What are you going to build?:
Typically, if a protocol treasury wanted to make yield on their assets, they would participate in an AMM pool. If the treasury is heavily concentrated in a single asset, they would need to swap some of that asset for a paired asset to participate in a pool. Through LR, the treasury can create a vault for their asset and other users can create tranches against it where they lock up a paired asset in exchange for a higher return. The paired asset and an equal valued amount from the vault will be combined into a position in an AMM. This allows the treasury to generate passive yield without downward pressure on the assets, which would negatively affect the overall value of their treasury. Other benefits include increased liquidity, hedging the treasury to market volatility, and greater participation in the ecosystem.
LR is made up of three core pieces, Maker Vaults, Taker Tranches, and Protocol Adapters.
Maker Vaults:
Makers create vaults that are tied to a particular AMM pool, like USDC/VELO. The Maker determines the revenue split (0-100%) that the Maker Vault receives from Taker Tranches, the lock up period for the tranches, and which side of the pool (USDC or VELO) should be provided by the Maker Vault and the Taker. Makers can withdraw assets that are not locked up in a tranche from the vault at any time. Once a tranche matures and is redeemed, the vault assets are returned to the vault. Makers can turn off new tranche creation.
Taker Tranches:
Users creating Tranches will provide the paired asset and lock it up into a tranche for the defined amount of seconds. These assets will be pooled with an equal value of assets into a liquidity pool and used to generate revenue. In return for the lockup, they receive an increased portion of the revenue. There can be any number of tranches created from a vault as long as there are free tokens in the vault to be paired with. Once a tranche matures and is redeemed, the Taker assets are returned to the Taker.
Protocol Adapters:These store the business logic for interacting with protocol specific code like depositing, withdrawing, staking, and harvesting rewards. Having protocol adapters allows us to maintain one vault and tranche codebase and expand it to allow for integrating into other protocols or newer versions of existing integrations.
Example (code is WIP, production may differ in implementation):
Maker creates a Maker Vault with a configured 25% revenue cut and a maturity period of 2592000 seconds. Maker deposits VELO worth $1mm into the Vault. Liquid Resilience is a solution built for protocol treasuries to get their idle token assets put to work in automated market makers without the need for them to sell their token holdings. Aside from the idle asset benefits, Liquid Resilience also creates a novel form of protocol owned liquidity, as assets are locked up for durations of time. A Taker provides $50k worth of USDC by interacting with the Maker Vault. This USDC is pooled with $50k worth of VELO in the Maker Vault into a position in the USDC/VELO pool. The liquidity pool tokens are sent to the new Taker Tranche. The Tranche would then stake the LP tokens into the Velodrome gauge to accrue emissions for the Tranche address. After 2592000 seconds, 30 days, either the Maker or the Taker can redeem the Tranche. LP tokens will be unstaked from the gauge and assets withdrawn from the pool. All VELO from the LP position is returned to the Vault, and all USDC from the LP position is returned to the Taker. Accrued emissions are split with 25% going to the Vault and 75% to the Taker. The Taker is receiving 75% of the emissions for the entire $100k position due to the pooling of his assets ($50k) and the vaults assets ($50k). If a $50k positions would have generated 1000 VELO, a $100K position would have generated around 2000 VELO. The Taker gets 1500 VELO, 75%, and the Vault gets 500 VELO. Here are a few scenarios based on the different Maker Vault Revenue Cuts. "LR Boost" is how much more the Taker made by putting their assets in an LR Tranche instead of putting the same value of assets directly into the liquidity pool. While the Vault receives a smaller portion of the yield, they are able to generate it with what would have otherwise been idle assets. In this case, the Maker is also exposed to USDC through the pool dynamics and develops a synthetic hedge against the volatility of their VELO without needing to sell or lend to someone that may sell.