> For the complete documentation index, see [llms.txt](https://fluxtra-lsd.gitbook.io/fluxtra-lsd-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://fluxtra-lsd.gitbook.io/fluxtra-lsd-docs/vault.md).

# Vault

The **Fluxtra Arbitrage Pool** enables users to **deposit their assets (e.g., OM)** and take advantage of arbitrage opportunities between liquid staking derivatives (LSDs) and their underlying assets. By utilizing market inefficiencies, the pool increases value over time while ensuring **full exposure to the underlying asset** and aggregating rewards in **ftOM**.

***

## **How Arbitrage Works in Fluxtra**

When users need **instant liquidity** for their **staked assets**, they often use a **DEX swap**, which typically incurs a **1-2% premium**. However, users who wait for the **21-24 day unbonding period** can avoid these costs entirely.

Fluxtra **capitalizes on this price discrepancy** by executing slow-burn arbitrage trades every **21-24 days**, generating yield while keeping the pool’s assets fully utilized.

***

## **Liquidity States in the Arbitrage Pool**

Funds within the **Fluxtra Arbitrage Pool** exist in four states:

1. **Available Assets** – Liquidity ready for arbitrage execution.
2. **Locked Assets** – Funds queued for withdrawal by users (subject to unbonding periods).
3. **Unbonding Assets** – Assets in the **unbonding phase** from a liquid staking provider. The dApp will provide **on-chain transparency** on these funds.
4. **Withdrawable Assets** – Funds that have **completed unbonding** and can be moved back into the arbitrage pool.

***

## **Execution Process**

### **Static Execution Model (Launch Phase)**

Initially, arbitrage execution follows a **fixed utilization model**, where different **percentages of the pool** are allocated based on the arbitrage opportunity:

| Arbitrage Opportunity | Pool Utilization |
| --------------------- | ---------------- |
| 0.5% Profit           | 10% of the pool  |
| 1.0% Profit           | 40% of the pool  |
| 1.5% Profit           | 70% of the pool  |
| 2.0% Profit           | 100% of the pool |

### **Dynamic Execution Model (Post-Launch)**

A more **adaptive execution model** will later be introduced, ensuring:

* **Arbitrage yield must exceed staking APR** to remain profitable.
* **Opportunities below 0.5% will not be executed**.
* **75% of the pool will remain in unbonding**, ensuring a continuous flow of capital.
* **Market indicators** (EMA, peak trading volumes, liquidation risks, and asset volatility) will refine execution efficiency.

***

## **Withdrawing Liquidity**

Since assets in the **Fluxtra Arbitrage Pool** are actively traded or unbonding, withdrawals take longer than standard unstaking periods.

* **For OM**, the unbonding time will initially be set at **25 days**. After this period, users can claim their funds.
* If **immediate withdrawal** is required and liquidity is available, users can **withdraw instantly for a 2% pool fee + 0.1% protocol fee**.
* If withdrawing unbonding assets early, the **fee is applied linearly** based on the remaining unlock period.

***

## **Performance & APY Model**

Unlike yield farming models, the **Fluxtra Arbitrage Pool generates APY purely from arbitrage opportunities**, making it independent of incentive-based rewards.

Historical data suggests **arbitrage opportunities of 1-2% every 21-25 days**, leading to potential **APYs of 18.9-33.5%**. The **actual APY varies** based on **market inefficiencies and liquidity availability**.

**Estimated APY Based on Market Conditions**

| Arbitrage Opportunity | 40 Days | 35 Days | 30 Days | 25 Days | 21 Days |
| --------------------- | ------- | ------- | ------- | ------- | ------- |
| 0.5%                  | 4.7%    | 5.3%    | 6.3%    | 7.6%    | 9.1%    |
| 1.0%                  | 9.5%    | 10.9%   | 12.9%   | 15.6%   | 18.9%   |
| 2.0%                  | 19.8%   | 22.9%   | 27.2%   | 33.5%   | 41.1%   |
| 3.0%                  | 31.0%   | 36.1%   | 43.3%   | 54.0%   | 67.2%   |
| 4.0%                  | 43.0%   | 50.5%   | 61.2%   | 77.3%   | 97.7%   |
| 5.0%                  | 56.1%   | 66.3%   | 81.1%   | 103.9%  | 133.5%  |

***

## **Why Use the Fluxtra Arbitrage Pool?**

* **Automated Arbitrage Execution** – No need to manually monitor price discrepancies.
* **Faster than Manual Trading** – Automated systems execute arbitrage **instantly**, preventing missed opportunities.
* **Fair Profit Distribution** – All users in the pool **share arbitrage profits**, instead of just the fastest traders.
* **Instant Liquidity for LSDs** – Liquid staking token holders can swap via the pool at a **fixed rate**.
* **Tax Efficiency** – In some jurisdictions, using an **auto-compounding LP model** reduces taxable events compared to frequent manual swaps.

***

## **Withdrawals & Immediate Exit Fees**

* **Standard Withdrawal** – After **25 days**, funds become available for withdrawal.
* **Instant Withdrawal** – Users can exit early for a **5% fee** (linearly reduced based on remaining unbonding time).

***

## **Fee Structure**

The **Fluxtra Arbitrage Pool** distributes profits fairly while remaining **highly competitive** in the DeFi space.

* **Deposit Fee:** **0%**
* **Performance Fee:**
  * **5% to ftOM holders**
  * **5% to Protocol Treasury**
* **Withdrawal Fee:** **0.5%** (Shared with ftOM holders)

By utilizing **Fluxtra’s Arbitrage Pool**, users can passively **earn yield through market inefficiencies**, benefiting from an **automated, decentralized, and fair** trading environment. 🚀


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