When a user wishes to withdraw their funds from a vault, the following sequence of calculations takes place:
- 1.Withdrawal % is calculated:
WithdrawalPercent = MyShares/Outstanding
WithdrawalPercentis applied to each asset position in the vault, and the user is sent a proportion of each position in the vault
- 3.The users is able to select between receiving the physical assets or converting them into USDC. If the user selects USDC, their claimed assets are routed through the market and liquidated
- 4.When the withdrawal is processed, shares are burnt
When withdrawing, the user gets a % share of all of the assets in the vault. They can also choose to convert the assets to USDC or any other single currency, on withdrawal
- 1.Bob still owns the 49,99 shares but with new depositors in the vault, the total number of outstanding shares has grown to 2500
WithdrawalPercent = 49,99/2500 = 0,01999 or 1,999%
- 3.Suppose the vault has following assets in it:
30 Day ETH call
The above table summarizes Bob’s claim to each of the positions in the vault. Bob can either redeem the assets themselves or convert to USDC (or any other asset of their choice) in the same transaction as the withdrawal is processed
Once user assets are claimed for withdrawal, there are different ways and time windows in which they can be converted back to a single currency on a single network (such as USDC on Ethereum). It is very rarely a good idea to instantly liquidate all of the user's holdings, as that can cause adverse price impact.
Over time, we will introduce more flexibility on how depositors can exit their positions. Practically speaking, once a user will submit a withdrawal, their funds become "escrowed" outside of the manager's control, and the funds can only be unwound into the currency of depositor's choice.
From there, Valio intends to offer multiple scenarios as to who can execute optimal liquidation and how. The depositor will also be able to set the liquidation time frame that they are comfortable with, while being mindful that a longer time frame likely leads to better execution.