Table of contents
- ⚡️ Introduction
- What’s new about Valio and why is it special?
- Who is Valio for?
- 💼 User guide: creating a vault and becoming a manager
- Reasons to become a vault manager
- Become a manager in 3 easy steps and start earning fees!
- 💎 User guide: depositing into managed vaults
- Reasons to become a depositor
- Become a depositor and start betting on traders in 3 easy steps
- Do I need to trust the vault manager?
- ⚙️ Advanced user guide
- Cumulative Price Impact Tolerance security framework
- Context: how could a nefarious vault manager steal (or lose) your funds?
- CPIT summary
- Applicability and special cases
- Protocol integration considerations
- Sufficient conditions for instant withdrawals
- Counter-protocol tech and economic risks
- Usefulness for the vault managers
Valio is a talent discovery marketplace connecting traders to capital. On Valio you can bet on traders and asset managers without needing to trust them. Let them allocate funds for you in a secure and non-custodial way. No lockups, withdraw any time!
For traders and asset managers, Valio is a way to make money by trading on behalf of others. Build a public track record and use that to attract more capital, earning more fees. Anyone can become a vault manager - it’s permissionless
What’s new about Valio and why is it special?
- A novel security architecture (CPIT) removes the need for trust between managers and depositors
- Omnichain - managers get access to platforms on multiple networks, such as 0x on Ethereum, GMX on Arbitrum and many others. Built on Layer0
- Seamless omnichain user experience
Who is Valio for?
- Traders of any experience level who want to build a public track record
- Seasoned and well known traders looking to monetise their following
- Funds and asset managers seeking secure on-chain infrastructure and access to capital
- Anyone looking to earn real returns by allocating capital to traders and asset managers
- DAOs looking to diversify their treasuries
- Anyone looking to discover new trading talent early
💼 User guide: creating a vault and becoming a manager
Reasons to become a vault manager
1. Create a public track record - you can start from 0
You can start by trading with your own capital. If you do well, people will notice you and deposit into your vault. When they do, you’ll earn fees with no extra effort
2. Already a seasoned trader with a following? Monetise it on Valio!
Let your followers bet on you and win together!
3. Create private whitelisted vaults only accessible to those you invite
Pool together capital with friends and partners, and form a community
Become a manager in 3 easy steps and start earning fees!
Step 1: In the “Manage” section on Valio.xyz select “Create vault”
Go through the steps to set up and deploy your vault. Make sure you select the right vault permissions, as you won’t be able to change them later (but you can deploy more vaults at any time). For a more advanced explanation understanding of the vault configuration, visit the advanced user guide. Once your settings are complete, create the vault and deploy it on chain.
Step 2: Deposit your own capital or let others know about your vault
A great way to attract more capital initially, is to start by depositing your own funds. This way, you will be able to build a track record and create a name for yourself. You can also link your social accounts to your vault! With time, let your performance speak for yourself - the better you perform, the more users will discover your vault and deposit in it.
Step 3: Earn and collect fees
Now that you are a successful manager, time to start trading and collecting fees! Management fees can be collected whenever a new depositor deposits into your vault, and performance fees are calculated based on a high water mark. To learn more about how fees and withdrawals work, check out the advanced user guide.
💎 User guide: depositing into managed vaults
Reasons to become a depositor
1. What if you discover the next Warren Buffet? Valio lets you do that! Discover and invest in the next generation of trading and asset management superstars!
2. You can achieve a diversified exposure to the asset management industry, from short term leverage traders to long term capital allocators and everything in between.
3. You are in control! Valio is non-custodial and you can withdraw your funds at any time. Advanced security mechanics prevent nefarious managers from running away with your funds!
Become a depositor and start betting on traders in 3 easy steps
Step 1: Browse the home page and explore section - find the right vault for you
Make sure you select a vault that’s right for you! Each vault has a different permission template, setting limits on what can be done with your capital. Permission templates range from conservative to high risk, and allow for different integrated instruments, levels of leverage and more. For more on this, check out the advanced user guide.
Step 2: Deposit and set automated exit conditions
Once you’ve found the right vault for you, make sure to set the automated exit conditions. These can be based on stop-loss, take-profit and CPIT conditions. For more info on these, check out the advanced user guide.
Step 3: Withdraw at any time
Valio does not lock up your capital - you can withdraw at any time after the initial 24 hour period, which is designed to prevent manipulation. You can either withdraw in-kind (a % of each asset that the manager has in the vault) or have your stake be converted into a single token such as USDC or ETH on withdrawal.
Do I need to trust the vault manager?
No! Trusting the manager is not required - this is a core innovation of Valio. The proprietary CPIT security framework provides guardrails against managers interacting in a non-desired way with your capital. In summary, the CPIT (which stands for Cumulative Price Impact Tolerance) architecture is a framework that limits the price impact that managers can create with the capital that they manage. The CPIT framework is applied on a per-instrument basis (works differently for spot markets, lending markets and so on). CPIT is expressed as a % of the AUM for any given day. The CPIT value is established on vault creation, and can not be changed. For more details, check out the advanced user guide.
⚙️ Advanced user guide
Cumulative Price Impact Tolerance security framework
Cumulative price impact tolerance (CPIT) is a mechanism that protects depositors from nefarious vault managers attempting to steal funds through creating artificial market displacement.
Context: how could a nefarious vault manager steal (or lose) your funds?
- Send funds to a wallet they control (easy to solve)
- Send funds to a protocol that can be exploited knowingly or unknowingly (easy to solve)
- Acquire a position in a smaller cap coin on a private wallet, use the vault funds to drive up the price of this coin, then dump it on the privately held wallet, thus transferring wealth from the vault depositors to the manager through price impact (tricky to solve)
- Buy small cap token A on my private wallet
- Use vault funds to market buy token A, driving up the price
- Sell token A from my private wallet
- Acquire small cap token A in my vault
- Borrow small cap token A on my personal wallet
- Market sell A in my vault
- Purchase back token A at a lower price, on my private wallet
- Return loan on my private wallet for token A
- Every time a trade is made, the price of the underlying asset is moved by some amount
- As a nefarious vault manager, I could profit by manipulating the price of any token by using the vault funds
- CPIT, expressed relative to the NAV of the vault, works a safeguard against nefarious vault manager behaviour by ensuring that the economics of “rugging” are not viable
- Why are the rugging economics not viable? Suppose daily CPIT of some vault is set at 3% - this means that the vault manager could, in theory, steal 3% of total funds through manipulations described above. For every 100m in their vault, they could steal 3m (assuming depositors don’t catch on in time). The up-front cost of achieving 100m TVL in your vault likely exceeds 3m
- Since CPIT is initialised by each vault manager individually, the values are expected to converge such that rugging is economically not optimal
For every buy/sell transaction the vault manager performs, they have 3 key variables:
Price before a transaction
Price at which the trade is executed
For each given transaction:
gives us a simple way to understand how much has been lost in each trade due to price impact created by the trade. In very liquid markets such as ETH/USDC spot, will be very small, whereas the more illiquid a market, the larger this value is going to be.
As a next step, for any given period of time (in the case of Vaults - each day), it can be calculated how much has the vault manager lost due to adverse price impact on trades. This is simply the sum of the individual
Now that we know the amount in USD that the vault manager has lost per day due to price impact, we want to express that as a % of the total NAV in their vault. The resulting value we call
, and is expressed in % terms relative to vault size
is an instantiated variable upon vault creation that sets the maximum cap for cumulative price impact. Before any trade is executed, the CPIT mechanism is ran to ensure that the daily limit is not violated.
Applicability and special cases
The mechanics described above illustrate the CPIT mechanics as applied to certain spot market structures. The CPIT framework is generally applicable and can be modified to support lending markets, various forms of derivatives and other products. Important to note that the CPIT mechanics are coupled with additional failsafes to ensure that funds can not be stolen via market impact creation.
Protocol integration considerations
Valio ensures that vault managers have the needed tools at their disposal to perform, while simultaneously looking to mitigate systemic risks. Key things considered for new integrations:
- Compatibility with instant withdrawals
- Availability of mark prices
- Counter-protocol tech and economic risks
- Usefulness for vault managers
Sufficient conditions for instant withdrawals
Being able to withdraw assets at any time is a key feature of Valio. In order to ensure that, there are several considerations that need to be met by integrated protocols
Instantly available mark-to-market with manipulation resistance
Any instrument that is integrated needs to have a reliable pricing mechanism. This is required to calculate the NAV. The weakest link in these types of calculations are usually the spot price oracles - only chainlink and contract call data will be used as inputs
Bounded gas costs upon withdrawals
When a vault manager deposits funds into a protocol, it’s important that the withdrawal costs of the position are bounded. There exist several systems, in which, over time, the withdrawal costs can grow without bounds
If a position in some protocol is locked and can’t be unwound - the sufficient condition is fractionalisation, such that the depositor can receive a fractional claim to this locked position, where they can then unwind it post withdrawal
Position liquidation considerations
In case positions can’t be fractionalized, the fall back is partial liquidations. Can a partial exit of a position trigger any form of margin events, where the entire position could be liquidated? Can the position be exited partially or wholly? If a position can be exited wholly, alternative exit mechanisms need to be available
Counter-protocol tech and economic risks
The goal of vaults is to strike a balance between preventing exposure to tail technical risk, while giving vault managers the freedom to take on counter-protocol economic risks, since the latter is frequently rewarded while the former is not.
Some of the key tech risks we consider:
- Track record of the protocol
- Admin key existence and management
- Existing audits
- Protocol tech risk hedging opportunities
- Degree to which the protocol is prone to manipulation
Some of the economic risks that we consider:
- Economic exploit risks
- Economic stability risks
- Collateralization risk (if a system is under-collateralized)
Usefulness for the vault managers
It’s extremely important to provide vault managers with the tools they need. The vast majority of vault managers can meet their investment allocation needs with access to spot markets, leverage, lending markets, perpetuals, options, select NFT exposure and the ability to underwrite various pools and AMMs. The strategy of Valio is to ensure that all of the most prominent protocols with deep liquidity and volume are integrated with prudence. That said, Valio will not seek to be first in recklessly integrating the new hot thing