Let's talk about the high-level mechanics of Saffron Uniswap Vaults (release date TBD).
♨️Vaults transform Uniswap yield into fixed income
♨️LPs on the fixed side are paid up-front
♨️Variable side depositors earn multiplied yield on single-asset deposits
Read more below:
Here's a look at recent yields on Uniswap V3
♨️Notice many assets are >50% real yield
♨️Majors included. ETH/USD at ~60% APR
♨️This is an opportunity for fixed income vaults
Let's focus on @Aster_DEX yield in our example
In this example we will construct a Saffron vault that pays a 30% up-front premium to ASTER/BNB LPs.
This is achieved by giving ASTER single-sided depositors the resulting variable yield in return.
The vault's variable rate is 400% even after taking protocol fees into account.
The lifecycle of a Saffron Uniswap Vault:
Below is a high-level description of how the vault starts and ends. Capital flows from the variable side to the fixed side at the start; then over the vault duration, the variable side earns all yield produced by the liquidity pool.
Results compared to using Uniswap alone:
For LPs, Saffron Vaults are a way to mitigate two major risks: time and volume.
The variable side takes on risk for major gains from a real yield source.
Vaults unlock value for both sides.
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Follow @saffronfinance_ for more.
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