> For the complete documentation index, see [llms.txt](https://zeit-1.gitbook.io/zeit/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://zeit-1.gitbook.io/zeit/vaults/overview.md).

# Overview

Vaults let you express a worldview in a single token.

## 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.