Overview

What is a Vault?

A Vault is a tool within the Tonk Finance ecosystem designed to optimize yield farming through automated strategies. These strategies are crafted to continuously reinvest funds deposited into the vault, maximizing the compound interest effect. By leveraging a Tonk Finance vault, users are able to avoid the need for manual intervention in the reinvestment process—such as harvesting rewards, purchasing additional tokens, and reinvesting them. This automation not only conserves on transaction costs and gas fees but also saves time.

At the heart of Tonk Finance, vaults play a pivotal role. They offer a mechanism through which users can increase their holdings of the staked asset, be it a liquidity pool (LP) token or a single asset. For instance, staking TON-USDT LP tokens in a vault leads to an accumulation of more TON-USDT LP tokens over time, thereby enlarging the user's share in the liquidity pool. This increase in share enables the user to earn higher fees and rewards progressively.

Despite their nomenclature, vaults within Tonk Finance do not impose any lock-in period on the user's funds. Withdrawals can be made at any time, ensuring that users maintain full control over their assets. It's important to recognize, though, that vaults are ideally used for medium- to long-term investments to fully benefit from compounding effects.

The Tonk Finance platform displays various metrics for each vault, including the annual percentage yield (APY), which accounts for the effect of compounding, in contrast to the annual percentage rate (APR) which does not. Users can also view the daily interest rates, the total value locked (TVL) by all users in a vault, and the underlying platform generating revenue for the vault.

Vaults can either involve a pair of tokens in liquidity pools, like TON-USDT LP tokens, or single tokens placed in lending platforms or reward pools. Upon depositing tokens into a vault, users receive specific vtTokens that represent their share within the vault. Further details on vtTokens will be provided subsequently.

Tonk Finance encourages its community to collaborate in the creation of new strategies, which are then reviewed by the Tonk team for potential implementation. It's crucial for these strategies to comply with platform standards to be considered for addition.

In summary, vaults in Tonk Finance are designed to:

• Implement yield farming strategies effectively.

• Automatically compound rewards back into the initial token amount.

• Facilitate the use of any asset for liquidity provision.

• Allow an asset to serve as collateral for another.

• Maintain collateral levels to avoid liquidation.

• Enable assets to produce yield.

• Reinvest profits generated from assets.

Users of Tonk Finance can benefit from these features without the need for active management, allowing their investments to grow over time.

What are vtTokens?

vtTokens represent a holder's share in a Tonk Finance vault, serving as proof of participation in the vault's investment strategies. When a user deposits assets into a vault, they receive vtTokens in proportion to their contribution. These tokens are crucial for earning interest and facilitating the withdrawal process.

Interest is earned on the deposited assets through the vault's automated strategies, which may include yield farming, liquidity provision, or other DeFi mechanisms designed to optimize returns. As the strategies generate profits, the value of the deposited assets increases. Consequently, the value of vtTokens also rises, reflecting the growth in the underlying assets due to earned interest and compounded returns. This increase in vtToken value is how participants earn interest on their investments in the vault.

To withdraw their investment and any earned interest from the vault, a user simply needs to redeem their vtTokens. Upon redemption, the vault calculates the current value of the vtTokens based on the total assets and the user's share of the vault. The user then receives their portion of the underlying assets, equivalent to the value of the vtTokens redeemed, back in their wallet. This process effectively converts the interest earned and the initial investment back into the original or another specified asset, completing the investment cycle.