Cumulative Price Impact Tolerance security framework - the key innovation behind Valio, eliminating to trust the traders you back
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)
Example long:
  1. 1.
    Buy small cap token A on my private wallet
  2. 2.
    Use vault funds to market buy token A, driving up the price
  3. 3.
    Sell token A from my private wallet
Example short:
  1. 1.
    Acquire small cap token A in my vault
  2. 2.
    Borrow small cap token A on my personal wallet
  3. 3.
    Market sell A in my vault
  4. 4.
    Purchase back token A at a lower price, on my private wallet
  5. 5.
    Return loan on my private wallet for token A