Curator Guide
Successfully curating a DLMM Vault is a skill that everyone can learn. No matter if the strategy is to manually manage liquidity, program a bot or train an AI agent - DLMM Vaults are open for everyone to curate. This guide intends to explain further how DLMM Vaults work and get you started.
Vault Components
DLMM Vaults have two main components: The Pool Balance, which is actively deployed liquidity in the DLMM pool and a Reserve Balance which is idle liquidity. The curator can change the size of the Pool Balance and the Reserve Balance anytime.
POOL BALANCE - ACTIVE LIQUIDITY The Pool Balance is active liquidity deployed into the DLMM pool to earn yield.
Vault Curators have the full DLMM suit at their disposal to deploy liquidity. The curator can choose to only deploy one token to the position. Spot, Curve and Bid Ask Strategies are available to choose directly from the SectorOne frontend, however, other custom liquidity shapes can be deployed by using the smart contracts directly through the backend.
Limitations in depositing vault liquidity to a DLMM position:
Only up to 51 bins can be deployed
DLMM positions can not be stacked as each rebalance will remove liquidity and deploy the new shape.
A maximum of 99% of the total vault balance can be deployed into the DLMM pool.
Sizing the pool balance correctly is just as important as shaping it correctly. Depending on the DLMM pool a given vault is deployed for, the size of the pool balance should be adjusted accordingly. A 51-bin position in a pool with a small bin step covers a much narrower trading range compared to a pool with a 20-bin step; therefore, the pool balance should be smaller in percentage terms. Volatility and market momentum should also play a role in determining an appropriate pool size.
RESERVE BALANCE - PASSIVE LIQUIDITY The Reserve Balance is passive liquidity not deployed into the DLMM pool and not earning yield from trading fees.
With the Reserve Balance curators can reduce impermanent loss or effectively long one token over the other.
By increasing the percentage of liquidity in the reserve of a vault the impermanent loss over the entire vault liquidity is reduced. This is especially important for vaults deployed on small bin step pools as this strategy can simulate a wide range allocation.
In an uptrend environment where token A outperforms token B, the vault curator can "trade" the trend by holding a larger proportion of token A vs token B in the reserve.
Vault Functions
As an curator you can choose a curator fee between 0.5% and 10% per year which will be charged of the liquidity in your vault. The curator fee is charged with every rebalance or refresh of your vault. The curator needs to refresh or rebalance the vault at least every 24 hours in order to claim his earned curator fees as only the last 24h of curator fees earned are claimable. This is to assure that liquidity providers can join and leave vaults daily.
You can find the total earned curator fees in your vault management page.
Rebalance allows the curator to deposit any amount of each token. He can only deposit token A or token B as well as a combination of both.
The frontend shows how much of the total vault balance will de deployed - this helps to size the pool balance well. Also, the curator can choose different liquidity shapes: Spot, Curve and Bid Ask.
With a maximum range of 51 bins the curator can position liquidity for the rebalance, similar to manual DLMM liquidity deployment.
Rebalance removes the active pool balance from the DLMM pool and re-deploys a new liquidity distribution - all within 1 transaction.
The Refresh function removes the entire liquidity from the DLMM pool and redeposits it back in the exact same way.
Refresh is a key function for Vault Curators as it triggers just like rebalance many important functions:
Distributes Curator Fees earned in the last 24h to the curator
Distributes Reward tokens (if active) to LPs of the Vault for claiming
Removes liquidity for LPs wanting to exit a vault
Updates the Vaults’ KPI metrics
RESET
The reset function removes all liquidity allocated to the DLMM pool and allocates it to the vault reserve balance. This function can be used when either a large liquidity provider wants to exit the vault or in case the curator for whatever reason does not want liquidity allocated to the market during a certain time. However, liquidity that is idle and not allocated to the market is not earning any fees from trading.
PAUSE
Curators can choose to pause deposits for their DLMM Vaults. Open DLMM Vaults are for everyone to join whereas paused DLMM Vaults are not open for capital to join. Users can always remove liquidity out of a vault, no matter if it is open or paused. The open and pause deposit switch can be changed anytime.
SHUTDOWN
If a curator decides to stop operating his DLMM Vault he can completely shutdown the vault. Once this process is started all deposits are stopped and all remaining vault users can withdraw their LP. The vault will fully shutdown after all liquidity got withdrawn.
From the inception of the DLMM Vault its performance is tracked. The most important KPI for each curator is the PnL which stands for Profit and Loss and includes yield from fees earned, curator fees payed, and impermanent loss or profit realized. The PnL number calculates the profitability of the vault compared to its underlying assets.
IMPORTANT
DUST - Do not deploy dust into bins!
Deploying dust into bins will halter your vault which will require assistance from the team to resolve. Dust can only be deployed via direct interaction with the smart contracts.
GAS - Always keep enough $ETH for Gas in the curator wallet!
The curator wallet is paying for the gas usage of the vault smart contract interactions.
JIT - Do not deploy Just-in-Time strategies!
Just-in-Time (JIT) bots or strategies harm the protocol by trying to maximize $ONE rewards while minimizing active liquidity for trading.
Radical Transparency & Performance Monitoring
DLMM Vaults offer complete performance visibility including factors such as Curator Fees, realized impermanent loss, fee earnings, $ONE Rewards earned and Chain incentives earned.
As a Liquidity Provider you have full visibility on the current strategy the vault curator is deploying.
The Vault Info on the left gives basic informations about the vault setup, like Pool / Tokenpair, Pool Bin Step, and Curator Fee.
The Vault Liquidity on the right gives a quick overview on the current active LP position of the vault like active bin price, number of deployed bins, token allocation per bin, average vault APR, as well as vault fees earned (24H, 7D, 30D).
The Total Vault Liquidity on the Vault Stats details page shows how much of the liquidity is active in the pool and how much is held passive in the reserve. It also showcases transparently the composition of both.
Active and Passive Vault Liquidity
Pool Balance - Active Liquidity in Vault The Pool Balance is active liquidity deployed into the DLMM pool to earn yield and rewards.
Reserve Balance - Passive Liquidity in Vault Reserve The Reserve Balance is passive liquidity not deployed into the DLMM pool and not earning trading fees and $ONE rewards. With the Reserve Balance vault curators can reduce IL (Impermanent Loss) or effectively long one token over the other.
The Historical Chart shows the performance of the DLMM Vault since its inception. By displaying 5 different lines users have full visibility over the vault performance.
Historical Vault Performance Chart
PnL - Profit and Loss (green line)
VT - Vault Token (light blue line)
Token A - e.g. MUSD (light green line)
Token B - e.g. WETH (dark purple line)
50/50 Hold (grey line)
The PnL (Profit and Loss) chart shows the profitability of the vault including $ONE rewards and chain rewards but without VIP rewards.
The Rebalance Heatmap shows how active a curator is. Ideally, the curator triggers at least one rebalance per day. More frequent rebalances do not necessarily mean the vault is performing better, but they do indicate that:
The curator is actively managing the vault.
Users can exit the vault every 24 hours.
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