Best Practices
Last updated
Last updated
Describing some recommended best practices when using the vaults.
The best way to use Alpha Vaults is to use one of the methods to .
The vault will then provide liquidity on its own without further actions from the liquidity manager.
Using Alpha Vaults, liquid markets can be created using less funds by:
Setting a narrower range for the base order.
Set a lower Rebalancing Period, so that rebalances can happen more frequently.
Creating liquid markets using less funds is a key feature of Alpha Vaults. But this comes at higher risks for depositors and projects. Depositors may incur high capital losses, and projects may experience poor price discovery if the tokens trade out of range.
To mitigate the above, projects may wish to consider:
Building a staking contract to compensate for depositors' much higher risk of capital loss.
Set a higher % of liquidity to full-range, so there will still be price discovery if tokens trade out of range.
Warn users they will have higher capital losses, which can be compensated by staking rewards.
IL (or Capital Loss) are often higher with a narrower range order, and with more frequent rebalancing. Projects can mitigate the risks of impermanent loss by:
Frequently estimate the tokens' future volatility, and widen the base and limit order if volatility increases.
Having more % liquidity in Full-Range.
Build an incentive scheme (eg staking, rebalance incentives) to compensate for IL.
Impermanent loss cannot be eliminated, and is often higher for smaller cap tokens. It is therefore helpful to warn depositors of this risk.
Frequently monitor the . If both indicators are often red, consider widening the ranges as IL is likely to be high.
Increase the , in order to realise less IL. This will only work if tokens stay within range, therefore it is helpful to also increase the width of the base and limit orders.
Change the in Edit Vault until the USD value is the cap amount.