How does it work
We all know that the normal vaults in Defrost Finance enable users to apply yield-bearing tokens to mint H2O. The yields reserved in the collateral tokens only have the native interest or transaction fees accrued. But how does the Super Vault manage to even include the farming rewards from other collaborated platforms?
Let's take qiAVAX as an example:
- 1.A user deposits AVAX on Benqi to earn interest and QI rewards. qiAVAX tokens are transferred into his/her wallet.
- 2.The user deposits qiAVAX into the Super Vault on Defrost Finance.
- 3.The Super Vault will generate Super-qiAVAX (S-qiAVAX) tokens, according to the current exchange rate, and transfer them into the user's wallet.
- 4.Once per day (the frequency might be changed in different vaults), the super vault will claim the QI rewards from Benqi and exchange them for qiAVAX with a series of transactions. The qiAVAX will be increasing in the Super Vault. A small fraction of the rewards will be collected as the protocol fee. This procedure will in turn lead to an increase of the exchange rate from S-qiAVAX to qiAVAX.
- 5.S-qiAVAX will be the yield-bearing tokens, applied as the collateral asset for minting H2O. The price will be fed based upon the Chainlink price and the internal contract algorithm.
- 6.The user can continue to earn MELT rewards by providing H2O liquidity.
With this simple and elegant mechanism, all of the yields from the underlying token will be maintained.
Now, thanks to a brand-new audited contract, when you commit your tokens to Defrost, the Super Vault collects both fees and rewards from the original platform, where your LP tokens were staked.
This means when using LP tokens to mint H2O, users will receive fees (from the LP tokens on the original platform) + rewards (also from the original platform) + MELT rewards (from Defrost) + fees (from the LP tokens on the Curve H2O pool).
For example, at the time of writing, the current supply APY is 6.6% from fees and the distribution APY from rewards is 2.3%. By staking in the super vault, when deciding to mint H2O using qiUSDC, users will not lose the supply APY 6.6% and their distribution APY (2.3% in our example) will be auto compounded.
The Super Vault fee: increase income and benefit MELT stakers
The Super Vault will charge a fee from the auto-compounding to increase the income generated by the Defrost protocols. What is charged will be distributed in part to MELT staker and in part stored as an operating fund.
Upon launching, the fee will be 20% of the auto-compounding rewards. Using qiUSDC as an example, if the rewards APY is 2.3%, what is charged is 2.3%*20%=0.46%. When our governance system goes online, this parameter could be changed with a vote.
How to use the super vault & security
On the Defrost Finance home page, please select “Open Vault”. On the following page, you can then click on “SuperVault”. Please note that LP tokens should be deposited into the Super Vault contract and then into the current vaults contract — this means there will be one more step as compared to the current process.
Naturally, if you prefer the current vaults, they are still open.
On a final note, to guarantee the Defrost system is safe, the Super Vault does not change any current mechanism and its contract cannot be upgraded. The team has simply added a super vault contract to connect the current vault function.