A new paradigm for strategy, explaining how Vaultka can help grow bull market earnings

Original | Odaily

Author | Aurantium aurantium

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Waves of on-chain migration

During the 2022 bear market, DeFi protocols led by GMX brought a "Real Yield" narrative to the market, providing a sustainable, stable, and high-capacity way to earn. After the collapse of FTX, the importance of decentralization and transparency has also attracted more and more attention, and the perpetual contract derivatives exchange (Perp DEX) has occupied more and more market share, and the corresponding protocol revenue and user income have also expanded, and the wave of migration from CeFi to DeFi has been unstoppable.

Among the Perp DEXs, GMX occupies a significant leading position, with GMX protocol revenue of $132 million in the past year, ranking ninth among all projects and first in the derivatives DEX track.

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GMX Ecosystem

GMX is a DeFi protocol on Arbitrum that allows liquidity providers (LPs) to deposit funds and provide leverage to perpetual contract traders, who in turn use the funds they provide for on-chain trading.

• Traders: In GMX V1, traders are required to pay trading fees and borrowing fees, while in V2, funding rates and price impact fees have been added.
• Liquidity Providers (LPs): Relative to traders, the other party participating in the protocol is called a liquidity provider, LPs invest a series of tokens to provide liquidity to traders and receive income from their trading fees. The liquidity it provides is GLP in V1 and GM token in V2.

To put it simply, for the expected value of a trader's profit and loss (EV), assuming that the profit and loss and win rate are both five or five, the average EV of the trader's profit and loss is zero. If fees are taken into account, the trader's counterparty EV in a zero-sum game is positive. Although some traders are able to make significant profits, after expanding the scope to all traders, it is their counterparties - liquidity providers who can continue to make profits.

Crossing the bull-bear's "money printing machine" GLP

GLP is a product composed of a basket of tokens, including non-stablecoins such as ETH and BTC, accounting for about 60%, and stablecoins including USDC, USDT, etc., accounting for 40%.

Ongoing Revenue: GLP's APR data for the past year is shown in the chart below, which continues to generate cash flow income for GLP holders even during bear markets. Its average annualized APR is 18%, whether it is compared to the 4.6% of the 10-year US Treasury bond or the 4% ETH POS staking income, the income from GLP is relatively substantial and stable.

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• Stable underlying assets: As mentioned above, stable coin assets account for 40% of GLP, while among non-stable assets, BTC accounts for 30% and ETH accounts for 26.8%, constituting a stable underlying asset portfolio, whose price in the past year is shown in the chart below, on the one hand, the overall asset trend is upward, there is no significant drawdown, on the other hand, in the current bull market, BTC, as the pioneer of the bull market, there is a possibility of continuing to rise.

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However, GLP will face counterparty risk caused by the imbalance of open interest (OI) and the problem of too few trading varieties. GMX launched the V2 version in August this year, using GM tokens as a liquidity pool to achieve independent risk control and expand trading assets. For LPs, they can also choose their exposure based on their risk appetite/return expectations.

Vaultka Product Matrix

After GMX opened up a simple and stable profit model for the market, a series of GMX-based Perp DEX competitors have also emerged in the market, including well-known protocols such as Gains Network, MUX Protocol, HMX, etc. Faced with a wide variety of similar products, investors have created a multifaceted demand, including compounding and enhancement of GMX's returns, and further control over its robustness. Vaultka came into being to create a comprehensive and rich derivative strategy matrix for the Perp DEX through comprehensive horizontal expansion and vertical deep division, and its TVL increased by more than $10 million by 3 times in the last month:

Horizontal system: Covering Arbitrum's popular Perp DEX protocol, and will soon launch index products to meet investors' needs for protocols with different characteristics.

Vertical system: provide a series of products with different risk appetites, and subdivide investors under each product to meet the needs of multi-level risk appetite.

GLP/GM 策略 Vault

As mentioned earlier, liquidity providers will continue to profit from traders' trades, with the average APR of the representative GLP reaching 18% over the past year, while the maximum drawdown of GLP is around 7%.

• Leverage 策略

At the time of the bull and bear transition, on the one hand, users hope to improve the profitability of their underlying assets, and at the same time, with the cessation of the Fed's interest rate hikes and the expectation of interest rate cuts, the expectation of risk assets to rise will increase, and investors' requirements for risk rates will also be further increased.

Vaultka's GLP/GM Leverage strategy is exactly what investors need:

Users can use stablecoins such as USDC and USDT as the stake principal, and the protocol will lend assets from the Lending module according to the leverage selected by the user, and then mint GLP or GM, and the protocol will receive the GLP/GM revenue share at regular intervals for Vaultka users to claim at any time.

Vaultka's lending module adopts a revenue sharing model, where users do not pay a floating loan interest rate but share the underlying agreement income proportionally, achieving a win-win situation for both borrowers and borrowers, and carries out the segregated pool design of lending to ensure the safety of lenders' funds.

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As of November 14, data from Vaultka's official website shows that under the 10x multiplier, the APR of the three GM pools such as ARB, ETH, BTC and other GM pools reached 250%, 166% and 153% respectively, while the corresponding APR of GLP also reached 108%.

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Based on the GLP price review data of the past year, the leverage ratio provided by Vaultka has a certain safety boundary, and investors can choose the multiple according to their expectations and risk appetite for the future market, meet the needs of risk interest rate, and help the underlying assets and yield to be improved.

Market Neutral Strategy

As part of its vertical product portfolio, Vaultka also provides investors with a market-neutral strategy that uses leveraged funds to hedge risk, providing an investment path for prudent investors.

As mentioned above, GLP/GM is composed of non-stablecoins, which is the first layer of "underlying asset volatility risk" that users face, and on the other hand, as a trader's counterparty, users will also face "counterparty risk" caused by unbalanced open positions (OI).

In response, Vaultka offers a hedging-based GLP-neutral strategy, which is hedged by shorting BTC and ETH based on the corresponding weights in GLP through a reputable lending protocol. Vaultka determines dynamic rebalancing points based on GMX traders' long/short positions through continuous backtesting and simulation to further stabilize the equity value of the product and meet low-risk investment needs.

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In addition, Vaultka also recently disclosed the GM leverage-neutral strategy of ETH and ARB, which eliminates the "risk of underlying asset volatility" through the combination structure of leveraged borrowing dual currency + hedging, and no matter how the price of ETH and ARB changes, it will not affect the value of the portfolio. Under a stable structure, we will continue to amplify the profitability of users.

Lending Module - Revenue Sharing

In other leverage strategy protocols, users often have a pain point - the borrowing interest rate fluctuates greatly and is difficult to predict, resulting in the leverage often failing:

• This type of agreement typically uses a bi-folded model of interest rates, where interest rates rise at a low rate before the borrowing utilization rate (UR) threshold and increase sharply after the threshold.
• In the case of GLP/GM's "APR > Lending Rate", users will usually continue to increase leverage, resulting in a rapid increase in UR, which in turn will make "APR < Lending Rate".
• The above situation makes the leverage unprofitable, the user starts to reduce the leverage, and after the data reverses, the leverage starts to increase again, and the process of constantly circulating according to the APR of GLP, the return fluctuates repeatedly and is difficult to predict.

In this regard, Vaultka has designed a revenue sharing model in the Lending module to solve this problem, and the users of the strategy vault pay the lender not a floating interest rate, but a bi-fold revenue share, and there will be no fluctuation of the lending rate at the APR critical point, so that the leverage of the strategy vault is profitable under all UR, releasing the potential of leveraged investment.

On the other hand, this model parameter has been pre-set, which is positively correlated with the user's leverage multiple, and the user can calculate the leverage cost that he needs to pay more clearly, which reduces the game cost and helps to clarify the cost consideration under each risk preference.

In summary, the Lending module designed by Vaultka enables GLP/GM leveraged investors to only pay attention to the investment target and the strategy itself, helping to make decisions, use and profits of leveraged strategies.

So far, Vaultka has created four strategy products vertically to fully meet the needs of users in market segments: (1) risk aversion-lending lenders, (2) risk-free appetite-GLP-neutral strategy, (3) low-risk investment-leverage-neutral strategy, and (4) free choice-leverage strategy.

Other Strategies Vault

Horizontally, Vaultka also covers a number of popular Arbitrum protocols, providing users with optional leverage strategies:

**HLP: **HLP is the liquidity provider of HMX, users deposit assets into GMX to mint GLP, and then deposit GLP into HMX as a liquidity provider, enjoying the dual transaction fee income of GMX and HMX. The characteristics of HLP are similar to GLP, with the characteristics of continuous profitability and low drawdown, and its price is shown in the chart below.

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VLP: VLP is a liquidity provider of Vela Exchange, which can only be minted through USDC and can be considered a Delta-neutral product, due to its single-asset nature with controllable liquidation scenarios and predictable risk-bearing capacity. gDAI: gDAI is a liquidity provider for the Gains Network, where users stake and mint gDAI with DAI, which is also neutral due to its eternal rising nature.

Many of the above strategy products have different asset characteristics and yields, and by comprehensively covering and linking to the Vaultka Lending module, users can freely choose according to their individual investment needs.

Lending module explained

Vaultka's lending module uses a revenue share model, which enables lenders to increase their returns based on market conditions, and a revenue prepayment model, which ensures stable and predictable returns.

Revenue Share Model

As mentioned earlier, the revenue sharing model solves the problem of the borrower's leverage effectiveness, and for the lender, the model also brings a number of advantages:

• Yield enhancement: Under this model, the higher the leverage used by the borrower, the higher the share rate (30% at 2x leverage, 37.5% with 5x leverage, with a linear increase in between), and the higher the actual capital efficiency and yield of the lender. And the APR increase of the underlying protocol will also be fed back to the lender's income.

The expected trading volume in the market will lead to an increase in APR, as well as an increase in borrower confidence, which will further promote the increase in leverage and leverage, thus achieving a triple increase in returns.

• Zero borrowing interest: Borrowers enjoy zero borrowing interest rates, and the reward share will only be triggered when closing a position that generates a positive return.
• Asset security: The lender's position is protected with no downside risk, and losses will be borne by reserve and leveraged users. Earnings Prepaid Model

Vaultka splits the lender's earnings into Base Rewards, which are calculated from the previous quarter's total earnings, and Bonus Rewards, which are adjusted from the previous week's total earnings.

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The model ensures that the lender can predict future returns with certainty and that the reward received by the lender will never fall below the stated expected amount, only increase.

In addition to the above features, Vaultka's unique lending vaults are tailored to each specific strategic vault, effectively isolating and managing the risks associated with each individual vault. And distribute esVKA rewards to lenders, and develop together with the platform to reap common benefits.

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Tokenomics

On October 19th, the Vaultka platform token $VKA TGE was completed, raising 2,583 ETH, 7.9 times the initial target.

The total number of VKA tokens is 100 million, of which 13% are private and public sale, 5% are airdrops, 15% are team, and the remaining 67% are used for various ecological development purposes, and the distribution details are as follows:

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代币用例

VKA tokens have a variety of use cases, including:

• Reward Boost: Staking VKA can earn 2.5x the reward released by esVKA. Each user's boost rewards will be based on the weighted ratio of their deposit to the pool's total liquidity weight, as well as the total amount of esVKA issued to the Vault.
• Protocol fee sharing: By staking VKA or esVKA, stakers receive 60% of the protocol's revenue, including a 15% strategic Vault management fee and a 0.2% withdrawal fee. esVELA and esHMX will also be allocated as expenses. esTokens will be vested and collected by Vaultka from the underlying protocol every two weeks. In addition, stakers are eligible for additional distributions of esVKA.
• Yield Voting Power: Weekly VKA stakers can also participate in the Vault Emissions Distribution, which can earn bribe fees from the protocol.

In addition, Vaultka will repurchase and burn VKA through protocol revenue, and the cuts released early by esVKA will also be burned.

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esVKA

As shown in the tokenomics, 42% of the tokens will be emitted in the form of esVKA, and esVKA staking enjoys the same benefits as VKA staking, including 2.5x release rewards, protocol fee sharing, revenue voting rights, and more. Users can also choose to convert their esVKA to VKA, which is divided into 1 year of full release or 90 days of early release (50% reduction)

The bull market is coming, and it's time to snowball

Vaultka's product matrix is still evolving, and in the subsequent planning, Vaultka will further expand the system, launch the Cocktail series (LP and governance token integrated investment), and incorporate more protocols and tokens to provide investors with a comprehensive, easy-to-make and operate product.

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Compared to the traditional derivatives market, the trading volume of the Perp DEX market is still small, as its official statement, Vaultka firmly believes in the potential of the Perp DEX market, and will actively participate in and promote the growth of this rapidly expanding market, with its comprehensive and in-depth product system, rolling a continuous cash flow snowball on the long slope of the Perp DEX.