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Allocator & Manager Handbook

This guide covers deploying an Earn vault and operating it safely and efficiently.

Deploying an Earn vault

Deploy via the EulerEarnFactory, specifying: underlying asset, share token name/symbol, initial performance fee (0–50%), and smearing period. After deployment:

  • Assign roles: set Curator, add Allocators, and optionally a Guardian. Use a multi-sig or DAO for Owner where possible.
  • Configure timelock: start low for bootstrapping; raise to ≥24h for production with user funds. Decreasing the timelock later is itself timelocked.
  • Add strategies and submit cap increases (timelocked). Start with conservative caps and raise as confidence grows.
  • Set supply and withdraw queues. Include all strategies with non-zero caps or balances in the withdraw queue.
  • Seed liquidity and consider an idle reserve (e.g., escrow/non-borrowable EVK vault) to improve instant withdrawals.

Managing strategy caps and risk

  • Cap increases are timelocked; cap decreases are immediate. Lower caps or set to zero on risk signals.
  • To remove a strategy: set cap to zero, reallocate funds out, then drop it from queues once balance is zero.
  • Forced removal (timelocked) exists for broken/reverting strategies; any trapped funds are treated as lost until recoverable.

Rebalancing and reallocation

  • Allocators update queues and call reallocate to move funds between strategies within caps.
  • Rebalance to pursue higher APYs and to maintain withdrawal liquidity (e.g., preemptively reduce exposure to highly utilized markets).
  • Consider automation via bots/scripts observing on-chain rates and utilization.

Fees, harvesting, and smearing

  • Performance fee: up to 50% of net positive yield, minted in shares to the fee recipient.
  • Harvest on a cadence that balances gas with freshness (e.g., when accrued yield surpasses a threshold). Yield is released to share price via smearing over a configured duration.

Emergency scenarios

Strategy becomes unsafe​

  1. Revoke any pending cap increases; set cap to zero.
  2. Reallocate available liquidity out; keep it early in the withdraw queue to prioritize repayment to users.
  3. Remove from queues once balance is zero.

Strategy reverts and freezes​

  1. Revoke pending cap changes and set cap to zero.
  2. Submit forced removal (timelocked), then remove from withdraw queue after delay. Treat trapped funds as lost until recoverable.

Curator or allocator misbehavior​

  • Replace Curator (Owner action), revoke pending actions, and revert risky changes (lower caps, reallocate).
  • Remove misbehaving Allocators and restore sensible queues and allocations.

Best practices

  • Diversify: keep single-strategy caps well below 100% of vault assets.
  • Prefer liquid strategies early in the withdraw queue; highest APY first in supply queue.
  • Maintain an idle buffer proportional to withdrawal patterns.
  • Communicate changes and rationales; use timelocks transparently.
  • Use multi-sigs for privileged roles; audit role assignments periodically.