💾Smart Vaults

Smart Vaults are not a fundamental component of UWU Protocol. Instead, it is an additional component developed post-deployment of UWU Protocol

What is a Smart Vault?

A Smart Vault is a Vault in UWU Protocol that is owned and managed by a smart contract. Smart Vaults enable a variety of use cases that can be built by anyone, as they're permissionless.

How do Smart Vaults work?

Smart Vaults are made possible because UWU Protocol allows users to transfer their Vaults from one Stacks address to another. Essentially, a Smart Vault is a smart contract designated as the owner of a Vault. By transferring an existing Vault or opening a new Vault where the designated owner is a smart contract, you effectively create a Smart Vault.

What capabilities do Smart Vaults offer?

Smart Vaults facilitate a diverse array of functionalities, including but not limited to:

  • Liquidation Prevention: A Smart Vault can be configured to proactively manage its own collateral ratio to try and prevent liquidation. It does this by automatically executing actions such as repaying debt or depositing collateral to adjust the collateral ratio

  • Automatic Dollar-Cost Averaging: A Smart Vault could be created that automatically borrows UWU and swaps it for another asset over a specified period of time

  • Multi-Signature Vaults: A Smart Vault can be designed to require multiple signers to confirm critical actions. This ensures that decisions such as depositing more collateral or borrowing additional UWU are made collectively

What risks are associated with Smart Vaults?

The primary concerns with Smart Vaults stem from potential vulnerabilities in their smart contract code. Should a Smart Vault contain flaws, the associated Vault may become compromised. While such exploits do not directly affect UWU Protocol, they can lead to temporary market disturbances. For instance, an attacker exploiting a Smart Vault with a high collateral ratio could mint and sell UWU, potentially impacting its market price. However, even in such scenarios, the minted UWU remains backed by the collateral in the Vault, thus not constituting bad debt.

Prior to utilizing a Smart Vault, it's crucial to conduct a thorough review and assess your comfort level with its security. A recommended feature for Smart Vaults is the ability for users to convert their Smart Vault back to a regular Vault whenever they choose.

How can I use Smart Vaults?

Currently, no Smart Vaults are known to be active on either the Stacks mainnet or testnet. Additionally, the Web App does not yet offer support for Smart Vaults. However, the tools and resources are available for developers to start building and integrating Smart Vaults at their discretion.

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