Liquidity Manager

Introducing the Curve Liquidity Manager by Vector Reserve, a dynamic solution designed to maintain the balance of the vETH/ETH pool, initially on Curve with further rollouts planned for additional LP positions and DEXes within the Vector ecosystem. It ensures the stability of the vETH peg, and generates additional yield through arbitrage opportunities. Here's how it works:

Step 1: Redeem vETH from Treasury into WETH

When the vETH/ETH pool on Curve goes out of balance, vETH and ETH lose their 1:1 peg. In response, Vector Reserve's Liquidity Manager takes action. The first step involves the Vector treasury redeeming vETH. For instance, 150 vETH can be internally redeemed to receive 150 WETH.

Step 2: Swap vETH Back into WETH on Curve

Next, the 150 WETH acquired is used to seize the arbitrage opportunity within the Curve pool. Because vETH/ETH is no longer trading at a 1:1 ratio, the 150 WETH can be swapped back for, let's say, 152.32 vETH within the Curve pool.

Result: Pool Back in Balance, Peg Restored, Yields Accrued

As a result of these two steps, the Curve pool is rebalanced, and the vETH peg is restored to its 1:1 value against ETH. Moreover, the Vector Reserve treasury earns a profit of 2.32 vETH during the process which is redirected back as additional yield for vETH stakers.

Peg Stability and Arbitrage Yield-as-a-Service

This process may initially appear as a loss of Total Value Locked (TVL), but in reality, it enhances the Vector ecosystem. It grows its reserves, tightens the vETH peg, and reduces slippage for users while meticulously ensuring that vETH is backed 1:1 by ETH throughout the entire process. It is an additional tool to bolster vETH yield and can also be rolled out as a service to boost partner LRT yield.

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