🧠Vault Strategies

What Is a Vault Strategy?

In Bonzo Vaults, a strategy is a modular smart contract that decides how the assets in a vault are put to work. You can view details about each strategy supported by Bonzo Vaults in this section of the documentation.

When users deposit into a vault, the vault holds the deposits and handles all of the accounting (minting/burning vault share tokens, tracking deposits/withdrawals, etc.). The strategy then takes those pooled assets and:

• Routes them into underlying liquidity pools and farms on partner protocols (such as SaucerSwap),

• Collects any trading fees and incentive rewards generated by those positions, and

• Periodically harvests and reinvests those rewards back into the position (auto-compounding).

When enough rewards have built up for it to be efficient, the strategy runs a “harvest” flow: it claims rewards, swaps them back into the vault’s underlying asset(s), and redeploys that capital into the liquidity pool and/or farm. Over time, this is what causes each vault share to be backed by more of the underlying tokens.

Each strategy is generally unique: it targets a specific combination of assets, pools, and protocols. Because of this, every strategy needs its own testing and review before being deployed to production.

Since strategies are the component that actively interacts with external protocols, they are also where extrinsic risk lives — for example, a bug or exploit in a third-party contract. To help manage this, strategies typically include safety controls, such as:

• An emergency withdrawal mode that pulls funds out of external contracts and holds them safely inside the strategy, and

• The ability to pause and resume normal operations if abnormal behavior or elevated risk is detected.

These controls are designed to give the Bonzo team and community tooling to react quickly if something goes wrong in an integrated protocol, even though the underlying risk can never be fully removed.