Defining Crypts, Vault and Strategies
Reaper Farm manages liquidity providing money with their uniquely built Crypts.
Essentially, Crypts are liquidity pools from top-tier protocols. Reaper auto compound the rewards given out from the underlying provider of those pools. The Crypts contain two contracts: a Vault contract and a Strategy Contract.
In practical terms, Crypts and Vaults are synonymous. The Strategy contract deals with the auto-compounding process in its entirety. Every crypt contains their own, individual Vault and Strategy Contract.
Broadly speaking, Vault contracts secure and manage all deposits and withdrawals for all assets within, whereas the Strategy contract handles all the transactions that go into generating the compounded APR into a nice, juicy APY. It sells the rewards farmed off your assets, creates new LPs and re-deposits them into the Vault contract for you.
One might ask: once a user obtains LP tokens and deposits them into the crypt, how do the tokens travel within the crypt?
From the time LP tokens are deposited into a Crypt, our Vault contract acts as a share issuer to an extremely secure vault. One receives a receipt token in the form of an rfTOKEN. The rfTOKEN represents your share of the Crypt that’s been deposited in, which will amount to the relative value of a wallet’s LP tokens to the rest of the LP tokens in the crypt.
As for the strategy contract, it will send all the LPs to the underlying protocol/pool. Then, on each compounding event, the strategy contract will claim all the rewards and send those newly minted LPs to the underlying protocol pool as well.
The Strategy contract is tailored to each and every Crypt. Whether it’s the xBOO, OATH-WFTM or fBEETS Crypt, they are all customized to…wait for it…reap the most out of selling the farming token for your prescribed LP tokens or governance token and compound it back into the vault.
Because different protocols have different farming distributions and emission schedules, each strategy is individually tailored and built per crypt. In general, the contract is automated to check for an optimal time of compounding every 5 minutes.
Reaper’s Crypts are a convenient, cost-effective way at getting the maximum APY a liquidity pool or staking pool can offer.
Knowing this process, how does Reaper mitigate the potential risk-transfer from liquidity pool, at the protocol level?
The answer to this question can be found in (1) the vetting methodology against potential new Crypt candidates and (2) the thorough security operations Reaper developers follow to mitigate potential attack vectors to its Crypts.
The vetting methodology contains three vectors to scrutinize over:
- De facto trust: a protocol and its subsequent liquidity pool must have a measurable amount of trust from the community, which can be measured by observing earnest communication from the team, the levels of engagement from community members and certain amounts of TVL.
- Origin of the code: most liquidity pools and protocols utilize in some capacity forked code, like Uniswap, Masterchef, etc. being that they have proven to be tried and true. A completely novel architecture does not guarantee such assurance.
- Lifetime: a protocol and its liquidity pool must have stood the test of time, in some capacity. If the other two vectors are true, they still need to be proven over the effects of time. Time in the space for a protocol with a certain amount of TVL and forked, trusted code will generally make it subject to: audits, market volatility and public scrutiny.
As for security operations, they represent some of the most technical points of software engineering and programming and require a strong computer science or engineering background to explore.
In an effort to communicate Reaper’s offerings in a streamlined manner, we will spare the common reader with technicalities. Although, Reaper was developed by the Byte Masons, who are security-minded engineers at the outset. At a very high level, their security processes looks as follows:
- Pre-Deployment Testing: consists of performing a suite of unit tests to verify normal operations of Crypts, such as: deposit, withdraw, harvest. The process is repeated with administrative and safety functions such as pausing, panicking, and retiring Crypt contracts.
- Reviews: extensive, internal rounds of reviews by multiple developers, both synchronous line-by-line audits, if the crypt is particularly complex, as well as asynchronous individual audits, for all crypts.
- Production Testing: Post-deployment manual testing to mimic typical user scenarios of deposits and withdrawals, safety-focused scenarios of panicking and pausing, and software development scenarios of reward estimation, to help estimate profitability of harvesting.
That being said, the combination of their vetting methodology on protocols and pools, along with the thorough, self-aware security operations, is topped off with a new arrival to their toolset:
pain.finance is used for new Crypts, with novel strategies that require additional production testing. The Crypts are introduced at a slower rate and typically have a cap on TVL, that gradually scales over time.
What are the fees associated with using Reaper?
Crypts take a 4.5% fee on all profit earned on each harvest and a 0.1% fee on all withdrawals:
- 4.05% is paid to the treasury for maintenance.
- 0.45% of the profit fee is paid to whoever called the Reaper Harvest-Bot function.
Relatively speaking, this fee is minuscule in comparison to the time-value one would spend perfecting their compounding regimen. Not to mention the gas cost users forgo.
An important thing to consider is the 4.5% fee is on the profit earned and not the total value of one’s shares.
Unassuming of our bias
Reaper’s services are a perfect representation of how protocols can create positive value for all participating parties. User’s need not worry of harvesting, selling and compounding as the auto-compounding strategies are tailored for optimal profitability and gas efficiency and do all of the brunt work; protocols receive an amazing tool that they can now add to their offerings, potentially attracting a larger user base and finally, Reaper collects a small fee for the convenient and secure service they offer. Everybody wins.
The Byte Masons’ firstborn has evolved into the leading solution on Fantom and with our recent launch of $OATH, there is no telling what Scythie has got under his drapes next…
\’Till next time.