Vaults

A Vault is a smart contract used to issue and manage veUSD loans.

The Vaultedge protocol supports multi-collateral Vaults, allowing users to utilize up to 10 distinct tokens as collateral.

Vaults maintain two balances: one is an asset (tokens) acting as collateral and the other is a debt denominated in veUSD. Modifying those balances by adding collateral or repaying debt changes the Vault’s health factor accordingly.

Vaults can be closed at any time by fully paying off the debt

What is your Vault's ICR (individual collateral ratio)?

This is the ratio between the "risk-adjusted value" in your vault and its debt in veUSD.

The risk-adjusted value (RAV) takes into account the dollar value of your collateral, as well as a safety ratio to account for how risky the collateral is. Higher risk collateral has a lower safety ratio, meaning a lower RAV.

$${Risk-Adjusted Value} = \text{Safety Ratio} \times \text{Price} \times \text{Collateral Amount}$$

There are multiple classes of collateral, with highly liquid and trusted collateral having a safety ratio of 1.0 and more risky collateral having a safety ratio of 0.8 or 0.5.

All non-stablecoin collateral has a safety ratio between 0 and 1.

Stablecoin collaterals have a safety ratio up to 1.1, which allows you to borrow at an effective collateral ratio of less than 110%.

Your individual collateral ratio will fluctuate over time as the prices of your collateral change. You can influence the ratio by adjusting your vault’s collateral and/or debt — i.e. adding more collateral or paying off some of your debt.

For example: Let’s say the current value of one ETH-LYNX LP is $1,000 and you decide to deposit 30 LPs. Say ETH-LYNX LP has a Safety ratio of 0.8. This means your risk-adjusted collateral value is $1,000 * 30 * 0.8 = 24,000. If you borrow 10,000 veUSD, then the collateral ratio for your vault would be Collateral Value / Debt = 24,000/10,000 = 240%. If you instead took out 20,000 veUSD that would put your vault's collateral ratio at 24,000/20,000 = 120%.

How can I take advantage of leverage?

You can sell the borrowed veUSD on the market for ETH and use the latter to top up the collateral of your Vault. That allows you to draw and sell more veUSD, and by repeating the process you can reach the desired leverage ratio.

Why did the collateral and debt of my vault increase without my intervention?

If vaults are liquidated and the Stability Pool is empty (or gets emptied due to the liquidation), every borrower will receive a portion of the liquidated collateral and debt as part of the redistribution mechanism.