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
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)
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.
The 80-20 strategy is based on a riddle posted by Hayden (Uniswap) and the solution posted by Scott (DeFi Pulse).
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.
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.
For a more detailed breakdown of 80-20 vaults. See the following sections: (inner workings of 80-20), , (compatible protocols/chains).