Introduction to Cardano Native Asset Vaults on the VyFinance platform

VyFinance
3 min readMar 6, 2023

Fully Decentralized rewards on Cardano.

VyFinance vaults allow users to stake Cardano Native Assets’ (CNAs — both tokens and NFTs) and in return access rewards in the form of other CNAs on chain.

Fully decentralized staking

What makes our vaults a first on Cardano, is that we have designed an end-to-end decentralized process for staking and rewards. Both the users deposit, and the users earned rewards are not in the custody of VyFinance at any point during the staking process. As such, only the staking user can access their assets and rewards.

How is custody handled in our vaults?

There are two phases to custody when it comes to staking. The first being the custody of the staked asset, and the custody of the reward.

Below is our approach to approach to both phases:

User Asset Custody

When a users stakes their asset to a vault, they will notice the asset leave their wallet. This does not mean VyFinance holds custody of the users assets. The assets are held in custody by the smart contract, from which only the user that deposited the assets can request its withdrawal. Therefore, this process is decentralized.

Rewards Custody

Once a user has staked, and the rewards have been calculated (this occurs every block), any reward amount will be locked to the staked assets until the user harvests. This means all staking rewards, from the moment they are attributed to any given wallet, are only accessible from that wallet. As such, these rewards are only custodial to the user from the moment they are earned. VyFinance cannot touch any earned rewards. All calculations are conducted using the smart contract, on-chain. Therefore, this process is also decentralized.

How our rewards are calculated

Each vault is designed to payout a set amount of reward, per second, for every asset staked.

An example payout for a token:

A vault that allows you to stake Token A for Token A is launched on our platform, with an APY of 33%. This means, for every Token A staked, 0.33 token A will be earnt in a year.

The calculation for payout per second is very simple:

(Annual payout)/(seconds in a year) = 0.33/31,536,000 = 0.0000000104 Token A per second. As most tokens on Cardano are 6 decimals, we always round down to the nearest 6 decimal number.

If we were to stake 1,000 Token A for 1 day, we would earn 1,000×0.0000000104×86400 = 0.904109 Token A.

As such, we can see that our vaults are only determined by stake size and total time staked. This classifies our vaults as ‘Inelastic’.

Elastic vs Inelastic Vaults

Elastic Vaults change the total payout given to a user based on the total amount that has been staked. If the total stake in an elastic vault were to change from 500,000 Token A to 1,000,000 Token A, it would last the same timeframe, but adjust the APY down so everyone receives half the payout.

The vaults on the VyFinance platform give a fixed reward per token staked. Regardless of the total amount of tokens staked to the vault, the reward will always stay the same. Hence, as the reward is static per token — we call this ‘Inelastic’ rewards.

The advantage to this is that a user can calculate their total tokens earned deterministically. The only variables that impact rewards are stake size, and time in the vault.

As a result, it becomes increasingly difficult to gauge the length of a vault’s life-span, as every deposit and withdrawal will have an impact on total rewards payout per second.

The vaults on VyFinance have been designed to be Inelastic as it allows for a fully decentralized process using the Cardano eUTxO model.

Where can I stake my CNAs?

You can stake your CNAs on the VyFinance platform: app.vyfi.io/vaults. We have vaults for multiple projects which you can swap between under the ‘projects’ filter.

If you have any questions, feel free to contact us on any of our socials:

Twitter: https://twitter.com/VyFiOfficial

Discord: https://discord.gg/uJBeZUnQMv

Telegram: http://t.me/vyfinance

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