Lotus Vaults
A lending vault lets you deposit a single asset (for example, USDC) and delegate lending decisions to a professional manager. The manager allocates the vault’s assets across Lotus tranches to target a specific risk-return profile.
When you deposit, you receive vault shares (a receipt token). Your shares represent your proportional ownership of the vault’s assets and are redeemable for the original deposit asset plus any accrued yield.
Why Lotus uses lending vaults
Lotus markets are flexible. That flexibility is useful, but it also means lending well requires ongoing risk work.
Vaults exist because:
Most users don’t want to manage tranches day to day. A vault provides a simpler path to a defined exposure.
Managers can specialize. Professional teams can monitor markets, adjust allocations, and react to changing conditions.
Risk becomes easier to compare. Instead of picking individual tranches, you choose a vault that matches a profile such as conservative, balanced, or aggressive.
Lotus also supports independent risk analysis (for example, through third-party risk tooling), but vaults are the default path for users who want delegation.
What a vault does
A vault manager runs a strategy that typically includes:
allocating assets across one or more Lotus markets and tranches
keeping some liquidity available for withdrawals
adjusting allocations as conditions change, within predefined risk limits
How vaults work
Lotus vaults follow the Vaults V2 standard.
Deposit and receive shares
Deposit the vault’s deposit asset (for example, USDC).
Receive vault shares that track your ownership of the vault.
If you own 1% of the shares, you own 1% of the vault’s assets.
Allocation and share value
The manager allocates the vault’s assets across Lotus tranches according to the vault’s strategy.
As borrowers pay interest, the vault’s assets increase.
When vault assets increase, the value per share increases.
Withdraw
When you redeem shares, you receive your proportional amount of the vault’s deposit asset.
Withdrawals can be constrained if most assets are deployed and market liquidity is limited. Vaults include mechanisms designed to help the vault deallocate from active positions when needed, so depositors can exit.
Who controls a vault
Before you deposit, understand who can change the vault and how quickly changes can happen.
Currently, all vaults must be approved by the Lotus Admin.
Vaults use role-based access control:
Owner: appoints key roles and manages the admin layer.
Curator: defines the strategy and risk boundaries (allowed markets, limits, and fees). Many sensitive changes are timelocked.
Allocator: executes day-to-day reallocations within the curator’s limits.
Sentinel: emergency role that can de-risk quickly (for example, pulling funds back or blocking risky changes).
Vault fees
Vaults can charge two fee types:
Performance fee: charged only on yield the vault generates (capped at 50%).
Management fee: charged on assets in the vault (capped at 5%).
Fees are set by the vault configuration. Review them before you deposit.
Risks of lending vaults
A vault reduces day-to-day complexity, but it does not remove risk.
Key risks include:
Liquidation risk: a lending position can incur bad debt if liquidation proceeds are insufficient to repay outstanding debt.
Management risk: poor allocations, slow reactions, or incorrect assumptions can reduce returns or increase losses.
Smart contract risk: vaults and Lotus can be audited and tested, but bugs and failures are still possible.
Liquidity risk: in stressed conditions, withdrawals might not be immediately available.
How to choose a vault
Use this checklist to compare vaults:
Decide your risk profile. Do you want to prioritize lower drawdown risk or higher returns?
Evaluate the manager. Look for a manager with a track record, clear communication, and operational discipline.
Review the strategy and current positions. Check how assets are allocated across markets and tranches. Confirm the exposure matches your risk tolerance.
Review fees. Make sure the fee structure matches the value you expect from delegation.
When you’re comfortable with the manager, strategy, and fees, deposit into the vault.
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