How Strategies are Managed

1. Creating a Strategy

• Strategies are created through governance processes.

• Each strategy has:

  • Its own implementation address.

  • Compatibility with base assets.

  • A witness type to ensure valid interactions with the vault.

Base Asset Compatibility:

• Strategies must support the same base asset as their associated vault. Example: A strategy linked to a USDC vault must also handle USDC.

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2. Issuing Shares

• When base assets are deposited, the strategy issues shares proportional to the deposit.

• These shares are sent back to the vault, representing the vault’s ownership of the assets in the strategy.

Equation for Issuing Shares:

$$\text{shares\_issued} = \frac{\text{amount\_deposited} \times \text{total\_shares}}{\text{total\_assets}}$$

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3. Burning Shares

• When assets are withdrawn, the strategy burns the corresponding shares.

• The amount of base assets returned is proportional to the number of shares burned.

Equation for Burning Shares:

\text{amount_withdrawn} = \frac{\text{shares_burned} \times \text{total_assets}}{\text{total_shares}}