80-20 Vaults

What are 80-20 Vaults?

80-20 vaults run an LP strategy on Rage's ETH perp where:

• 80% of TVL earns yield on an external protocol (80% isolated risk)
• 20% of TVL provides concentrated liquidity on Rage

Which protocols is 80-20 composable with?

The 80-20 strategy is general purpose, and we plan to launch vaults that accept LP tokens from:

• AMMs (Curve, Uniswap, Sushi, Balancer)
• Borrow/Lending (Rari, Compound, Aave, Euler)
• Other Derivatives (GMX, Ribbon, Dopex)

How do 80-20 Vaults recycle liquidity?

The vaults allow external LP positions to generate additional yield by providing liquidity into our ETH perp. By segmenting 20% of the vault's TVL to collateralize a vAMM range order, the vault recycles the assets to create more liquidity.

What is the inspiration of 80-20?

The 80-20 strategy is based on a riddle posted by Hayden (Uniswap) and the solution posted by Scott (DeFi Pulse).

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            <p lang="en" dir="ltr">My favorite v3 vault design sounds a bit like a riddle:<br><br>I always maintain a
                50/50
                allocation but still uses concentrated liquidity. I rebalance with no fees or permanent
                loss.<br><br>What am I?
            </p>&mdash; hayden.eth 🦄 (@haydenzadams) <a
                href="https://twitter.com/haydenzadams/status/1419715588323217412?ref_src=twsrc%5Etfw">July 26, 2021</a>
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        <blockquote class="twitter-tweet" data-conversation="none">
            <p lang="en" dir="ltr">create a balance sheet for a hypothetical xyk pool.<br><br>deposit 10% of each asset
                in a v3
                nft<br><br>deposit the other 90% in a lending protocol.<br><br>as price changes **atomically**<br><br>1.
                burn
                nft<br><br>2. calculate new 10% based on assets <br><br>3. deposit&amp;withdraw as per calc<br><br>4.
                mint new
                v3 nft.</p>&mdash; 𝚂𝚌𝚘𝚝𝚝 𝙻Ξ𝚠𝚒𝚜 🌾 (@scott_lew_is) <a
                href="https://twitter.com/scott_lew_is/status/1419764256619311104?ref_src=twsrc%5Etfw">July 26, 2021</a>
        </blockquote>
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Why should I use 80-20 vaults?

80-20 vaults have a few appealing properties:

• Isolated risk: At least 80% of assets earn yield outside of Rage
• UNI v2 Payoff: Impermanent Loss of 80-20 closely replicates UNI v2.
• Extra Yield: Depositors earn yield from the yield generating service, Rage trading fees, and $RAGE tokens.

What are the risks of 80-20 vaults?

80-20 vaults have no liquidation risk, but face two forms of exogenous risk:

• Arbitrum Downtime: If the Arbitrum network is down for an extended period of time, the vault payoff may deviate from the expected UNI v2 payoff.
• Yield Generating Asset Risk: Yield generating assets such as Curve's Tri-Crypto may experience their own impermanent loss which could cause the payoff to deviate from UNI v2. To see the specific risks of a yield generating asset visit the 80-20 Backtests section.

Want to learn more?

For a more detailed breakdown of 80-20 vaults. See the following sections: Operations (inner workings of 80-20), Payoff, Protocols and Chains (compatible protocols/chains).