How it works
Here's everything you need to know about Symmetry Baskets and how they work.
When someone creates a new basket, a unique address is assigned to that basket.
At any given time, a basket can contain up to 15 (including USDC) tokens in its composition with various target weights.
Example: a Solana LSD (ySOL) basket has 3 tokens in its composition with the following target weights: 45% mSOL, 45% jitoSOL, 10% bSOL.
After the initial deposit into the basket, the basket is assigned a nominal starting price of $100, which is used to track basket performance over time as composition tokens & their prices change. Therefore, a basket with a price $1,000 signifies a 10-fold increase in value from its inception.
Types of Baskets
Symmetry protocol introduces a versatile approach to on-chain asset management through the creation and management of three distinct types of baskets: Mutable, Immutable, and Permissioned. Each type caters to different strategies and management styles, offering a broad spectrum of possibilities for creators. Below, we delve into the characteristics and potential applications of each basket type.
Mutable
Mutable baskets offer the highest level of flexibility. Creators have the authority to adjust the basket's composition, modify token weights, rebalance assets, alter deposit fees, and update the basket's description. This allows for responsive management to market conditions.
Public Portfolios: Ideal for showcasing investment strategies that adapt over time, mutable baskets allow creators to adjust holdings based on evolving market insights.
Influencers: Mutable baskets are a good option for influencers to share their holdings & portfolio to their communities transparently, while earning fees on deposits.
Copy-Trading: Users can follow the strategies of successful portfolio managers, benefiting from their expertise as they adjust the basket.
Portfolio Managers: Professionals managing portfolios can use mutable baskets to implement tailored investment strategies, making adjustments as required to meet investment goals.
Immutable
Once created, immutable baskets are set in stone, with no possibility for the creator to alter any parameters or the composition of the basket. This rigidity ensures transparency and stability, as users know the basket's composition will remain consistent over time.
Bundles: Packaged groups of tokens that represent a particular theme or sector, allowing users to gain exposure to specific areas of interest without the need for active management.
Diversification Tools: Investors looking to diversify their portfolio can use immutable baskets as a hands-off approach to spread their investments across a predefined set of assets.
Indexes: Representing the performance of a particular market segment, immutable baskets can track the collective performance of their constituent tokens, similar to traditional market indices.
Permissioned
Permissioned baskets combine the flexibility of mutable baskets with restricted access to depositing. Only the creator can deposit into the basket, but redemption is open to anyone holding the basket tokens. This exclusivity allows for controlled growth and management of the basket's assets.
Treasury Management: Organizations can manage their treasury in a transparent, yet controlled manner, allowing only authorized deposits while maintaining public visibility.
Private Portfolios: Users or groups seeking to create a shared pool with restricted access can use permissioned baskets to control contributions while allowing for collective benefits.
Gated Portfolios & Copy-Trading: For strategies that require a level of exclusivity or qualification, permissioned baskets offer a way to restrict access to depositing while still allowing others to participate in the success through redemption.
Through these diverse basket types, Symmetry empowers creators and users to navigate the complexities of asset management with tools tailored to their specific needs and strategies, fostering innovation and inclusivity in the decentralized finance (DeFi).
Basket Tokens
Each basket is represented by a unique SPL (Solana Program Library) token, encapsulating the basket's composition. Holding a basket token, such as ySOL, is equivalent to owning a proportional share of each asset within the basket, based on its composition weights.
Example: if Alice owns 1 ySOL token valued at $500, she effectively holds $225 worth of mSOL, $225 of jitoSOL, and $50 of bSOL.
The protocol ensures that the basket's price remains stable through minting new tokens upon deposits and burning tokens upon withdrawals. This mechanism ensures that the basket price reflects its performance rather than being influenced by the supply and demand of the basket tokens.
At any given time, the price of a basket token is calculated by dividing its TVL by basket token circulating supply.
So if ySOL basket has a TVL of $2 million, and there are 4,000 ySOL tokens in circulation, price of 1 ySOL is $500.
How Deposits Work
There are 3 options for depositing into a basket and minting basket tokens:
Option 1: Depositing USDC
Users can deposit into baskets using USDC, which creates a temporary account used to rebalance USDC into composition assets before minting the basket tokens to the user. After rebalancing, tokens are transferred to Symmetry smart contract managed account, temporary account is closed and basket tokens are minted to the user.
Alice deposits USDC into a temporary account managed by Symmetry smart contract, which is then rebalanced to basket composition. After rebalancing, tokens are transferred from the temporary account to the primary account (also managed by the smart contract) and basket tokens are minted to Alice. This option requires Alice to send multiple transactions, which are:
Creation of temporary account & usdc transfer
Rebalancing trigger, transfer to primary account, minting of basket tokens, closing temporary account
Option 2: Depositing Composition Assets
Alice already has basket's composition assets in her wallet. Alice sends a transaction which deposits her tokens into the basket through Symmetry smart contract, and receives newly minted basket tokens in her wallet. This happens in a single transaction, however, due to transaction size limits, this option is only available for baskets with up to 5 tokens in the composition.
Using this option, Alice has to deposit composition tokens with the same ratios as basket composition target weights, otherwise a fee penalty equal to basket's slippage tolerance is applied which gets added to the basket TVL.
Option 3: Depositing a single asset
Alice wants to deposit into ySOL vault and only has jitoSOL, she can deposit jitoSOL into ySOL and mint ySOL tokens in the same transaction. However, using this option, if Alice deposits an asset which is not needed by the basket (after deposit the current weight of deposited asset is over its target weight), ySOL tokens will be minted to Alice with a 3% penalty, where the penalty goes to other basket holders.
Alice wishes to deposit into the ySOL basket but only has jitoSOL in her wallet. Alice can deposit her jitoSOL directly into the ySOL basket. This transaction not only contributes to the basket's composition but also mints ySOL tokens in Alice's account in a single transaction, representing her share in the basket.
Understanding Overweight Deposits and Penalties
The protocol is designed to maintain optimal basket composition, adhering to predetermined target weights for each asset. If Alice decides to deposit an asset like jitoSOL, and this deposit results in the asset exceeding its target allocation within the basket (making the asset overweight), a specific mechanism is triggered:
Penalty for Overweight Deposits: In such cases, the protocol applies a 3% penalty on the minted ySOL tokens for Alice. This penalty is not an arbitrary charge but serves a dual purpose: it discourages disproportionate deposits that could skew the basket's balanced composition and rewards other basket holders for maintaining the integrity of the basket's intended asset distribution.
Distribution of Penalties: The collected penalty is redistributed to the existing basket holders. This approach ensures that the basket's composition remains aligned with its investment strategy, while also compensating existing holders for any temporary imbalances caused by new deposits.
Key Takeaways for Option 2 and 3:
Flexibility in Deposits: Users can directly deposit specific assets into Symmetry Baskets, enhancing the ease of participation and composability.
Incentive for Balanced Contributions: The penalty mechanism incentivizes users to contribute assets in alignment with the basket's target composition, supporting the overall strategy and stability of the basket.
Mutual Benefit: Penalties collected from overweight deposits are redistributed to existing holders, ensuring that all participants benefit from maintaining the basket's optimal composition.
This tailored deposit mechanism underscores Symmetry's commitment to providing a balanced, fair, and efficient asset management platform, fostering collective success and stability within the ecosystem.
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