Vaults & Yield Farming

What is Yield Farming and What are Yield Aggregators?

The DeFi space has been built around the mutual distribution of fees and rewards amongst users in compensation for their interaction with the platform. For instance, users stake tokens to secure the platform or add liquidity in a liquidity pool to enable swaps, these tokens accrue rewards through either swap fees or through tokens distributed as rewards. This is often done through “yield farming”.

Yield farming for an individual with limited funds can be cost prohibitive given the high transaction costs for claiming rewards and interacting with smart contracts continuously. To overcome this constraint, “yield aggregators” (sets of smart contracts that pool these staked funds together, automatically harvest rewards, and reinvest them) have become a cost and time efficient way for individuals to maximize their yield.

Who holds the funds?

Despite what the name 'Vault' suggests, user funds are never locked in any vault. Users have total autonomy over their funds and can withdraw from a vault at any moment in time. Tosha.io also does not take possession of any user funds staked in vaults. However, it is advisable to view vaults as investment tools to store funds for the medium to long term in order to maximise the effects of compounding.

Each vault can either refer to a pair of tokens invested in Liquidity Pools, or a single token invested in lending platforms or single stake reward pools. After depositing tokens to a vault, the user is supplied with vault specific Tosha LP token which represents their share in the vault.

Can I withdraw?

Whenever a user wants to withdraw the tokens that are staked in the vault, users simply withdraw using the Tosha LP token receipt. The initially deposited tokens plus extra vault yield in form of Tosha token will go back to the wallet. Tosha.io users should protect their Tosha LP tokens (deposit receipt) since they represent staked assets in the vault. Losing these tokens would result in loss of staked assets so be careful!

Reminder

The funds in the vault are not tied to the wallet address from which user made the deposit. The Tosha LP tokens are the only evidence of your share in the vault. With the Tosha LP token comes full ownership of the underlying staked assets.