a brief 1-day lock-up period after your deposit. This measure is not about limiting your access to your funds. It is about protecting your investment and the vault from potential exploits by bad-faith actors. This short waiting period ensures enhanced security for all users.

  1. Why can't someone just do this themselves?

Certainly, people could manage their own investments. But Swaap Strategy Vaults offers significant advantages. They save time and reduce transaction fees. They ensure optimal collateral-to-debt ratios. They seek the highest yields and automatically reinvest earnings. Manually replicating this would be inefficient and time-consuming.

  1. Where does the yield come from and go?

The yield in Swaap Strategy Vault comes from three main sources. These sources are determined by the strategy allocation of each Vault.

  • Recursive Staking Yield: This is generated from the stETH staking yield. The strategy amplifies returns by borrowing ETH on AAVE to increase exposure to stETH. But, it's important to track AAVE's changing borrowing rate. Profit depends on ETH borrowing cost being lower than stETH returns. The Swaap Strategy Vault manages this.

  • Lending Interest: Lending interest is a part of yield. It comes from the interest earned by supplying ETH to trusted lending protocols, like AAVE.

  • Market Making Yield: Returns come from providing liquidity in Swaap Maker pools by Swaap protocol. The protocol has a strong APR track record since 2022. It offers good APRs for liquidity providers with no risk of impermanent loss.

These yields are added to your position. They increase the value of your vault tokens. The tokens represent your share in the vault. By combining these approaches, Swaap vaults efficiently maximize returns on your chosen asset.

  1. Is there a fee to use Swaap Vaults?

Each Swaap Strategy Vault is subject to two types of fees: Management fee and Performance fee. Our Performance fee utilizes the high-water mark method. This ensures that you only pay fees based on the profit earned by the Vault from the time of entry to its peak. It protects against fees in bad times and avoids repetitive fees on the same profit. Additionally, users incur a yearly Management fee. It covers expenses such as gas costs for rebalancing, strategy deployment, and maintenance. These costs ensure the Vault runs smoothly. Please refer to each Vault page for the applicable fees and its value.

Risks and Learn more

  1. What are the risks using Swaap Vaults?
  • The Recursive Staking and Lending strategy carry risks. These include smart contract dependencies on used protocols like AAVE and Lido. They also include the risk of liquidation. For instance, a drop in stETH's value relative to ETH can trigger liquidation. The drop is influenced by shifts in user strategy, Lido's risks, or reduced liquidity. Swaap's advanced collateral management does this by reducing leverage. It does so by converting stETH to ETH to repay debt and keep a healthy collateral-to-debt ratio. But, this comes with potential slippage losses.

  • The Market Making strategy on Swaap Maker and Swaap Strategy Vault is developed by Swaap protocol. It uses established DeFi protocols and focuses on liquid strategies. These strategies boost sustainability and cut risk. All core contracts are audited and open-sourced. Audit reports are accessible here. But, smart contracts have the risk of vulnerabilities or bugs. Thorough due diligence and staying updated are essential for all investors. For further details on safety features mitigating operational security risks, please visit here

  1. How can I learn more?

You can visit our knowledge base page to dive deeply into Swaap Strategy Vaults. Or ask more in depth questions to our community on Discord→