Supervaults are now live! Start earning optimized yields with automated liquidity management. Ready to get started? Check out the how-to deposit section below for step-by-step instructions. Please review Supervaults Terms before participating.
Strategic Objectives
Supervaults democratize market making profits to beat the competition on pricing and attract liquidity at scale. They achieve two key strategic goals:- Offer the tightest spreads (best prices) for on-chain spot markets in a sustainable way
- Maximize supply capacity for non-USDC assets as collateral for lending/borrowing and perpetuals to unlock new trades
What are Supervaults?
Supervaults are Neutron’s flagship DeFi innovation that manage liquidity on behalf of users by efficiently allocating deposits into the Neutron DEX Duality. Unlike traditional yield vaults or static liquidity pools, Supervaults actively optimize capital deployment to:- Minimize slippage for traders through concentrated liquidity
- Maximize fees earned by liquidity providers across multiple fee tiers
- Reduce impermanent loss through dynamic position management and rebalancing
- Bootstrap supply capacity for lending and perpetual protocols
Key Terms
Understanding Supervaults requires familiarity with core market making concepts:- Duality: Neutron’s enshrined orderbook with advanced order types designed to minimize risks and costs for market makers. Features impossible to build outside an app-specific chain.
- Slinky: Neutron’s enshrined, high-performance oracle operated by validators as part of consensus, guaranteeing up-to-date prices at every block for any CEX asset.
- Cron Module: Neutron module enabling guaranteed scheduled smart-contract execution at the start or end of each block.
- Spread: Price gap between highest buy order and lowest sell order. Smaller spreads mean better prices for traders. Market makers profit by buying slightly lower and selling slightly higher.
- Adverse Selection: Losses from arbitrageurs taking advantage of outdated pricing. Too tight spreads risk adverse selection; too wide spreads lose order flow.
- Gas Fees: Cost to perform on-chain computation.
- Inventory Costs: Costs of holding volatile/low liquidity assets from risks and opportunity cost.
Who Benefits from Supervaults?
Supervaults create value for multiple participants in the Neutron ecosystem:For Liquidity Providers
Deposit paired tokens and receive LP share tokens representing proportional vault ownership. Earn optimized yields through strategic liquidity placement across price ranges and fee tiers.
For Traders
Supervaults provide deeper liquidity at current price points, resulting in significantly reduced slippage for large trades and better execution quality.
Why Supervaults Beat Traditional AMMs
Traditional market-making is challenging on-chain due to latency, censoring incentives, and high costs (inventory, gas, and opportunity costs). Traditional AMMs use simple, static algorithms and lack external price feeds, causing them to rely on off-chain arbitrageurs to inform them about true asset prices. This results in immense value leakage to arbitrageurs who profit at the expense of liquidity providers. Supervaults overcome these fundamental limitations through Neutron’s unique infrastructure:Slinky Oracle Integration
Unlike traditional AMMs with no price feeds, Supervaults leverage Slinky’s high-frequency, censorship-resistant price feeds to stay current with CEX prices without leaking value to arbitrageurs.
Automated Cron Execution
The Cron module enables reliably automated strategies without expensive and unreliable keeper systems, eliminating gas costs and execution risks.
MEV Protection & Priority Access
Begin and end block execution enables high-value, order-sensitive transactions to avoid front-running while giving Supervaults priority access to arbitrage opportunities.
100% Capital Utilization
Unlike passive AMMs where large portions of liquidity sit unused far from mid-price, Supervaults actively concentrate and rebalance all liquidity around current market prices.
Detailed Feature Comparison
| Feature | Standard AMM | Concentrated Liquidity | Traditional Market Makers | Neutron Supervaults |
|---|---|---|---|---|
| Capital Utilization | ~10-20% effective | ~60-80% effective | ~90-95% effective | 100% effective |
| Gas Costs | Low (infrequent) | Medium (rebalancing) | High (frequent updates) | Zero (Cron exempt) |
| Adverse Selection Risk | High (no oracle) | Medium (manual updates) | Low (frequent updates) | Minimal (per-block updates) |
| Lending Integration | Limited depth | Better but fragmented | Not designed for lending | Purpose-built (-5% depth) |
| Arbitrage Capture | Loses to arbitrageurs | Loses to arbitrageurs | Competes with arbitrageurs | Priority capture (begin-block) |
System Design & Market Making Strategy
Two-Tier Liquidity Strategy
At the beginning of each block, Supervaults execute a sophisticated market making strategy:1
Balance Assessment
The vault notes its internal token balances and checks for any imbalances between paired assets.
2
Price Discovery
Gets current token prices from Slinky oracle for precise positioning calculations.
3
Tight Spread Deployment
Provides primary liquidity at tight spreads around the current Slinky price for optimal trading.
4
Reserve Liquidity Deployment
Deploys remaining liquidity at larger spreads (~±5% depth) to bootstrap supply capacity for lending protocols.
Reserve Liquidity for Lending Protocols
Unlike traditional market making where reserve liquidity remains unused, Supervaults strategically provide it at ~±5% depth to bootstrap supply capacity for lending/borrowing protocols. Mars Protocol’s risk methodology determines collateral caps by examining how much of an asset can be atomically traded into USDC. Since Mars liquidation bounties are 5% above debt value, they specifically examine -5% depth liquidity. Benefits for the ecosystem:- 20x higher collateral caps for Mars compared to XYK pools
- Enhanced LP profitability: LPs buy liquidated assets at ~5% discounts (potentially 5% APY in single trades)
- Significant gains compared to concentrated liquidity approaches
Smart Rebalancing
When demand imbalances occur (more of one asset than the other), Supervaults automatically rebalance by offering more of the oversupplied token at the tightest spreads. This increases supply of the oversupplied asset and gradually brings the vault back to parity.Priority Arbitrage Capture
When Duality orderbook prices diverge from Slinky prices, arbitrage opportunities emerge. Since Supervaults operate at the beginning of each block, they have priority access to capture this arbitrage before other market participants. The vault purchases mispriced liquidity using its reserves, then continues normal liquidity deployment. This “vault-owned-MEV” generates additional profits for liquidity providers while keeping arbitrage value within the ecosystem.How Supervaults Work
User Experience
Deposit Process
Users deposit paired tokens (token0 and token1) and receive LP shares minted via Neutron’s token factory module, representing their proportional claim on the vault’s total value.
Withdrawal Process
Users redeem LP shares to withdraw their proportional share of vault assets. The vault handles complex DEX position management automatically during withdrawals.
Technical Implementation
Each block, Supervaults execute a precise rebalancing sequence:- dex_withdrawal(): Withdraw all active DEX positions owned by the vault
- dex_deposit(): Fetch fresh prices from Slinky oracle and recompute optimal liquidity deployment
- Strategic Positioning: Deploy liquidity across multiple price ranges based on fee tier allocation, token imbalance, and configured parameters
- Full Custody: The vault maintains complete custody of all funds throughout the process
How to Deposit Into Supervaults
Follow these simple steps to start earning optimized yields with Supervaults:1
Connect Your Wallet
Navigate to the Neutron Web Application and click the Connect button at the top right to connect your preferred wallet.
2
Access Supervaults
Select the Supervaults tab from the left side menu to view all available vault pairs.
3
Choose Your Vault
Select from the list of available Supervaults. Each vault shows:
- Current TVL (Total Value Locked)
- APY (Annual Percentage Yield)
- Deposit cap status
- Asset pair information
4
Deposit Assets
Supervaults support both single-sided and double-sided liquidity provision:
- Single-sided: Deposit only one asset (e.g., just ATOM or just USDC)
- Double-sided: Deposit both assets in the pair proportionally
5
Monitor Your Position
Once deposited, you can:
- Track your position’s TVL in the “My Position TVL” chart
- Monitor vault performance and rebalancing activity
- View your proportional share of vault rewards
6
Withdraw When Ready
To withdraw funds:
- Navigate to your deposited vault pair
- Select Withdraw
- Choose the amount to withdraw
- Confirm the transaction
Withdrawals are on a pro-rata basis from the total vault value and will return proportional amounts of both assets in the pair.
Ecosystem Integration & Strategic Impact
Unified Liquidity on Duality Orderbook
Supervaults provide liquidity to Duality, Neutron’s enshrined orderbook, which aggregates liquidity from multiple sources:Supervaults
Automated market making with CEX-grade pricing and tight spreads
Astroport AMMs
PCL and other automated market maker strategies
Professional MMs
Traditional market makers and limit orders
Arbitrage Internalization Benefits
Traditional Fragmented Approach:- AMM pools (Astroport, Astrovault) operate independently
- Rely on sophisticated third-parties for CEX/DEX arbitrage
- Pay integration costs for aggregator availability, liquidation routing, and front-end integrations
- Value continuously leaks to external arbitrageurs and service providers
- All AMMs compile onto the same Duality orderbook
- Every market making strategy benefits from shared volume without individual integration costs
- Supervaults conduct automatic CEX/DEX arbitrage by trading against mispriced liquidity
- Arbitrage profits stay within the ecosystem and compound back into the orderbook
Risk Management
Understanding potential risks helps users make informed decisions about Supervault participation:| Risk Category | Potential Impact | Mitigation Strategies |
|---|---|---|
| Smart Contract | • UX degradation • Stuck funds • Loss of funds (exploit/hack) | • Best development practices • Comprehensive audits • Bridge rate limits • Governance-enforced contract migration |
| Oracle | • Performance degradation • APR degradation | • Prices sourced across numerous CEXs/providers • Aggregated across all validators • Redundant price feeds |
| Platform | • UX degradation • Performance degradation | • Best development practices • Regular audits • Social coordination for restart/upgrade |
Vault Performance Calculations
Understanding how Supervault performance is measured helps users make informed investment decisions and interpret the metrics displayed in the interface.30D APY/Hold
The primary metric for calculating vault returns is APY vs Hold. This compares the returns of the vault to holding a 50/50 portfolio of the underlying assets. Looking at the last 30 days, we calculate total returns for the vault ignoring new deposits and withdrawals: We then compare this to the 30-day returns for holding an equivalent value of the two underlying vault assets. The resulting value is annualized to produce the final 30D APY/Hold value:APY vs Hold shows whether the active market making strategy outperformed a simple buy-and-hold approach, accounting for fees earned minus any impermanent loss effects.
Volume (Vol)
Volume represents the total amount of trading activity for a vault, encompassing two types:- Maker Volume: When the vault provides liquidity that other users trade through
- Taker Volume: When the vault trades through existing liquidity on the orderbook
Total Value Locked (TVL)
TVL is the total value of tokens in the vault, effectively representing the sum of net deposits and accumulated vault revenue. This metric indicates:- The scale of the vault’s operations
- Market confidence in the vault strategy
- Available liquidity for traders
Vault Capacity
Most vaults have a maximum deposit capacity to optimize capital efficiency and maintain high APYs. When TVL equals or exceeds vault capacity, new deposits are temporarily disabled. Benefits of capacity limits:- Ensures optimal capital utilization
- Maintains competitive APY rates
- Prevents dilution of returns for existing depositors
Pool Balance
Pool balance represents the current amount of each token held by the vault. Key implications:- Withdrawal proportions: Users receive their pro-rata share of vault TVL in the current pool balance ratio
- Imbalance risk: Higher imbalances indicate greater inventory risk, where the over-supplied token’s market performance disproportionately affects vault APY
- Rebalancing indicators: Shows how effectively the vault’s automated rebalancing maintains target allocations
Monitor pool balance ratios to understand your withdrawal composition and assess the vault’s current risk profile.
Technical Architecture
In Summary:
Supervaults represent the cutting edge of automated market making, combining Neutron’s integrated modules (Cron, Slinky Oracle, Token Factory, and Duality DEX) into a unified liquidity management system that operates trustlessly without external dependencies.