Our goal is to develop high quality strategies quickly, tweak portfolio allocations on the fly and emergency exit any malfunctioning protocol.
To do so, we developed our own highly flexible interface for portfolios and strategies.
Our architecture has the following characteristics:
- A strategy compiles multiple investment steps into a single transaction.
- A strategy builds on top of multiple 3rd party protocols
- A portfolio aggregates multiple strategies into one diversified investment vehicle
- A portfolio can also aggregate multiple portfolios -> portfolio of portfolios
- A portfolio manages how much of its capital is deployed to which strategy -> E.g. 60% "stablecoin" strategy, 30% "delta neutral" strategy, 10% "moonshot" strategy
In case a protocol we use gets exploited or a malicious governance proposal pops up, we want to withdraw our funds quickly from that protocol. We call this mechanism "emergency exit".
To achieve a quick exit, we make use of
- Cash strategies
- Wrapper portfolios
A cash strategy does nothing but hold stablecoins. A wrapper portfolio consists of two strategies, an actual investment strategy and a cash strategy. Typically the target allocation of the Wrapper portfolio would be 100% investment strategy, and 0% cash strategy. In case of an emergency exit, the portfolio rebalances all funds from the investment strategy (100% -> 0%) into the cash strategy (0% -> 100%).
Step by step process:
- The DAO Team decides to exit a strategy
- The DAO multisig triggers a function to rebalance
- The portfolio moves all funds from the investment strategy into the cash strategy
- The user can still withdraw her funds at any point, and the DAO has never access to the user funds.
The advantage of having a wrapper portfolio is that 3rd parties who integrate our strategies can also make use of the wrapper. If e.g. a treasury invests via the wrapper portfolio, they don't have to constantly monitor the strategy, but can rely on the brokkr DAO to emergency exit their funds in case of a black swan event.