# Overview ## Overview Vaults package a prediction‑market strategy into a **single ERC‑20 token** (“PPV share”). Instead of holding individual event markets that **expire** and can go to **$0 or $1**, a vault holds a **portfolio** of positions, can **trade in and out before resolution**, and **rolls** into new markets as old ones settle. The result is a token with a continuous **NAV / PPS** time series that can be traded on secondary markets and (where supported) used in DeFi. *** ### What you are buying A PPV token is a **share of a vault**. * The vault holds collateral (currently **USDC.e on Polygon**) and a portfolio of prediction‑market positions. * The vault’s value is tracked as **NAV** (net asset value). * The PPV token’s accounting price is **PPS** (price per share):\ **PPS = NAV ÷ total shares** Vaults are implemented as a **fork and extension of Boring Vaults**, preserving the share‑based accounting model (NAV/PPS) and extending it for prediction markets (roll cycles, thin orderbooks, and redemption handling). *** ### How vaults fit into the prediction market stack ```mermaid flowchart TB A[Prediction markets\n(Polymarket + others)] --> B[Vault strategy\n(manager: human/bot/AI)] B --> C[Vault portfolio\n(many positions)] C --> D[NAV / PPS\n(accounting + pricing)] D --> E[PPV ERC-20 token\n(one token = one worldview)] E --> F[Secondary markets\n(DEXs, aggregators)] E --> G[DeFi building blocks\n(collateral, indices, structured products)] ``` *** ### Vault categories Vaults are grouped by the thesis they express. Typical categories: * **Politics**\ Elections, legislation, geopolitical outcomes, policy direction. * **Macro**\ Inflation, rates, recession risk, central bank actions, growth regimes. * **Tail risk**\ Low-probability, high-impact scenarios; often convex payoff profiles. * **Culture / tech adoption**\ Regulatory moves, social shifts, adoption outcomes, narrative-driven events. A vault can span multiple categories if the strategy is designed that way. *** ### Strategy types Vaults differ mainly by *how decisions are made* and *how returns are generated*. #### Discretionary (human-managed) * A manager decides what to hold and when to change it. * Can take profits or cut risk **before resolution** when information changes. #### Systematic / algorithmic * Rules-based strategies (sizing, rebalancing, hedging, rotation) implemented as code or strict playbooks. * Useful for repeatable approaches (baskets, hedged spreads, regime rules). #### Bot / agent / AI-operated * Strategy decisions and execution can be run programmatically. * Typical advantages: speed, continuous monitoring, automation of execution logic. * Still evaluated the same way as any vault: performance, risk, liquidity, and execution quality. #### Market-making / liquidity strategies * Designed to earn from spreads and re-pricing inefficiencies rather than “being right” on a single outcome. * Usually higher turnover; returns depend heavily on execution and inventory/risk control. #### Incentive / airdrop farming vaults Some strategies may target **non-price incentives** (e.g., rewards tied to trading activity or liquidity). Airdrop/incentive vaults generally: * maintain required activity patterns (volume, participation, liquidity), * manage market risk while meeting those constraints, * treat rewards as part of vault value (reflected in NAV/PPS when realized). *** ### Why tokenization matters here A single prediction market position has a simple payoff, but it is not a durable asset: * it **expires**, * it resolves to **0 or 1**, * its risk is dominated by a single event. A vault changes the shape of the underlying exposure: * **Portfolio instead of single bet:** risk is distributed across many markets. * **Perpetual exposure:** resolved markets are replaced by new ones. * **Continuous price process:** PPS evolves over time, rather than a one-time binary payout. This creates a common “price series” (PPS) that can be used for: * portfolio-level risk measurement (volatility, drawdowns), * comparing strategies on a consistent basis, * and, where supported, integrating PPVs into DeFi systems that expect an ERC‑20 with a price process. *** ### Pricing and liquidity constraints Prediction markets often have **thin orderbooks**. “Paper” marks (mid-price) can be misleading at size. Vaults therefore use an **impact-aware** view of valuation for operational decisions: * not just “what is the mid price,” * but “what could be realized if positions had to be unwound now,” accounting for depth. This matters most for: * withdrawal sizing (how much collateral needs to be freed), * roll checkpoints (mint/burn pricing), * and performance fee checkpoints (HWM). *** ### Primary vs secondary access You can get exposure in two ways: #### Primary flow (mint/redeem via rolls) * **Deposits:** processed on a **24-hour roll** cycle (mint at roll PPS). * **Withdrawals:** processed in batches; timing is **vault-configurable** (minimum typically **24 hours**, can be longer). Primary is tied to roll timing and unwind constraints. #### Secondary markets (trade PPVs like any ERC‑20) PPVs can be traded on DEXs/aggregators where liquidity exists. Secondary markets allow: * **immediate entry** (without waiting for the next deposit roll), * **immediate exit** (without waiting for withdrawal processing), * and a way to manage risk when redemption timing is longer. Because primary flows have settlement timing, PPVs can trade at a **premium or discount** to PPS: * a discount can reflect redemption delay, liquidity expectations, or risk sentiment, * a premium can reflect demand for immediate exposure or expected near-term NAV changes. ```mermaid flowchart LR A[Deposit request] --> B[Next roll (~24h)\nMint at PPS] C[Withdrawal request] --> D[Roll(s)\nRedeem at PPS\n(timing vault-configurable)] E[Secondary market trade] --> F[Immediate transfer\n(subject to liquidity)] ``` *** ### How to evaluate a vault Focus on **strategy, risk, and liquidity** rather than individual event picks. #### 1) Track record (what happened) * PPS/NAV history * drawdowns (depth and duration) * consistency across market regimes * realized vs unrealized PnL behavior (if reported) #### 2) Strategy clarity (what it is) * what markets it trades (and why) * what it is trying to capture (edge source) * when it expects to lose money * whether it can exit/reposition before resolution #### 3) Risk controls (how it avoids blowing up) * concentration limits (per market / per theme) * hedging approach (if any) * liquidity buffers / cash management * how it behaves under adverse moves #### 4) Liquidity and mechanics (how you get in/out) * withdrawal timing configuration * how frequently rolls occur * whether a secondary market exists and how deep it is * sensitivity to price impact (thin-book exposure) #### 5) Execution quality (how it trades) * slippage control methods (limits, staged execution, TWAP-like tools) * handling of illiquid positions * behavior around roll freeze windows and redemption preparation *** ### How vaults differ in practice Common differentiators that affect both returns and user experience: * **Directional vs hedged:** pure thesis exposure vs explicit downside control. * **High turnover vs low turnover:** execution-driven vs long-horizon positioning. * **Liquidity-tolerant vs liquidity-sensitive:** some strategies accept longer exits; others require faster repositioning. * **Resolution-dependent vs trading-driven:** some rely on settlement outcomes; others rely on re-pricing before resolution. *** ### Collateral use PPVs are ERC‑20 tokens, so they are technically compatible with DeFi collateral systems. Whether a PPV can be used as collateral depends on third-party support and risk parameters. Vaults that are more likely to be considered for collateralization tend to have: * lower volatility and smaller drawdowns, * reliable pricing inputs (including handling of thin orderbooks), * sufficient liquidity for liquidations, * and a longer, stable on-chain track record. Collateralization typically requires conservative parameters (LTV, liquidation threshold) and robust pricing/oracle assumptions. *** ### Summary * Vaults convert prediction-market exposure into **perpetual, portfolio-based ERC‑20 assets** (PPVs). * Managers can **trade before resolution**, hedge, and roll exposure as markets settle. * NAV/PPS provides a common accounting and pricing frame; valuation is designed to account for thin orderbooks via impact-aware inputs. * Roll timing makes secondary markets useful for immediate entry/exit and can create premium/discount dynamics. * A continuous PPS time series is what makes prediction exposure usable for portfolio risk measurement and (where supported) DeFi building blocks such as collateral and structured products. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. 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