How Yield Generation Works
Using a vault
What a vault is, what happens when you supply a stock to one, what your shares mean, how your stock grows, how you leave and what you rely on.
A vault is a smart contract that holds the stock people supply and runs one strategy on it. When you supply, it gives you shares, which stand for your part of the stock it holds, and you hand them back to take your stock out.
The vault does only three things: it takes deposits, pays withdrawals, and runs the strategy that earns on the stock. No one can take the stock you supplied, including the automated service that runs the strategy. The contract lets it go to only two places: back to a holder who withdraws, or to a money market registered on the vault, as collateral. Adding a money market waits a public delay of at least three days. This limits what anyone can do with your stock; it does not remove the risks of the money markets themselves. See What no role can do.
On tango.finance, each stock has its own vault. This page explains what using one looks like from your side, and points to the pages that go deeper.
Key points
- The vault only takes deposits, pays withdrawals and runs the strategy. No one, including the automated service that runs it, can take your stock or send it anywhere but back to a holder or to a registered money market.
- You supply a stock and receive shares counted in that stock. The strategy posts it as collateral at money markets, borrows a stablecoin, lends it, and turns the difference into more of the same stock.
- You leave by handing back your shares, with no request queue. How much can leave at once depends on what the money markets can pay back.
- You rely on the money markets, price feeds and stablecoins the strategy uses, and on the automated service running it, within the contract's limits.
What happens when you supply
You send the stock from your wallet, and the vault gives you shares in return. Your stock joins everyone else's, and the strategy puts it to work. There is no fee to supply or to leave.
Supply can be closed for a while. Each vault has a deposit cap, the most stock deposits can bring it to, and it takes no deposits while its stablecoin side is short. See Supply a stock.
What your shares mean
Your shares are a standard ERC-20 token that your wallet holds. Each share is worth a number of units of the stock: all the stock the vault holds, divided by the number of shares. No price is read to work this out. The app shows your part as Supplied.
The strategy's stablecoins and debt are kept in a separate account, the stablecoin book, and never change what a share is worth in stock. See How your stock compounds.
How your stock grows
The strategy posts the stock as collateral at money markets, borrows a stablecoin against it and lends that stablecoin where it earns more than it costs. The profit is used to buy more of the same stock, so each share holds more stock than before. A liquidation can lower it again. See How yield is generated.
How you leave
You hand back your shares and receive the stock. Part of the stock is kept idle, so a small withdrawal is paid from that straight away. A larger one can release collateral and repay debt in the same transaction. In the app you choose an amount, and the app sends the withdrawal that pays now.
There is no request to file and no queue. How much can leave at once depends on what the money markets can pay back, and on the health of each position. See Withdraw in the app and Withdrawals.
Who runs the strategy
Three roles look after each vault:
| Role | What it does | How fast |
|---|---|---|
| Curator | Chooses the money markets, stablecoins and price feeds the strategy may use, and sets the fee | Every change waits a public delay of at least three days |
| Operator | Moves positions, borrows, lends and harvests profit into stock | At once, within what the curator allows |
| Admin | Appoints and removes the curator and operator | Removals and a new operator take effect at once. Its other changes wait the curator's delay |
On tango.finance, the strategy is run by an automated curation service, which holds the operator role. No role can change what a share is worth or the contract's code. See Profiles and access control and Timelocks.
What you rely on
The contract limits what each role can do, but the strategy still depends on things outside it:
- the money markets where the stock is posted and the stablecoin is lent;
- the price feeds, the stablecoins and the tokenized stock itself;
- the operator's choices about how much to borrow and where to lend, and its work bringing rewards back.
Read Risks before you supply.
Where to read more
| To learn about | Read |
|---|---|
| The stock and stablecoins a strategy can hold | Asset support |
| Where the stablecoin is lent | Lending venue support |
| Where the stock is posted as collateral | Borrow venue support |
| How rewards come back to you | Reward claiming |
| The performance fee | Fees |