Term Strategy Vaults

Term Strategy Vaults - Technical Architecture

Term Strategy Vaults implement the ERC-4626 standard tokenized vault interface built on Yearn V3's modular strategy framework. This enables seamless integration with DeFi protocols while inheriting Yearn's battle-tested security features and access controls.

Capital Efficiency and Liquidity Management

Term Strategy Vaults implement an automated liquidity management strategy between fixed-rate TERM markets and variable rate lending protocols. This maximizes capital efficiency by optimizing yield on idle funds while maintaining liquidity for upcoming deployments and withdrawals.

Portfolio Risk Framework

The vault enforces key risk controls through smart contract parameters:

• Portfolio Maturity Cap: Maximum weighted average duration limit across all loans manages overall portfolio duration.

• Collateral Standards: Whitelisted assets must maintain minimum collateral ratios, ensuring quality and protection against defaults.

• Concentration Limits: Fixed per-loan exposure cap ensures portfolio-wide diversification, minimizing the impact of any individual loan default.

• Reserve Requirement: Fixed, e.g. 20%, reserve ratio maintains adequate liquidity buffer for redemptions and new lending opportunities.

Governance Structure

The protocol employs a two-tiered governance structure where curators set operational parameters while LP token holders have ultimate authority to veto any proposed changes to risk parameters, collateral standards, and protocol configurations. This enables adaptive management while maintaining core risk principles through smart contract enforcement.