🪙Vaults
What is an auto-compound Vault?
Auto-compound Vaults are investment instruments that employ a specific set of strategies for yield farming. They make use of automation to continually invest and reinvest deposited funds, which help to achieve high levels of compound interest. By using a Key of Life vault to compound your gains, you save thousands of transactions with their associated gas costs, and precious personal time. Instead of manually harvesting and selling rewards, buying more tokens, and reinvesting that continuously, a vault does all that automatically at a high frequency.
Vaults are the core of the Key of Life ecosystem. In a Key of Life vault, you earn more of the asset you stake in it, regardless if this is a liquidity pool (LP) token or a single asset. For example, vaults where one can stake BTC-BNB LP will result in more BTC-BNB LP over time, effectively growing your share in the liquidity pool and thus allowing for more and more fees and rewards over time.
Despite the name 'Vault' suggests, user funds are never locked in any vault on Key of Life. One could always withdraw from a vault at any moment in time. Key of Life also does not own user funds staked in vaults. However, it is generally best to view vaults as investment tools to store funds for the medium to long term in order to have the effects of compounding really kick in.
When browsing the vaults on the platform, you will see the annual percentage yield (APY), which takes the frequent compounding into consideration compared to annual percentage rate (APR) which does not. You will also see daily interest percentages and the total amount invested in a vault by all users (TVL). Furthermore, one can see what underlying platform the vault is using as a source of revenue.
Each vault can either refer to a pair of tokens invested in liquidity pools, such as CAKE-BNB LP tokens within the Binance Smart Chain ecosystem, or a single token invested in lending platforms or single stake reward pools. After depositing tokens to a vault, the user is supplied with vault specific kaToken (key of life automizer Token) which represent their share in the vault. We will elaborate on kaTokens in the next section.
Anyone in the Community can work together to build new strategies and submit them to the Key of Life team for review.
Summarizing, vaults can:
Efficiently execute yield farming strategies.
Compound rewards into the initially deposited token amount.
Use any asset as liquidity.
Provide one asset as collateral for another.
Manage collateral at a safe level to mitigate liquidation.
Put any asset to work to generate a yield.
Reinvest earned profits.
Users can sit back and relax, and watch their investment grow!
What are kaTokens?
A kaToken (key of life automizer Token) is an interest-bearing, tokenized proof of deposit that you will receive at the moment you deposit in a Key of Life vault. A kaToken is unique per vault, e.g. you get kaKOL tokens when depositing KOL into the KOL Maxi vault. One can view kaTokens as the receipt of your vault deposit.
Key of Life users should hold on tightly to their kaTokens and not sell or exchange it, since you would lose ownership of your staked vault assets if you did so!
How do kaTokens earn interest?
Key of Life's vaults automatically create more of your deposited asset in the form of compound interest. By holding kaTokens in your wallet, they are increasing in value against its corresponding vault asset. The number of kaTokens in your wallet will remain constant, but the quantity of the vault tokens they can be redeemed for increases. This is also the reason why kaTokens do not 1:1 match with the token amount initially deposited.
How do I redeem kaTokens for the initially deposited tokens?
Whenever you want to withdraw the tokens that are staked for you in Key of Life's vault, you simply initiate a withdrawal transaction to exchange them. The kaTokens are then taken from your wallet and burned, and your deposited assets plus yield will be given back to you.
What are the advantages of the kaToken system?
Key of Life's kaToken system has a few major advantages:
kaTokens allow any user to withdraw their fair share of deposited funds;
The system allows you to deposit the kaToken receipt to a cold or hardware wallet for ultimate safety;
Your privacy is maintained, as you remain anonymous to Key of Life. Your funds in the vault are not tied to the wallet address from which you made the deposit, since the kaTokens are the only evidence of your share in the vault. Therefore, you could withdraw your share of funds from a different address if you moved your kaTokens to it;
kaTokens can have tax benefits. Not only do our kaTokens make bookkeeping super simple, but since you're not selling off your rewards or receiving staking rewards direct to your wallet, (in many jurisdictions) you will not be incurring tax liabilities in the same way you would with farming your own yield; and
Lastly, kaTokens can be used as interest-bearing collateral.
How often do the vaults harvest their profits and reinvest?
Vaults are normally harvested multiple times daily and profits are automatically reinvested (compounded).
Why can't someone just do this themselves?
They could, but vaults help you save on personal time and transaction fees, maintain healthy collateral to debt ratios, self-optimize for the best possible yields, and automatically reinvest earnings. Attempting to do this manually would result in large inefficiencies. At Key of Life we like to say: "Sit back and relax, the vault does all the work for you."
What is the vault fee structure?
Most vaults have a performance fee structure, taking a percentage cut of all harvest rewards. This fee on profits is split up and distributed back to KOL stakers, allocated to Key of Life's treasury, sent to the strategist that developed the vault and sent to the one calling the vault's harvest function. These fees are already built into the APY of each vault and daily rate. You do not need to calculate it yourself. The performance fee and the fee structure breakdown are presented inside the Deposit and Withdraw module in a vault.
The performance fee on additional yield, i.e. vault profits, is in part distributed back to KOL's stakers and is the main source of Key of Life's platform revenue. A part of it also funds Key of Life's treasury which is used to further fund platform development, security and other initiatives. The performance fee was also implemented to promote community engagement and governance participation. A successful and engaged community is critical for our future growth, which in turn rewards platform users even more.
Furthermore, some vaults have a withdrawal fee. The main purpose of this fee is to prevent possible exploits from bad-faith actors. Without the fee, somebody could deposit just before the harvest() function execution and withdraw straight after that event, taking a % of the gains generated by legitimate stakers. Withdrawal fees stay in the vault and are shared amongst vault funds.
What is harvesting on deposit?
Many of Key of Life's vaults "Harvest on Deposit". This means that when you deposit into the vault, you are also calling the harvest function of the vault's strategy. By calling the harvest function, you trigger the collection of pending farm rewards and compounding of those rewards back into the vault tokens for everyone.
Key of Life does this so that it is impossible for malicious actors to steal yield, so a withdrawal fee is not required. This greatly benefits long-term investors.
Almost all of the vaults on more inexpensive chains like Fantom and Polygon harvest on deposit. You can tell if a vault harvests on deposit if there is no withdrawal fee.
For depositing, and thus calling the harvest function, you will receive a reward in the form of the native chain token (e.g. WFTM or WMATIC) due to the harvest call fee.
Harvesting on BNB Chain
BNB Chain also has a harvesting constraint in place:
Vault TVL is below $10k and older than 2 weeks: community harvest.
Does the performance fee get taken out when I withdraw my funds?
No, the performance fees are on profits and are taken every time someone calls the harvest() function.
Does the vault page show the APY?
Yes. Our displayed APY values reflect the predicted rate earned on a vault in a year. This rate is determined by the underlying platform it uses, the strategy that it is interacting with at the time, the total amount of funds in the vault and also takes into account the effect of compounding. As a unique feature, we have also included all vault fees in the APY calculation. What you see is what you get!
What risks do the vaults have?
Key of Life vaults are audited, but this does not mean that a vault is entirely risk free. Below are some of the general vault risks:
Assets deposited into the vault have no risk of decreasing in quantity but can decrease in monetary value.
As with any smart contract, the ultimate risk is that an investor's funds can end up stolen or unable to be withdrawn. The team does take steps to quantify the security risks of smart contracts and will only interact with ones that meet a specific set of requirements after excessive testing to make sure the underlying platform does not contain so called 'rug-pull' functions.
More detailed vault risks, or better yet, information on Key of Life's vault safety expressed by the Key of Life Safety Score.
What are the different vaults?
Money Market : Utilizes lending platforms, such as Venus on BNB Chain or Scream on Fantom, to generate the highest possible yield for these coins (e.g. BUSD, BNB, LINK, DOT, DAI, USDT, ETH, or BTCB).
Native Token Farming : Takes advantage of the high yield on popular farms by depositing another asset to earn, sell and compound profits of the native reward token.
What will I get out when I make a vault withdrawal?
The default is that you withdraw the token type that you deposited, because at Key of Life you earn what you stake. You will get the amount you deposited plus the yield generated (minus a potential vault withdrawal fee). For vaults supporting Key of Life ZAP, users can withdraw directly into other assets, native or stable assets supported for ZAP.
How do LP vaults work?
Liquidity pool (LP) vaults work by reinvesting the fees awarded to LP participants. In return for providing liquidity to the pool, many platforms reward investors with tokens. Our vaults regularly harvest these rewards, sell it, buy more of the LP’s underlying assets, and then reinvest to complete the cycle.
This compounds the rewards gained from a liquidity pool. Key of Life creates strategies that automate this process, saving you time and gas fees in comparison to farming manually. This is all done for a tiny fee that is distributed back to those who stake in Key of Life's governance pool or in the KOL Maxi vault. A small percentage also goes to the Key of Life treasury.
How often are balances updated in the vaults?
Pending rewards are not reflected in the balance until they are swapped for the initial deposited token. This can vary depending on the strategy running.
How do vaults get added to Key of Life?
New potential vaults can be discussed in our Telegram. Our strategists then add the potential investment strategy to our strategy list. A priority is assigned to each new, potential strategy based on its APY, TVL and sustainability. Our developers/strategists then attack the list from top priority to bottom. The official forum is used for submitting actual vault requests.
Then the platform which the vault is potentially going to deposit into, is very thoroughly screened if it has safe smart contracts and no other dangerous traits.
What’s your vault naming process?
Each vault on the platform is named after the token that users can deposit in it. For example, the CAKE-BNB LP vault uses CAKE-BNB LP tokens for its investment strategy. A BTC vault uses the BTC token, etc.
Underneath the vault name, you can find the platform used for investing the token and farming its yields. For example, Uses: Venus means that that particular vault invests the token in Venus, a DeFi algorithmic money market and synthetic stablecoin protocol.
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