Introducing Curve & Convex Vaults
We are excited to announce the imminent release of Ondo’s new Curve & Convex vaults.
Last year, Ondo introduced vaults enabling depositors to provide single-sided liquidity on decentralized exchanges (DEXs) while adjusting their risk/reward level. We were blown away by the positive feedback from the community, DAOs, and other depositors. Our vaults have provided $200M+ in liquidity to over a dozen projects.
The new release builds on our existing features — from risk tranching and fee-less auto-compounding — and introduces a number of new benefits for stableswaps: integrations with Curve & Convex, multi-pair vaults, and flexible tranche ratios.
New Protocol Integrations: Curve & Convex
Ondo’s initial offering supported two DEXs: Uniswap V2 and Sushiswap. While those protocols remain a core offering, we are rolling out new integrations starting with Curve.
Curve Finance is a leading decentralized exchange with over $20B in liquidity. Curve’s AMM is particularly attractive for stableswaps, i.e. deep liquidity and low slippage for traders.
And the icing on the cake: our vaults automatically stake tokens on Convex Finance and auto-compounds the yield to boost the APY.
Let’s take a look at some of the features in these new integrations.
Multi-Pair Vaults
Past vaults invested funds into a single DEX LP pair. This new release includes a strategy that supports multiple LP pairs in a single vault, with an emphasis on stableswap pairs.
Diversification will improve risk-adjusted returns for all depositors. Senior tranche depositors in particular drastically reduce their exposure to long-tail events such as the de-pegging of a single stablecoin.
Indeed, when a stablecoin loses in value within an LP (de-pegging), the overall value of the LP decreases. The phenomenon can be amplified with traders reducing their exposure to the de-pegged token, until the LP’s value gets close to zero. If an Ondo single-pair vault was an LP in this context, the principal of both tranches would be wiped out.
Thanks to this new multi-pair feature, this scenario cannot happen: funds are invested in several LPs and the underlying diversification prevents the safe fixed tranche from losing funds, as those are covered by the variable tranche deposits.
Flexible Tranche Ratios
Vaults for Uniswap V2 and Sushiswap must have exactly the same amount of invested assets in each tranche. This requirement often leads to excess funds after the subscription window, a major friction point for depositors.
With Curve, we were able to remove this requirement: our new vaults have the flexibility to accept different amounts in each tranche, which will materially improve the experience.
Beyond this flexibility, this feature also allows us to further tailor our offering to depositors needs. We can finely tune how protected the fixed tranche is and how levered the variable tranche is, which leaves room to create special over-leveraged tranches for advanced users well-aware of the underlying risks of a strategy.
…And All Your Favorite Features
Risk Tranching
Ondo vaults are structured products offering risk tranching. Here’s a quick reminder:
- The safer Fixed Tranche provides fixed yield: stable, predictable returns with protection from volatility and black-swan events.
- The riskier Variable Tranche provides leveraged variable yields: boosted returns in exchange for securing the senior tranche.
Fee-less Auto-Compounding
Compounding your returns by re-depositing them can materially improve your performance.
However, manually compounding yields in DeFi can be complex, costly, and risky for individual depositors.
For example, a user who staked himself a Curve LP in Convex would have to go through the following steps for compounding his rewards, costing him about $350 in gas fees:
- Claiming rewards to receive CRV and CVX in his wallet (one transaction)
- Approving and Swapping both CRV and CVX for USDC (four transactions)
- Approve USDC and deposit in a curve pool (2 transactions)
- Approve the Curve LP and deposit with staking in Convex (2 transactions)
Ondo takes care of this burden and regularly compounds rewards to boost the vault’s performance — without any added cost to users!
What should you expect?
Our team is concluding extensive internal audits and testing, as well as an external audit by ABDK. Ondo will roll out these new vaults in two phases: a guarded launch followed by a full deployment.
We’ll start by deploying a USDC vault with conservative caps:
- Both tranches will accept USDC up to their caps, allowing depositors to choose their risk level.
- The strategy will deposit the funds in Curve to mint 3CRV (3pool LP) tokens, deploy them into multiple high-yield stableswap pools, and stake on Convex to boost the yields.
- Ondo automatically compounds the yield to boost your APY.
- After the vault expires, depositors will be able to claim their USDC (principal and yield).
Over time we’ll progressively increase vault caps, as well as offer new vaults that will accept other tokens (e.g. ETH and other stablecoins).
This release enables innovative strategies that will help deliver strong, sustainable yield to Ondo depositors. Our team is excited to continue to deliver innovative products to help depositors, DAOs, and the community achieve their financial goals.
Ondo Finance is building a decentralized investment bank. We are building software that finds attractive investments across the traditional and DeFi landscape, repackages these assets into easily understood risk/reward offerings, and then matches and offers these assets to both institutional and retail investors. Join our community to stay up-to-date with our latest developments and product launches!
