Introduction to Automated Vaults
We're proud to introduce a brand new class of products to Alpaca Finance — Automated Vaults. These are vaults that run complex strategies for you, similar to an on-chain hedge fund. We currently have two strategies for Automated Vaults, which are the Market-Neutral Strategy and the Savings Strategy.
Market-Neutral Strategy A pseudo-delta-neutral leveraged yield farming strategy where you can yield farm high APY pairs while minimizing your risk by hedging out market exposure. The Automated Vault eliminates the majority of market risk by farming long & short positions simultaneously, and rebalancing them for you to maintain neutral exposure. Or if we put it in alpaca language: high yield and low risk.
Savings Vault Strategy A 1xLong strategy similar to lending or staking the base crypto asset(ETH, BTC, BNB, etc.) but earns higher APYs than lending or staking because the underlying capital is deployed to earn yield in high-leverage yield farming positions with no liquidation possible. The Automated Vault achieves this by farming long & short positions simultaneously, and rebalancing them for you to eliminate liquidation risk and maintain 1xLong exposure.

🚩Automated Vault’s Key Features

  • Higher max leverage(8x): Because the strategy is auto-rebalancing, and liquidation-free, it can run higher leverage profitably with a minimal increase in risk. We've thoroughly backtested 8x strategies on multiple assets and marketplaces to verify this. Thus, we'll offer 8x vaults as well as lower-leverage ones.
  • Auto-rebalancing: The key challenges in executing this strategy manually are having to monitor the positions (to prevent liquidation on one of the positions) and calculating how to adjust the positions as asset prices move, in order to reset the net exposure back to the desired target. Our Automated Vaults take care of all this for you, so young and veteran alpacas alike can just sit back, relax, and enjoy the yields; auto-compounding, auto-rebalancing, auto-profiting.
  • No liquidation risk: We are creating a specialized worker for this strategy that will remove the ability for keepers to liquidate the positions. This is because as mentioned before, liquidation is unnecessary for this strategy due to its setup; When one position drops in equity value, the other one's equity value rises the corresponding amount, making the aggregate change to equity value close to 0. Yet, if liquidation was turned on, though very unlikely with automated rebalancing, it would be technically possible that if the price of the crypto asset moved dramatically, one of the positions could be liquidated unnecessarily (due to liquidation monitoring individual position health instead of the health of the aggregate strategy). With no liquidation, this risk will not exist within the Automated Vaults. As mentioned before, it’s important to note that this implementation DOES NOT increase the chance of bad debt to lenders, because the debt ratio of the aggregate strategy will not materially increase. With this strategy, the Equity Value and Safety Buffer remain healthy at all times, which is why it is market-neutral. In fact, the volatile asset’s price could drop 90% and the aggregate debt ratio of the two positions would still not increase enough to trigger liquidation according to our current parameters for leveraged yield farming. Of course, this would never happen in practice because our rebalancing mechanism would kick in much sooner.
  • Auto-compounding: To maximize the yields for our farmers, in addition to compounding the yield farming tokens - e.g., BOO, CAKE, MDEX, etc., ALPACA rewards earned from the two LYF positions in this strategy will be auto-compounded for you, maximizing the yields and reducing position maintenance even further.
  • No lock-up: You are free to deposit and withdraw at any time.
  • No minimum position size: You can open AV position at any size.
  • No swap fees to invest / withdraw: You are able to invest in and withdraw from Automated Vault without having to pay for swap fees. Normally, users would have to swap their assets to invest in the liquidity pool (the amount required to swap will be determined by the initial deposited assets); however, in AVs, users can deposit a stable asset in Market-Neutral vault (volatile asset in Savings vault), and the smart contract will automatically borrow the required amount of assets enough to make the LP token for the chosen vault without swapping required.
Copy link