DeFindex Strategy

The Strategy contract is the backbone of the DeFindex Protocol, responsible for generating yields for each DeFindex Vault that integrates it. By adhering to the standardized DeFindexStrategyTrait, these contracts enable seamless interaction between the Vaults and external DeFi protocols.

---

Key Features of a Strategy

1. Protocol-Specific Integration: Strategies act as a proxy, managing specific external protocols such as lending pools or liquidity providers. This design ensures:

   • DeFindex Vaults are decoupled from protocol-specific complexities.

   • Flexibility in introducing new strategies without modifying the core Vault contracts.

2. Single Underlying Asset: Each Strategy manages one underlying asset, such as USDC or XLM. For instance:

   • A Strategy can manage a single token like USDC.

   • In liquidity pools, the Strategy manages the liquidity pool token (e.g., USDC/XLM LP tokens).

3. Position and Balance Tracking:

   • Shares Management: In some cases, like the Blend Strategy, the Strategy must issue shares internally to track positions and investments. This happens when the protocol requires specific authorizations or lacks direct support for managing positions at the Vault level.

   • Proxy Use Cases: In other cases, where the protocol supports directly adding positions on behalf of the Vault, the Strategy can act purely as a proxy, and shares tracking inside the Strategy might not be necessary.

   • Consistency with Vaults: Regardless of the internal tracking mechanism, the deposit(), withdrawal(), and balance() functions must always return the depositor's balance in the underlying asset. This ensures that the Vault can accurately track the status and health of its associated Strategy.

4. Modularity and Extensibility: Developers can create custom Strategies tailored to specific use cases, DeFi protocols, or yield-generation techniques. This opens doors for innovation while maintaining compatibility with the DeFindex ecosystem.

---

Core Functions of a Strategy

Every Strategy implements the DeFindexStrategyTrait, which defines the following core functions:

1. Initialization (__constructor):

   • Configures the Strategy with parameters such as the underlying asset, external protocol addresses, and custom settings.

2. Asset Retrieval (asset):

   • Returns the address of the underlying asset managed by the Strategy.

3. Deposits (deposit):

   • Allows the Vault to deposit assets into the Strategy for yield generation.

   • Requirement: Must return the depositor’s balance in the underlying asset.

4. Harvesting Yields (harvest):

   • Executes protocol-specific actions to claim or generate rewards.

   • Can trigger reinvestments for compounding yields.

5. Withdrawals (withdraw):

   • Enables the Vault to withdraw assets from the Strategy.

   • Requirement: Must return the depositor’s balance in the underlying asset.

6. Balance Tracking (balance):

   • Provides the current balance of the underlying asset held by the Strategy for a specific depositor.

   • Requirement: Must return the balance in the underlying asset, not shares or derivatives.

---

Advantages of the DeFindexStrategyTrait

1. Standardization:

   • Unified interface for interacting with any Strategy, reducing complexity for Vaults.

   • Facilitates third-party Strategy development while maintaining compatibility.

2. Transparency:

   • Vaults can track their balances and yields in terms of the underlying asset, avoiding ambiguity with derivatives or shares.

3. Flexibility:

   • Support for diverse protocols and yield-generation mechanisms.

   • Easy to introduce new Strategies or upgrade existing ones without disrupting the Vaults.

4. Security:

   • Decoupling Vaults from external protocols minimizes risk by limiting direct interactions.