Curators 101
A vault curator is the entity that designs, configures, and oversees a vault.
A crucial difference between DeFi strategies and traditional off-chain strategies is that DeFi vault curators never take custody of user assets. DeFi’s non-custodial nature enables users to retain control of their funds at all times, and its programmatic nature encodes in every smart contract the actions that curators can and cannot perform with user assets.
Actions curators can take
On a particular vault, curators handle the strategic and risk management decisions that impact vault performance. Our mandate is straightforward but crucial: protect suppliers first, then maximize safe, scalable yield.
Market allocation and risk parameters (lending example)
Market allocation: In a lending vault, curators select which borrow markets to include in a vault and allocate user supply between them based on a set strategy.
Market supply caps: Set supply caps on each market allocated to the vault to balance risk and yield. These caps set limits on how much vault supply can be allocated to a particular market.
New market LLTVs: Configure LLTV (Liquidation Loan-to-Value) ratios based on asset volatility, DEX liquidity depth, and oracle nuances. When spinning up a new market, we set LLTVs to ensure that any loan positions taken out against vault supply are sufficiently over-collateralized.
Active risk management
Raise or lower vault caps based on market signals: improved DEX depth, sustained borrow demand from diverse borrowers, and proven liquidation performance in stress events.
Rebalance allocations to optimize risk-adjusted yield as market conditions change.
Actions curators cannot take
The limitations placed on curators are just as important as the actions we can take.
Curators cannot execute supply or withdrawal transactions that move funds on- or off-platform: At no point in the curation lifecycle do curators have the authority to withdraw user funds. This means that wherever vault supply is allocated, a supplier can withdraw funds (subject to available liquidity).
Curators cannot block users from withdrawing funds: the ability for a user to unilaterally withdraw funds from a vault is encoded in the vault smart contract. Note: During market utilization spikes (which may occur as a result of adverse market conditions), withdrawals may be delayed.
Why expertise matters: The case for professional curation
Effective vault curation requires specialized knowledge across multiple domains:
Risk modeling and market analysis
Curators must have an understanding of how to balance risk with capital efficiency. For example, markets with higher LLTVs naturally attract more borrowers since borrowers get access to higher leverage. However, higher LLTVs give less room for error during adverse market conditions. The role of a curator is to find the appropriate balance that drives risk-adjusted yield.
Collateral analysis and due diligence
Our vaults adhere to rigorous risk management guidelines to enhance resilience against market volatility. This begins with an extensive due diligence evaluation of collateral assets. Our curation team engages in this comprehensive analysis before adding any new market to a Gauntlet Vault. The process includes an assessment of liquidity, security, audits, oracles, special mechanisms, and more.
Liquidation mechanics and DEX liquidity
Liquidations on assets with thin DEX liquidity can trigger liquidation cascades. Deep liquidity helps facilitate liquidations as they're needed.
Real-time risk management
Our risk infrastructure uses simulations, real-time monitoring, and automated response systems to continuously assess market conditions. This helps us determine when to keep assets idle, when to deploy to new markets, and when to pull back.
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