Vault Discontinuation Policy
Due to market and user dynamics as well as other external factors, there comes a time in a vaults life where they become obsolete and an economic load for the organization. At this point, it is in the DAO’s best interest to pursue discontinuation.
To “Discontinue” a vault is understood as stopping the earning and harvesting operations as these transactions are at a cost to the DAO. Additionally, the discontinued vault’s status on the registry is set to “deprecated” which automatically removes it from the UI for all users without any deposits in them. This prevents new deposits from occurring. Finally, an announcement is made about this decision and alternative staking opportunities are suggested to the users with positions on the unsupported vaults.
The purpose of this policy is to provide guidance around the standards and indicators of unsatisfactory vault health to inform discontinuation decisions.
The following points were discussed with different technical and operational contributors from the Badger community and are subject to change:
- Vaults should only be maintained for as long as they are profitable for the DAO except where the vault provides a value other than monetary to the DAO.
- Profitability is assessed by observing the difference between the yearly projection of the gas costs of earning and harvesting the vaults and the projected yearly revenue of the vault. Gas costs and yields are variable so an extrapolation of historical values of these should suffice.
- Vaults where a net negative is estimated should be discontinued.
- Vaults where an annual profit below $50,000 USD is estimated should also be discontinued. This is due to the labor and opportunity costs involved in maintaining these vaults.
- Vaults that incentivize liquidity for the DAO’s native assets ($BADGER and $DIGG). Decisions around whether or not to discontinue these vaults should be informed by the Finance and Economics contributors and will require a deeper analysis on the impact of the decision
- Vaults that are managed by partners as these don’t really represent any fixed and ongoing costs to the DAO. For example: byvWBTC.
- The profitability policy will only be applied for vaults with 90 days of antiquity or more. This is because the long term performance of a vault can’t be reliably assessed during the first few weeks after its launch. At the same time, enough support time should be allowed in order for small depositors to at least breakeven with the deposit/withdrawal gas costs.
Stopped support from underlying protocol:
- Vaults that manage assets that have been discontinued or retired by the underlying protocol should also be discontinued by the DAO. There might be situations in which assets that generate profitable yields are discontinued by their protocols for several reasons (Technical vulnerabilities or performance improvements, for example).
- Badger vaults that manage these assets should also be discontinued as any further support will mean an economical loss for the DAO. Should these assets be retired in favor of newer versions, the DAO should launch a new vault for these new products as long as it remains a profitable option.
- User migration incentives and facilitation can be considered on a case by case basis. An example of this is the Curve Tricrypto pool retirement in favor of Curve Tricrypto2.
Discontinued vaults are simply removed from the UI for new depositors and their operational support is stopped. This doesn’t mean that these vaults are fully eliminated. Their contracts will remain open for deposits on chain and it will be up to individual users to decide whether or not they want to withdraw their assets or avoid depositing them. It is the DAO’s responsibility to make it clear through their communication channels and UI that “Discontinued” vaults doesn’t generate yields. To do this, users with an active position on a discontinued vault will continue to see them on the UI with a “Discontinued” tag as well as a tooltip with an explanation of the state’s implications.
For the case of vaults V1.5, deposits can be blocked at the Smart Contract level. Once a vault of this version is declared discontinued, a call from the Dev Multisig will be executed to completely stop any new deposits into them.
Additionally, a possibility exists for discontinued vaults to become operational again. This could be the case if an asset's yields become profitable for the DAO due to different market conditions. In this case, the vault would be reactivated by:
- Changing the vault’s status on the registry from “deprecated” to “guarded” or “production” as needed. This will show them once more on the UI for all users.
- Restoration of earning and harvest operations on the vault’s contracts.
- Announcing these changes to the community through the different Badger communication channels.