Inside Vesper: Multi-Pool
[Ed. note: This is the second in a three-part “Inside Vesper” series outlining some of Vesper’s key components and innovations in the run-up to the February 17 launch. Start with the first installment, “Modularity.” For more detail, check out our documentation in GitBook.]
In DeFi, there are many avenues to secure high APY. But often these strategies burn out soon after they catch fire or are only attractive on a small scale for deposits. Vesper’s Multi-Pool capability enables it to mitigate these shortcomings to hit high APY, short-term strategies at large scale.
Beyond “food farms” and recursive money games, some protocols can present legitimate, safe, high APY opportunities. Usually, this is tied to the launch of a new protocol that rewards participants with project tokens beyond the yield.
But this approach won’t sustain a high yield forever. One of two scenarios enables high APY: limited time token yield or little interest from depositors. In either case, it’s not practical to swap the existing pool strategy for this new one. (Though, of course, Vesper is capable of doing so).
Other projects choose to cap deposits or ignore the strategy altogether. But neither approach is the best solution. So we developed a “multi-pool” approach.
Multi-Pool Under-the-Hood
In the same way that Vesper pool strategies are swapped and compounded, they can also run in parallel with one another. Our front pools (described in the previous article) can take on any number of strategies consecutively, with a variable allocation of deposits to each pool.
This is achieved by “queueing” multiple strategies to the same pool. This looks like allocating the first 10 million USDC from the vUSDC pool to Strategy A, the next 20 million USDC to Strategy B, and the rest to Strategy C. The limits on strategies and order of the queue are dynamic, and can be updated as needed.
This is key to the pool architecture for two reasons. The first, of course, is better yield optimization. We can lend to any number of platforms at the same time, mitigating fluctuations in interest rates. When a new strategy enters the fray, we can queue it to first priority with a small deposit limit, say 5 million USDC, so as to not smother the APY with an overpowering deposit.
The second benefit is an incremental adoption of new strategies. Let’s say that the new strategy sustains itself at 5 million USDC. We can ladder up in 5-million USDC intervals as this strategy can handle additional TVL. In principle, this is similar to how Amazon surfaces changes to its site, exposing those changes to a small number of users and widening that group over time.
Beyond that, this enables Vesper pools to faithfully take on any amount of TVL. In the DeFi future, everyone can benefit from consistent APY, and if 100% of assets go to one strategy at a time, a pool would likely be suffocating its earning potential significantly. Multi-Pool is an important, unique feature to Vesper pools that unlock new ways of thinking about pool scalability.
