What is Vault Finance?
The Vault is a liquid staking protocol on Solana that converts SOL into vSOL (its liquid staking token) that can be used in other DeFi platforms while also earning its staking rewards. Instead of locking tokens into one single validator, The Vault spreads token delegation across a set of validators to support decentralization and security on Solana.
Using Vault
To get started, the wallet must contain the SOL that should be staked.
Stake
To contribute to the Solana network, SOL must be staked with validators. But staking traditionally on Solana comes with the limitation of locking staked SOL for at least 3 days when they are to be withdrawn. Additionally, staking SOL should be done across multiple validators to limit the risk of centralization. These limitations are what Vault is fixing in the Solana ecosystem through liquid staking and network delegation, optimized for better rewards.
Vault emits vSOL in place of the SOL staked for users to provide liquidity in pools to earn additional yield, generate yield through DeFi activities and as an asset that can be used as collateral for borrowing.
vSOL is The Vault’s liquid-staked SOL token. It starts at a 1:1 exchange rate with SOL and accumulates staking rewards over time, so the vSOL:SOL exchange rate increases as rewards compound (example: 100 vSOL ≈ 106.31 SOL after a year at ~6.31% APY, per the current APY seen above).
Direct Stake
Although Vault can automatically delegate staked SOL into any validator in the priority list, the Direct Stake feature gives the user the opportunity to select a specific validator. Select Bandito Stake as shown below.
Unstake Pool
The unstake pool is Vault’s effort to support the platform’s health for users who want to exit instantly. Users can deposit SOL here without staking while they get to enjoy a reasonable percentage of yield.
Earn Points
Vault has a points system for users who stake SOL on the application. Periodically, these points are airdropped and can be ultimately converted into the $V token. Users earn points during seasonal periods by interacting with the Vault products. When designated seasons end, points are converted into option contracts that grant the right to mint $V at a set strike/fixed price during an exercise window.
Validators
The Vault uses a delegation strategy through a scoring system that prioritizes higher returns for LST holders and validator nodes that contribute positively to the Solana community. Smaller and new validators are encouraged to apply as members of the delegation.
Governance
Holders of the $V token from Vault can participate in voting processes that help in directing the application the way the community thinks it should go. $V are locked in the governance platform below to create proposals and vote.
Vault Fees
The Vault charges a small set of fees:
- Delayed unstake fee: 0.1% (this applies to delayed unstaking flows).
- Management fee: 5% on staking rewards (this applies to rewards only, not principal).
These fees are collected to support the Vault protocol maintenance.
Tokenomics & $V launch mechanics
The Vault’s $V token has a total supply of 100,000,000 $V with distribution across the DAO treasury, contributors, vPoints holders, future contributors, liquidity, and early stakers. There is no VC allocation. The token contract address for the $V token is VAULTVXqi93aaq9FsyPKgdgp6Ge1H1HoSvNC4ZbqFDs.
Risks
It is necessary to be reminded of the risks involved with decentralized applications such as Vault’s. A liquid staking application is prone to smart contract and Solana network risks. This can impact the value of the tokens held through the Vault protocol. Before participating, please be sure that you understand the risks involved and that you are willing to proceed.
Conclusion
Vault is making liquid staking lucrative for the regular SOL staker in the Solana ecosystem while also advocating for more decentralization in the validator set on the blockchain network. With Vault, users don’t have to choose between staking rewards and DeFi opportunities as they can make their assets productive while also supporting the ecosystem.
