> For the complete documentation index, see [llms.txt](https://docs.canopyhub.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.canopyhub.xyz/canopys-four-layers/strategy-layer/how-strategies-are-managed.md).

# 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.

***

### 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:**

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

***

### 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* When assets are withdrawn, the strategy burns the corresponding shares.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:**

$$
\text{amount\_withdrawn} = \frac{\text{shares\_burned} \times \text{total\_assets}}{\text{total\_shares}}
$$