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Vaults
The best way to maximize your crypto passive income through DeFi.
If you spend enough time in the decentralized finance (DeFi) sector, it’s highly likely that you’ll encounter the concept of Vaults and wonder what they are. Vaults go by many names; yield aggregators, yield optimizers, auto-compounders, or yield maximizers. In this article, you’ll learn exactly what Vaults are and how you can use them to grow your capital with stellar interest rates, 24 hours a day!
A conventional Vault is an auto-compounding instrument that earns reward tokens on 3rd party farms and automatically reinvests those rewards on your behalf into more LP deposited on the farm to achieve compound interest.
Other kinds of Vaults exist as well, such as Boosted Vaults and Ultra Farms which are completely unique to Crystl Finance. It is recommended that you become familiar with our V3 Vaults product once you understand how conventional Vaults operate.
Conventional Vaults compound at an optimal frequency between 1~4 times a day depending on the strategy. The frequency is chosen to ensure maximum profitability between gas cost vs. earned rewards. After you have made a deposit, please allow up to 24 hours to see a change in balance.
V3 Vaults on the other hand, compound much more frequently due to being extremely gas efficient and initiating compound events upon every deposit or through additional manual contract calls.
There is a 5% service fee on the rewards earned on each compounding event. 4% goes of this to the treasury to support the development of the platform & benefit the community, and 1% goes to Revenue Sharing to reward $CRYSTL token holders.
There is also a miniscule withdrawal fee of 0.1% to discourage Vault manipulation.
At this time, Crystl Vaults only display your LP token amount (and its $ value) which includes your deposit as well as any earned interest. You may use a 3rd party platform such as tin.network if you wish you track the difference from your deposit.
A native solution to track gains/losses is set to release with our upcoming V3 Vaults and website improvements & overhauls.
The Crystl team takes great effort to ensure the safety of all assets under the Crystl Finance protocols. Furthermore, staking features like Vaults are both verified and non-custodial, which means that users are the only ones which can withdraw their own funds. You are always in control of your capital. It is possible to operate Vaults manually in an emergency.
Our code has been fully audited by HashEx. If you would like to review the source code for Crystl Finance, it is available in our Github organization.
Do you have further questions about our code or security practices? Please contact us through our community channels.
Yes. It is possible to operate Vaults manually in an emergency. Crystl Finance Vaults are verified, audited, and non-custodial.
Note: The information below talks about conventional V2 Vaults. To learn about V3 Vaults, see the following page.
Like a bank account, a Vault is an instrument for you to grow your capital through the accumulation of interest. When interest is earned, your deposit grows! The next time interest is earned again, your deposit grows even more! This effect is known as compound interest, and it arises because each proceeding interest is calculated on your new balance which includes all previous earnings.
The biggest difference between earning interest through a Vault in DeFi compared your bank account? Vaults are way more lucrative! You also have full control over your capital and can withdraw or liquidate your tokens at anytime. Below is an example of a conventional V2 Vault on Crystl.Finance operating on the Cronos network. This particular Vault accepts CRO and wBTC liquidity tokens provided on the VVS Finance exchange.
The above Vault advertises an annual ROI (return on investment) of 16.27%. This may seem baffling for an investor new to the DeFi sector, but such a return is normally considered a conservative staking option by DeFi standards.
In this case providing Bitcoin (wBTC) paired in liquidity with Cronos coin (CRO) into this Vault achieves the given interest rate. To some it may seem too good to be true, but thousands of users are already taking advantage of financial opportunities such as this. Arguably, these very opportunities are a huge part of the reason why the DeFi sector has recently seen such explosive growth.
Disclaimer: The information in this article should not in any sense be interpreted as financial advice. You are responsible for your own investment decisions in DeFi. Displayed interest rates in screenshots may vary from the present.
An initial reaction of misbelief upon seeing the high interest rates offered by Vaults is completely normal! Especially if you are new to DeFi. But, be rest assured that the interest rate is simply the mathematical result of compound interest.
To understand exactly how Vaults are capable of achieving such a high interest rate. Let’s consider the following Vault as an example.
Notice that underneath CRO-WBTC there are two keywords indicated in green: “VVS”, and “VVS LP”. VVS indicates that the strategy the Vault uses to grow your deposit is located on VVS Finance. VVS LP indicates that this Vault only accepts LP tokens from VVS Finance (in this case, CRO-WBTC VVS LP).
On the Vault interface, pressing the information icon (i) and then expanding the View Farm Site link will take you to the underlying site with farming strategy used by the Vault.
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If you're following along, looking around on the farm site you should be able to find the farming option (see the image below) where users may stake CRO-WBTC LP to earn VVS tokens with an APR of 15.98%! Or approximately 0.04% daily (divide by 365).
By providing liquidity on the VVS Finance decentralized exchange (DEX), the VVS Finance platform rewards liquidity providers by paying them with VVS tokens. VVS tokens of course have some value (decided by the supply & demand of the market), and can be sold or bought on the market through the VVS Finance DEX. So, how does the Vault on Crystl Finance use these facts to achieve the stellar 16.27% ROI if the APR is only 15.98%? It’s simple!
The Vault will automatically harvest users' VVS farming rewards every day. It will then sell VVS for more CRO and wBTC tokens! Each time this is done, the Vault will reinvest the CRO and wBTC tokens into CRO-WBTC LP and deposit the LP back on the farm on behalf of the user. This means that each day, the user’s deposit will earn more VVS than the last. This is the concept of compound interest at work.
Crystl Vaults perform auto-compounding ~1-4 times a day. This frequency varies for each Vault and is optimized for maximum profitability, taking into account farm APR as well as the gas cost of operation (not paid by the user).
Vaults are capable of achieving astronomical compound interest rates by automatically selling reward tokens earned on underlying farms, and reinvesting capital into more LP tokens deposited back into the farm. For a crystal clear understanding, see the graphic below!
Fees: Crystl Finance Vaults charge a 5% performance fee on each compound. This 5% is used to pay the operational cost of the Vault (the gas fees), to fund the protocol treasury, as well as to distribute rewards through Revenue Sharing feature to $CRYSTL token holders of the Crystl Finance protocol.
Let’s say you are an investor looking to provide liquidity on the VVS Finance exchange. To reiterate the previous example, suppose you are interested in providing and staking BTC-CRO LP. You then have two choices:
- 1.Deposit BTC-CRO LP on VVS Finance and earn VVS tokens.
- 2.Deposit BTC-CRO LP on Crystl Finance and earn more BTC-CRO LP.
Choosing option #1 would be beneficial if you were looking to accumulate VVS tokens as a long term investment (bullish on VVS), or if you wished to sell VVS for something other than BTC and CRO.
On the other hand, choosing option #2 would be beneficial if you were looking to maximize your BTC-CRO LP deposit and enjoy hands-free automated compound interest (bullish on BTC-CRO LP). Of course, there is always the option of performing the same strategy as implemented by the Vault manually – but there is a catch: Gas Fees!
Every blockchain requires users to pay gas fees to perform transactions. On Cronos, users must pay gas fees in CRO tokens. If you were to manually perform the exact same strategy as done by a Vault and reinvest your VVS farming rewards into LP to stake that new LP every single day for 365 days a year then you would spend a large amount of capital paying for gas fees!
On the other hand, using a Vault means you don’t have to worry about paying all those gas fees at all! Isn’t that convenient?
Impermanent loss is another strong reason users might want to choose to deposit into a Vault instead of in a farm. In fact, reward tokens such as VVS arguably exist to minimize the risks associated with impermanent loss.
When a user provides assets to a liquidity Pool, there is a risk for some impermanent loss if the prices of the deposited tokens deviate. By using a Vault users can guarantee that their token rewards (such as VVS) are invested into the tangible assets in the LP. This effectively hedges the LP investment and minimizes impermanent loss.
Vaults offer a powerful alternative to farms because they are capable of automating the investment process that users typically would need to employ manually to achieve compound interest.
Albert Einstein once said the following; “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
While many users continue to chase other opportunities in DeFi, providing liquidity into a Vault on Crystl Finance offers a means to investing that is not only hands-free but is also free from gas fees as well as the typical stress involved from chasing buy & sell day-trading opportunities. Users who take a long term approach to investing may see Vaults as a reliable means to financial freedom and automated capital growth.
The effects of compound interest become prominent especially for those users committed to staking in Vaults for longer periods. The chart below outlines a comparison between earning rewards on a farm and an investment automated by a Vault. As you can see, exponential interest really ramps up over the long run and this effect is only amplified further with a larger initial capital.
Visit Crystl Finance to explore the variety of available Vault options to put your capital to work 24-hours a day! From conservative stablecoin-stablecoin LP pairings like USDC-USDT, to bluechip pairs like BTC-CRO, or token pairs for promising projects like VVS-CRO you are sure to find an option that is appropriate for you.
Every investor should consider their own investment appetite as well as risk tolerance. Please consider providing liquidity only for tokens that you have confidence in.
- Deposit & forget, hands-free automated capital growth at lucrative interest rates
- Hedge against impermanent loss by automated reinvesting & dollar-cost-averaging (DCA)
- Earn DEX trading fees while providing liquidity & growing LP token balance
- Portfolio diversification through being exposed to two assets in LP
- Avoid expensive blockchain gas fees incurred by manual investing
- Attract more investors by offering lucrative compound interest rates
- Build deeper liquidity for the project's native token, resulting in low price slippage, price stability, and appreciation
- Automatic, positive buy pressure on your token (if underlying reward token is non-native)
- Expedite token price discovery phase (if underlying reward token is native)
- As deposited Vault LP capital grows, Vaults earn more performance fees
- Higher revenue will drive demand and price appreciation for CRYSTL
Last modified 6mo ago