The Economics of the Blueberry Vaults

Welcome to the exploration of the economics underpinning the Blueberry Vaults. This collection of three vaults, encompassing the GLP Non-Leveraged Vault, the GLP 3x Leveraged Vault, and the USDC Vault, is engineered to maximize rewards through a harmonious blend of their individual economic mechanics.

1. GLP Non-Leveraged Vault

The GLP Non-Leveraged Vault harnesses the economic principle of compounding interest, widely regarded as one of the most powerful concepts in finance. By automatically reinvesting your earned ETH rewards from GMX into GLP at strategic intervals, your principal assets grow, thereby increasing the rewards generated.

From an economic standpoint, this Vault provides users with the benefits of continuous compounding, a strategy that otherwise would require frequent transactions, considerable time, and potentially prohibitive gas fees. The vault reduces these barriers, democratizing access to the benefits of compounding.

2. GLP 3x Leveraged Vault

The GLP 3x Leveraged Vault introduces the concept of leverage, a fundamental tool in finance that allows users to increase potential rewards using borrowed money. By borrowing USDC from the USDC Vault and re-staking it back into GLP, this vault aims for 3x leverage, thereby amplifying the ETH rewards generated and the gains associated with GLP if the price of GLP rises (though it amplifies losses if the price falls).

Economically, leveraging is a double-edged sword. While it increases potential rewards, it also amplifies the risk of losses. The GLP 3x Leveraged Vault aims to manage this risk through a careful rebalancing strategy, ensuring that the leverage ratio never exceeds certain bounds.

In terms of the leverage ratio, the vault targets 3x leverage, but the ratio can fluctuate with the price of GLP, the amount of rewards earned, and deposits and withdrawals from the GLP 3x Leveraged vault or the USDC Vault. The smart contracts allow the ratio to fluctuate until it hits 4x at which point the GLP 3x Leveraged Vault automatically rebalances back down to 3x leverage.

3. USDC Vault

The USDC Vault is designed to let users earn fees through delta-neutral lending. It accrues a variable fee, generated from the borrows taken by the GLP 3x Leveraged Vault, and also earns a portion of the rewards generated by GLP within the GLP 3x Leveraged Vault strategy.

The variable fee will be paid to the USDC Vault according to a utilization curve with the following format... The interest rateRtR_tfollows the model:

ifUā‰¤Uoptimal:Rt=R0+UtUoptimalRslope1if \hspace{1mm} U \leq U_{optimal}: \hspace{1cm} R_t = R_0 + \frac{U_t}{U_{optimal}} R_{slope1}

ifU>Uoptimal:Rt=R0+Rslope1+Utāˆ’Uoptimal1āˆ’UoptimalRslope2if \hspace{1mm} U > U_{optimal}: \hspace{1cm} R_t = R_0 + R_{slope1} + \frac{U_t-U_{optimal}}{1-U_{optimal}}R_{slope2}

The USDC Vault parameters are currently set at:




In addition, the USDC Vault earns 5% of all GLP rewards that have been earned by the associated GLP 3x Leveraged Vault. In this way, it earns both a stable lending rate and a variable, high-upside rate from rewards generated from the GMX platform.

Economically, the USDC Vault serves as a decentralized lending pool, providing the necessary capital for the GLP 3x Leveraged Vault to execute its strategy. It provides a stable, lower-risk return to lenders, while contributing to the overall ecosystem's health by fueling the GLP 3x Leveraged Vault.

The Economic Synergy

The three vaults operate together to create a balanced and sustainable DeFi ecosystem. Each vault provides a unique economic function and caters to a different risk profile:

  • The GLP Non-Leveraged Vault offers the power of continuous compounding and caters to users seeking to maximize their rewards over time.

  • The GLP 3x Leveraged Vault caters to users who are bullish on GLP and its rewards and are willing to take on more risk for potentially higher rewards.

  • The USDC Vault appeals to risk-averse users seeking safety of principal and stable lending rates on their USDC, while also having upside from earning a portion of GLP rewards.

In summary, the Blueberry Vaults exhibit an elegant interplay of different economic principles and risk-reward profiles. By understanding these economic foundations, users can make informed decisions about which vaults align best with their goals and risk tolerance. As always, users should do their own research before participating in any DeFi platform.

Last updated