Protocol Mechanics

Minting & Redemption

Arbitrove's yield-bearing index vaults can be understood through the lens of ALP, one of the protocols flagship products enabling exposure to a blue-chip Arbitrum index. Users can deposit various assets, including ETH and blue-chip Arbitrum tokens, to mint ALP. However, only ETH deposits and withdrawals are allowed during the bootstrapping period.

The amount of $ALP minted per ETH (or other assets) deposited is based on the latest price of the asset deposited relative to the latest composition of $ALP, the price of the assets inside the $ALP, and the number of outstanding $ALP fetched by Arbitrove’s oracle.

The fees for minting and redeeming ALP are asset-dependent and dynamically adjusted based on the difference between the index and target composition. Arbitrove’s dynamic deposit fee allows for the automatic rebalancing of different strategies. For example, a lower deposit fee is enabled when an asset is below the target composition to encourage deposits. Conversely, a higher deposit fee is configured when an asset is above the target composition to discourage depositing.

ALP & TROVE Yield

Once minted, ALP can be staked on Arbitrove to earn esTROVE and the organic yield generated from our strategies. Arbitrove’s vaults earn yield through single-coin staking, LP farming (either just LP farming in DEXs, staking LP tokens in DEXs, or staking LP tokens in the protocols' contracts), and potentially lending out assets on safe platforms (currently outside the scope). For example, at launch, GMX will be single-side staked on GMX Earn, and MAGIC will be paired with ETH to yield-farm at Sushiswap's Onsen.

The yield earned by the vault strategies is directed to a separate contract and shared with the ALP holders. After the fee switch is turned on via a governance proposal, yield is also shared with TROVE stakers. TROVE staking is available for both TROVE and esTROVE holders. No lock or deposit fee is incurred for those who stake TROVE, which will be liquid upon launch. esTROVE will be linearly vested for a year after the vesting module launch in September, and esTROVE holders can continue staking after September.