Flow of Funds

A detailed overview of flow of funds in Nest

1

Users Deposit Stablecoins

• Who: The capital provider (user) begins the process.

• Action: Deposits stablecoins into a vault via the Nest interface or a compatible wallet.

• Output: The capital provider receives vault tokens, representing their share in the vault.

2

Vault Receives Funds

• Who: The vault contract, implemented using the ERC-4626 standard.

• Action:

  • Transfers stablecoins from the capital provider to the vault.

  • Mints vault tokens proportional to the deposited amount.

• Output: Stablecoins are securely held in the vault.

3

Vault Manager Purchases Underlying Tokenized Assets

• Who: The vault manager who oversees fund deployment for the vault.

• Action:

  • The vault manager decides how to allocate the vault's stablecoins, by either purchasing yield-bearing tokenized assets, or leaving the deposit within the vault as liquidity buffer.

  • Allocations are optimized to achieve the vault's target annual percentage yield (APY).

• Output: Stablecoins are leveraged to serve the vault's financial strategy, to either purchase yield-bearing assets or remain in the vault as liquidity.

4

Underlying Assets Operationalize Funds

• Who: Managers of the underlying assets.

• Action:

  • Operationalize the newly received funds to generate returns.

  • As returns are made, underlying tokenized assets increase in value.

• Output: Yield-bearing tokenized assets accrue in value.

5

Vault Token Value Increases

• Who: The vault accrues value through underlying token appreciation.

• Action:

  • Yield accrual has a direct effect on the yield-bearing asset values.

  • As a result, the value of vault tokens also increases.

• Output: Increased vault token value, as a direct result of vault operations kickstarted by the user's deposit. Users can realize their returns by burning vault tokens.