# Vaults

Sova Vaults are ERC-4626 compliant tokenized vaults that aggregate Bitcoin liquidity for cross-chain settlement operations. Depositors provide cbBTC and receive svBTC—a yield-bearing token representing proportional ownership of vault assets.

Yield derives from real economic activity: fees earned from solver operations executing cross-chain settlements. No token emissions. No inflationary rewards.

{% hint style="success" %}
**Fee Structure:** 0% management fee. 10% performance fee on profits only.
{% endhint %}

***

## Specifications

| Parameter           | Value                            |
| ------------------- | -------------------------------- |
| **Vault Standard**  | ERC-4626 Tokenized Vault         |
| **Deposit Asset**   | cbBTC (Coinbase Wrapped Bitcoin) |
| **Vault Token**     | svBTC                            |
| **Minimum Deposit** | $500 USD equivalent              |
| **Network**         | Base Mainnet (Chain ID: 8453)    |

***

## Architecture

### Deposit Flow

1. User deposits cbBTC to the Sova vault contract
2. Vault mints svBTC proportional to current exchange rate
3. cbBTC enters the capital pool available for solver operations
4. Yield accrues to the vault, increasing the svBTC:cbBTC exchange rate

### Yield Generation

Vault yield is generated from protocol revenue:

| Source              | Description                               |
| ------------------- | ----------------------------------------- |
| **Settlement Fees** | 0.5% fee on cross-chain swap volume       |
| **Solver Activity** | Fees from BTC/ZEC settlement execution    |
| **Future: Staking** | $SOVA token staking rewards (see Roadmap) |

Unlike inflationary DeFi yields, Sova vault returns are backed by actual transaction volume flowing through the protocol.

***

## svBTC Token

svBTC is a rebasing vault share token implementing the ERC-4626 standard:

| Property          | Description                                           |
| ----------------- | ----------------------------------------------------- |
| **Ownership**     | Proportional claim on underlying vault assets         |
| **Yield Accrual** | Auto-compounding via exchange rate appreciation       |
| **Composability** | Fully transferable, usable in external DeFi protocols |
| **Transparency**  | On-chain NAV with verifiable exchange rates           |

### Exchange Rate Mechanics

The svBTC:cbBTC exchange rate increases over time as yield accrues:

```
Day 0:    1 svBTC = 1.0000 cbBTC  (deposit)
Day 365:  1 svBTC = 1.0850 cbBTC  (8.5% APY accrued)
```

Your svBTC balance remains constant. Its redemption value appreciates.

***

## Fee Structure

| Fee Type            | Rate | Description                      |
| ------------------- | ---- | -------------------------------- |
| **Management Fee**  | 0%   | No annual fee on AUM             |
| **Performance Fee** | 10%  | Applied only to realized profits |
| **Deposit Fee**     | 0%   | No entry cost                    |
| **Withdrawal Fee**  | 0%   | No exit cost                     |

### Performance Fee Calculation

```
Vault gross yield:    10.0%
Performance fee:       1.0%  (10% of 10%)
Net yield to LP:       9.0%
```

***

## Smart Contracts

All contracts deployed on Base Mainnet and verified on BaseScan:

| Contract           | Address                                                                                                                 | Function                 |
| ------------------ | ----------------------------------------------------------------------------------------------------------------------- | ------------------------ |
| **svBTC Token**    | [`0xdFc4047620bd71F3dd781f1048f6890b76281D36`](https://basescan.org/address/0xdFc4047620bd71F3dd781f1048f6890b76281D36) | ERC-4626 vault shares    |
| **Vault Strategy** | [`0xc23AE9352739E0AC242Bf0263980769C06a8F52B`](https://basescan.org/address/0xc23AE9352739E0AC242Bf0263980769C06a8F52B) | Capital deployment logic |
| **Conduit**        | [`0x1894fF3B7d07151b0b8aaBF059Ab4aD28EB6770f`](https://basescan.org/address/0x1894fF3B7d07151b0b8aaBF059Ab4aD28EB6770f) | Asset routing            |
| **Role Manager**   | [`0xf97fC42e1B3c4c570cD0Ebc9f0967fF7C49B4360`](https://basescan.org/address/0xf97fC42e1B3c4c570cD0Ebc9f0967fF7C49B4360) | Access control           |

***

## Security Model

### Smart Contract Security

* **ERC-4626 Standard** — Battle-tested tokenized vault implementation
* **OpenZeppelin Base** — Industry-standard contract libraries
* **Transparent Proxy** — Upgradeable pattern for security patches
* **Role-Based Access** — Granular permissions via Role Manager
* **Multi-Sig Admin** — Critical functions require 2/3+ signatures

### Risk Factors

| Risk               | Mitigation                                           |
| ------------------ | ---------------------------------------------------- |
| **Smart Contract** | Verified contracts, proxy upgradeability for patches |
| **Solver Default** | Collateralization requirements, insurance reserves   |
| **Oracle Failure** | Multiple price feeds, staleness checks               |
| **Liquidity**      | Withdrawal queue system for large redemptions        |

***

## Technical Documentation

For comprehensive vault architecture, strategy implementation, and integration details:

{% content-ref url="../vault-documentation/vaults" %}
[vaults](https://docs.sova.io/vault-documentation/vaults)
{% endcontent-ref %}

***

## Get Started

{% content-ref url="../using-sova/depositing" %}
[depositing](https://docs.sova.io/using-sova/depositing)
{% endcontent-ref %}