Vault Lifecycle

Complete journey from proposal creation to final settlement.

Overview

A vault's lifecycle consists of five distinct phases:

  1. Proposal - Investor creates funding offer

  2. Acceptance - Trader accepts, vault deployed

  3. Active Trading - Trader executes strategy

  4. Closure - Deal ends or risk limits breached

  5. Settlement - Profits split, funds withdrawn

Understanding each phase helps both investors and traders navigate the platform successfully.

Phase 1: Proposal Creation

Investor Actions

Step 1: Create Proposal

  • Navigate to Funding page

  • Click "Create Proposal"

  • Configure terms:

    • Trader address

    • Capital amount (USDC)

    • Profit share (e.g., 80/20)

    • Duration (days)

    • Max drawdown (%)

    • Daily drawdown (%)

Step 2: Submit

  • Review all parameters

  • Submit proposal transaction

  • Approve USDC spending (one-time)

  • Pay gas fee (~$0.10-$1.00)

Result:

  • Proposal created with status: Pending

  • Trader notified

  • USDC remains in investor's wallet (not transferred yet)

Proposal States

Pending:

  • Awaiting trader response

  • Investor can cancel anytime

  • Expires after 24-48 hours (configurable)

Accepted:

  • Trader accepted (moves to Phase 2)

Declined:

  • Trader declined

  • Proposal closed, no action needed

Canceled:

  • Investor canceled before acceptance

  • Proposal closed

Expired:

  • Timeout reached without response

  • Automatically marked as expired

Phase 2: Acceptance & Vault Deployment

Trader Actions

Step 1: Review Proposal

  • View proposal details on Funding page

  • Check terms:

    • Capital amount available

    • Profit share (your percentage)

    • Duration (time commitment)

    • Risk limits (operational constraints)

Step 2: Decision

  • Accept: Deploy vault and start trading

  • Decline: Reject proposal (no penalty)

  • Ignore: Proposal expires after timeout

Step 3: Accept Proposal

  • Click "Accept Proposal"

  • Confirm transaction

  • Pay gas fee

What Happens on Acceptance

Automatic Process:

  1. Vault Deployed

    • Smart contract created with unique address

    • Vault configured with proposal terms

    • Initial state: ACTIVE, not paused

  2. USDC Transfer

    • Investor's USDC transferred to vault's Hyperliquid account

    • Happens automatically via smart contract

    • Exact amount as specified in proposal

  3. Oracle Activation

    • Balance monitoring begins (60-second intervals)

    • Peak balance initialized

    • Risk limit tracking starts

  4. Deal Deadline Set

    • Current time + duration = deadline

    • After deadline, either party can close vault

  5. Trading Enabled

    • Trader can immediately place orders

    • Agent wallet authorized for vault

    • All pre-trade checks active

Vault Initial State:

Address: 0xABC...def (unique)
Status: ACTIVE
Paused: false
Closed: false
Initial Balance: $10,000 (example)
Peak Balance: $10,000
Current Balance: $10,000
Last Balance Update: Now
Deal Deadline: Now + 30 days
Profit Share: 80% trader, 20% investor
Max Drawdown: 20%
Daily Drawdown: 5%

Confirmation

Both parties receive:

  • Vault address

  • Hyperliquid trading account (vault's)

  • Deal deadline timestamp

  • Dashboard link to monitor vault

Phase 3: Active Trading

Trading Operations

Trader Activities:

  • Place orders on Hyperliquid (BTC, ETH, etc.)

  • Manage positions (long/short)

  • Monitor PnL and drawdown

  • Stay within risk limits

Order Execution:

  • Orders signed by agent wallet

  • Execute on Hyperliquid L1

  • Logged in vault audit trail

  • Subject to pre-trade checks

Pre-Trade Validations:

  • Vault is ACTIVE

  • Vault not paused

  • Vault not closed

  • Deal deadline not passed

  • Balance data fresh (<10 min)

  • Sufficient balance for order

Oracle Monitoring

Every 60 Seconds:

  1. Oracle polls Hyperliquid for vault balance

  2. Updates on-chain vault balance

  3. Checks max drawdown limit

  4. Checks daily drawdown limit

  5. Updates peak balance if new high

If Risk Limit Breached:

  • Vault automatically pauses

  • Trading disabled (new orders rejected)

  • Positions remain open (can close)

  • Event logged for transparency

Investor Monitoring

Dashboard View:

  • Current balance (updates every 60s)

  • Current drawdown (% from peak)

  • Daily drawdown (% from day start)

  • Open positions

  • Trade history

  • Unrealized PnL

  • Time to deal deadline

Alerts:

  • Warning: Within 5% of risk limit

  • Critical: Within 2% of risk limit

  • Paused: Limit breached

Investor Cannot:

  • Place orders (only trader)

  • Pause vault manually (only auto-pause)

  • Withdraw funds mid-deal (must close vault first)

Position Management

Trader Responsibilities:

  • Monitor leverage and margin

  • Set stop-losses

  • Manage risk actively

  • Avoid approaching drawdown limits

  • Keep positions reasonable size

Best Practices:

  • Trade with 60-70% of balance (keep buffer)

  • Use stop-losses below drawdown threshold

  • Monitor balance freshness

  • Check vault status before large trades

  • Communicate with investor if approaching limits

Vault Pause Scenarios

Max Drawdown Breached:

Initial Balance: $10,000
Peak Balance: $11,000 (after profits)
Max Drawdown: 20%
Pause Trigger: $8,800 (20% below peak)

If balance drops to $8,800 → Vault pauses

Daily Drawdown Breached:

Balance at 00:00 UTC: $10,000
Daily Drawdown: 5%
Pause Trigger: $9,500

If balance drops to $9,500 within 24h → Vault pauses
Resets at midnight UTC

What Happens When Paused:

  • Status: PAUSED

  • New orders: Rejected

  • Existing positions: Can close (reduce-only)

  • Oracle: Continues updating balance

  • Trading: Disabled until unpaused

Unpause Options:

  1. Balance Recovery: If balance improves above limit, trader can unpause manually

  2. Close Vault: Trader closes all positions and triggers settlement

Phase 4: Vault Closure

Closure Triggers

1. Deal Deadline Reached

  • Duration expires (e.g., 30 days passed)

  • Either party can trigger closure

  • Must close all positions first

  • Standard settlement process

2. Risk Limit Breached

  • Max or daily drawdown hit

  • Vault paused automatically

  • Trader can close immediately or wait for recovery

  • If closed while paused, settlement at current balance

3. Early Termination (Optional)

  • If enabled in proposal terms

  • Trader requests early close

  • Investor approves

  • Positions closed, settlement proceeds

4. Inactivity Timeout

  • No trades for X days (e.g., 7 days)

  • Either party can trigger closure

  • Protects against abandoned vaults

  • Settlement at current balance

Closure Process

Step 1: Close All Positions

  • Trader closes all open positions

  • Use market orders for speed

  • Vault balance becomes final PnL

  • Oracle updates one last time

Step 2: Trigger Closure

  • Trader or investor calls closeDeal()

  • Smart contract marks vault as CLOSED

  • Final balance locked in

  • Settlement calculations begin

Step 3: Profit Calculation

Initial Balance: $10,000
Final Balance: $12,000
Profit: $2,000

Profit Share: 80% trader, 20% investor
Trader Profit: $1,600
Investor Profit: $400

Trader Payout: $1,600
Investor Payout: $10,400 ($10,000 principal + $400 profit)

Step 4: Withdrawal Enabled

  • Both parties can withdraw their share

  • Withdraw from vault smart contract

  • USDC transferred to respective wallets

  • No time limit on withdrawal

Closure Scenarios

Scenario 1: Profitable Deal

Capital: $10,000
Final: $15,000
Profit: $5,000
Profit Share: 80/20

Trader Gets: $4,000 (80% of profit)
Investor Gets: $11,000 ($10,000 + 20% of profit)

Scenario 2: Loss Within Limits

Capital: $10,000
Final: $9,000
Loss: $1,000

Trader Gets: $0
Investor Gets: $9,000 (takes the loss)

Scenario 3: Max Drawdown Hit

Capital: $10,000
Max Drawdown: 20%
Paused At: $8,000
Final: $8,000

Trader Gets: $0
Investor Gets: $8,000 (protected by limit)

Scenario 4: Recovery After Pause

Capital: $10,000
Paused At: $8,000 (20% drawdown)
Trader Recovers to: $11,000
Final: $11,000
Profit: $1,000
Profit Share: 80/20

Trader Gets: $800
Investor Gets: $10,200

Phase 5: Settlement & Withdrawal

Withdrawal Process

For Investors:

  1. Go to vault dashboard

  2. View final settlement amounts

  3. Click "Withdraw"

  4. Confirm transaction

  5. USDC transferred to wallet

For Traders:

  1. Same process as investors

  2. If profit > 0, withdraw profit share

  3. If profit = 0 or loss, nothing to withdraw

Transaction Details:

  • Network fee applies (minimal on Hyperliquid)

  • Instant transfer upon confirmation

  • Visible on Hyperliquid explorer

  • No withdrawal limit or delay

Settlement Edge Cases

Multiple Withdrawals:

  • Each party can only withdraw once

  • Full amount transferred in single transaction

  • Cannot withdraw twice

Partial Withdrawal:

  • Not supported

  • Must withdraw full settlement amount

Delayed Withdrawal:

  • No penalty or deadline

  • Funds remain in vault contract

  • Withdraw anytime (days/weeks/months later)

  • Gas fees still apply

Post-Settlement

Vault State:

Status: CLOSED
Balance: 0 (after withdrawals)
Historical Data: Preserved
Trade History: Available for export
Analytics: Locked at closure time

Historical Records:

  • All trades logged on-chain

  • Audit trail accessible forever

  • Export to CSV available

  • Performance metrics frozen

What Happens Next:

  • Vault remains deployed (historical record)

  • No further trades possible

  • Both parties can create new proposals

  • No ongoing costs or obligations

Timeline Examples

Example 1: Successful 30-Day Deal

Day 0: Investor creates proposal ($10,000, 30 days, 80/20 split)
Day 1: Trader accepts, vault deployed, trading begins
Day 1-28: Active trading, balance grows to $13,000
Day 29: Approaching deadline, trader closes positions at $13,500
Day 30: Deal closes, settlement calculated
  - Profit: $3,500
  - Trader: $2,800 (80%)
  - Investor: $10,700 ($10k + $700)
Day 31: Both parties withdraw

Example 2: Paused Due to Drawdown

Day 0: Proposal created ($10,000, 30 days, 20% max DD)
Day 1: Accepted and deployed
Day 1-5: Trading goes well, reaches $11,000
Day 6-10: Market turns, balance drops to $8,800 → PAUSED
Day 11: Trader closes positions at $8,500
Day 12: Vault closed, settlement:
  - Loss: $1,500
  - Trader: $0
  - Investor: $8,500
Day 13: Investor withdraws $8,500

Example 3: Early Termination

Day 0: Proposal created ($5,000, 60 days, early close allowed)
Day 1: Accepted
Day 1-14: Trading very successful, reaches $8,000
Day 15: Trader requests early close (up 60%)
Day 15: Investor approves, positions closed at $8,200
Day 15: Settlement:
  - Profit: $3,200
  - Trader: $2,560 (80%)
  - Investor: $5,640 ($5k + $640)
Day 16: Both withdraw

Best Practices

For Traders

During Trading:

  • Check vault status before each session

  • Monitor drawdown daily

  • Keep buffer below risk limits (5-10%)

  • Set stop-losses

  • Close positions before deadline

Approaching Deadline:

  • Plan exit strategy 2-3 days before

  • Unwind positions gradually

  • Lock in profits

  • Communicate with investor

If Paused:

  • Assess whether to close or attempt recovery

  • If closing, use market orders

  • Document reasoning

  • Communicate decision

For Investors

During Trading:

  • Monitor daily (don't micromanage)

  • Trust trader's strategy

  • Intervene only if severe issues

  • Track progress toward deadline

Risk Management:

  • Diversify across multiple traders

  • Start small with new traders

  • Set appropriate risk limits

  • Review performance weekly

At Closure:

  • Verify final balance

  • Check settlement calculation

  • Withdraw promptly

  • Provide feedback to trader (future feature)

Common Questions

Q: Can I extend the deal duration?

A: Not currently. You must close the current vault and create a new proposal if both parties want to continue.

Q: What if the trader disappears?

A: After inactivity timeout (e.g., 7 days), you can trigger closure and withdraw at current balance. If no positions are open, you get full current value.

Q: Can I withdraw my principal mid-deal?

A: No. Funds are locked until vault closes. This protects the trader's ability to execute their strategy.

Q: What happens to open positions at deadline?

A: Trader must close all positions before triggering closure. If trader doesn't, you can initiate closure after deadline (trader has grace period to close positions first).

Q: Can profit share be renegotiated?

A: No. Terms are locked at creation. Close the vault and create a new proposal with updated terms for the next deal.

Q: What if vault is paused near deadline?

A: Vault can still be closed while paused. Settlement uses the current (paused) balance. Deadline enforcement is independent of pause state.

Next Steps

Related Pages

PreviousCreating ProposalsNextProfit Sharing

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