# Introduction
We believe DeFi is not just decentralised finance but also democratisation of finance, harnessing blockchain technology to bring financial products to everyone that are now only available to a few.
In partnership with global institutions, AlgoRai Finance offers robust and transparent DeFi structured products that protect and grow digital assets over time, all at the touch of your fingertips.
# Security Audit
AlgoRai Finance has been audited by Kudelski Security.
View our full report [here](https://kudelskisecurity.com/wp-content/uploads/AlgoRai-Secure-Code-Review-Report-Public-Release.pdf).
# FAQ
### What is AlgoRai?
AlgoRai is a decentralized structured products platform.
### What are structured products?
Structured products are financial instruments which have predefined features that offer returns based on an underlying asset and are often linked to derivatives. AlgoRai leverages structured products to achieve specific risk-return objectives, in our case, making measured, regular, and informed bets on the volatility of an asset in a systematic way, through smart contracts.
### What are the structured products that AlgoRai offers?
AlgoRai offers structured products on Algo, BTC and ETH. These structured products generate yield on various strategies, including automated covered calls and put selling. More information on our structured products can be found [here](/option-vaults/what-are-structured-products).
### What are the risks in covered-call vaults?
Depositors may potentially give up asset appreciation upside in exchange for a guaranteed yield. This happens when the spot market price of the underlying asset exceeds the strike price or is “in the money” at the end of the round, and an amount equal to the difference between the settlement and strike price will be withdrawn and paid to the market makers. It is worth noting that this is uncommon, as our vaults carefully select strike prices to generate the highest returns with the lowest risk possible. Depositors will still be up in terms of USD values as the underlying asset would have had to appreciate significantly over a short period of time.
### What are the risks in put-selling vaults?
Vault deposits may incur losses on a weekly basis when the spot market price of the asset is below the strike price or is “in the money” at the end of the round. An amount equal to the difference between the settlement and strike price will be withdrawn and paid to the market makers. Do note that this is an uncommon occurrence, as our strike prices are carefully selected to offer users the highest returns with the lowest risks possible.
### What chain does AlgoRai operate on?
AlgoRai offers products on the Algorand and Ethereum blockchains.
### Processing a deposit?
The beauty of AlgoRai is in its simplicity. Users can easily deposit their assets into our vaults through smart contract interactions.
### Where do my deposits go?
User deposits go into secure vault smart contracts that have been rigorously audited.
### How are deposits processed throughout the week?
Deposits at the beginning of a round (defined time period of operation from vault commencement to expiry of the option) will be immediately exposed to the vault’s performance of the following week. Deposits made mid-week will not the exposed to the performance of the current round, and will be exposed to the vault’s performance of the coming round.
### How are withdrawals processed throughout the week?
Withdrawals made on funds that have been deposited mid-week and are not actively participating in the current round will not be exposed to any vault performance. These funds can be withdrawn at any point in time. Withdrawals made on funds that are actively participating in the current round will be exposed to the current active round, and made available for withdrawal at the end of the round.
### How are vault yields paid out?
The asset you used to make a deposit in to the vault will be the same underlying asset you will receive as yield pay-outs. E.g. Algo covered-call selling vault earns and receives yield in Algo.
### Do I have to reinvest the yield I earn from vaults?
No, our vaults automatically reinvest the weekly yields users earn back into the vaults. This essentially compounds the yield premiums for our users.
### Can I buy the options written by AlgoRai vaults?
No, at the moment our options are only sold to whitelisted market makers.
# User Guide
# To Deposit
1\. Ensure your Wallet has the Currency required for deposit.
2\. Select the Vault that you want to make a deposit in.
3\. Click 'Connect Wallet'.
4\. The following window will pop up. Connect the Wallet of your choice.
5\. Once you are connected, you will notice that 'Connect Wallet' is now labelled as 'Opt In'. You need to first opt-in your account to the deposit contract of each vault. Click 'Opt In'.
6\. You will see the following window. If your chosen vault is not in Algo, your Deposit Currency Balance will be reflected and you are required to opt-in as well. You only need to opt-in once for each Deposit Currency. Tick all boxes to opt in.
7\. Now, you will see that 'Opt In' is showing 'Manage'. This means you have successfully opted in. Click 'Manage'.
8\. You will see 2 tabs - Deposit and Withdraw. By default, you should be on the Deposit tab. If not, click the Deposit tab.
9\. Enter your desired amount in the field. Click 'Deposit'. Now, your deposit will be queued to enter the current/next round depending on the present state (read more [here](/about-us/user-guide/vault-states)). You can view your deposits under the Portfolio page under 'My Pending Requests'.
# To Withdraw
1\. Under the Portfolio page, you will see 'My Positions'. Chose the Vault you want to make a withdrawal from and click 'Go To Vault'.
2\. Once you see this page, click 'Manage'.
3\. The following window will pop up. Click the Withdraw tab. You will see the button telling you to opt in. Opt in is required to request a withdrawal. Click 'Opt In'.
4\. After you have successfully opted in, the button will now show 'Request Withdrawal'. Do note that you are only allowed to withdraw the full amount, no partial withdrawal is permitted. Click 'Request Withdrawal'. If you are requesting for withdrawal between the end of the current round and before the next round commences, your amount is immediately claimable upon clicking 'Request Withdrawal' (read more [here](/about-us/user-guide/vault-states)).
5\. Now, your requested withdrawal is added to the withdrawal queue, which is processed at the end of each round. You can view your requested withdrawal under the Portfolio page as shown. You can click 'Cancel Withdraw' if you change your mind.
6\. When your amount is ready to be claimed, 'Cancel Withdraw' will be changed to 'Withdraw'. Ensure that your Wallet is connected. Click 'Withdraw' to claim the full amount into your Wallet. Do note that the amount shown here is subject to change at the end of the round after settlement.
# Cancel Deposit
1\. You are able to cancel your requested deposit before the next round starts. All deposit requests are processed at the start of each round (read more [here](/about-us/user-guide/vault-states)).
2\. There are 2 ways to cancel your deposit - from the Vaults main dashboard or the Portfolio page.
3\. On the Vaults page, determine the Vault and open the drop down card by clicking on it. Then, click 'Manage'.
4\. Under the Deposit tab, click 'Cancel Deposit' when you are ready to proceed.
5\. Alternatively, you can view all your pending deposits under the Portfolio page. Click 'Cancel Deposit' on the Vault you want to cancel your deposit from.
6\. All 'Cancel Deposit' actions are almost immediate and the amount will be reflected back into your Wallet.
# Cancel Withdrawal
1\. You are able to cancel your requested withdrawal before settlement. All withdrawal requests are processed at the end of each round after settlement is completed (read more [here](/about-us/user-guide/vault-states)).
2\. There are 2 ways to cancel your withdrawal - from the Vaults main dashboard or the Portfolio page.
3\. On the Vaults page, determine the Vault and open the drop down card by clicking on it. Then, click 'Manage'.
4\. Under the Withdraw tab, click 'Cancel Withdrawal' when you are ready to proceed.
5\. Alternatively, you can view all your requested withdrawals under the Portfolio page. Click 'Cancel Withdraw' on the Vault you want to cancel your withdrawal from.
6\. All 'Cancel Withdraw' actions are almost immediate and your amount will continue to be queued for the next round.
# Vault States
Here are our 4 primary vault states and what it means in relation to your deposits and withdrawals.
#### **1. Round Start, Auction Pending**
Vaults are now closed to all new withdrawals and deposits. New deposits made after this state begins will be pending and only completed at 'Round End, Settlement Complete'. Any withdrawal requests will also be made pending and completed at 'Round End, Settlement Complete'.
***Deposit window - Open.*** Deposits will be added to the next round.
***Withdrawal window - Closed.*** You may still request for a withdrawal.
#### 2. Round In Progress, Auction Completed
Similarly, vaults are still closed to any new deposits for this round and any deposits made will join the next round. Requested withdrawals will only be enabled at 'Round End, Settlement Complete'.
***Deposit window - Open.*** Deposits will be added to the next round.
***Withdrawal window - Closed.*** You may still request for a withdrawal.
#### 3. Round End, Settlement Pending
Now, the round has ended and settlement is in progress. Deposits made will be added to the upcoming round and withdrawals will only be enabled at the next stage.
***Deposit window - Open.*** Deposits will be added to the next round.
***Withdrawal window - Closed.*** You may still request for a withdrawal.
#### 4. Round End, Settlement Complete
The previous round has officially ended and the upcoming round is in preparation. Deposits made prior to this stage will be added to the upcoming round. Deposits made during this state will also be added to the upcoming round.
***Deposit window - Open.*** All pending deposits as well as deposits initiated during this window will be added to the upcoming round.
***Withdrawal window - Open.*** All pending withdrawals as well as withdrawals initiated during this window will be completed instantly.
# Glossary of Terms
## Vaults Page
**Projected APY** - The projected effective rate of return based on the weekly performance of the vault compounded over 52 weeks
**DeFi Rewards APY** - The projected effective rate of return based on the weekly DeFi Reward Supply per vault divided by the vault total TVL, compounded over 52 weeks
**Vault Cumulative Yield** - The cumulative rate of return of the vault since inception
**TVL** - The Total Value Locked (TVL) is the sum of the current deposits and premium
**Strike Price** - The pre-determined set price at which an option vault will be cash-settled
**Strike Distance** - The strike price distance of the strategy is determined as a percentage (above/below) the asset spot price at time of round start
**Current Price** - The actual market price of the asset in the vault
**Available for Deposits** - Amount of assets left that the vault can accept
**Max Deposits** - The maximum amount of assets the vault can hold
**Current Deposits** - The amount of assets in the vault now
**Premiums (All Time)** - Total amount of premiums collected since the inception of the vault
**Fees (All Time)** - Total amount of fees collected by AlgoRai since the inception of the vault
**Vault Performance** - Price of the asset at the maturity of each round, colour-coded to indicate if the round was profitable for the depositors. Green indicating profit, red indicating settlement
**Previous Week’s Performance** - The total change in the amount of the underlying asset for the last week expressed as a percentage
**This Week’s Performance** - The premium paid by the Market Maker this round expressed as a percentage over locked value in the vault
**Round Ends In** - Time left till the end of the round
**My TVL** - My total deposits plus premiums realised
**My Premiums Realised** - Total historic amount of premiums earned
**My Deposits** - Total historic amount of deposits made
**My Pending Deposits** - Amount waiting to be deposited in the next round
**My Requested Withdrawals** - Amount requested to be withdrawn after current round
**My Available Withdrawals** - Amount available to be withdrawn to your Wallet
**Current Round** - Deposits are batched weekly. Deposits done now will join in the following round
**My Current Round TVL** - Do note that amount shown here may change at the end of the round after settlement
**Deposit to Next Round** - Deposits are batched weekly. Deposits done now will join in the following round
**Next Round Starts In** - Time remaining till deposit is added to the next round
**Current Round** - All requested withdrawals now are added to a withdrawal queue, once the round ends you will be able to claim your withdrawal
**My Current Round TVL** - Do note that amount shown here may change at the end of the round after settlement
**Withdrawal Starts In** - Time remaining till withdrawal amount requested can be claimed
**My Pending Withdrawals** - Amount of requested withdrawal
**Withdraw Current Round TVL** - Amount that you may request to be withdrawn. This will be added to the pending withdrawal at the end of the round
## Portfolio Page
**Strategy** - The strategy that the vault uses to earn yield
**Projected APY** - The projected effective rate of return based on the weekly performance of the vault compounded over 52 weeks
**Realised APR** - The effective rate of return based on the weekly performances of the vault extrapolated over 52 weeks
**My Deposits** - Amount of assets you have deposited into the vault
**Max Deposits** - The maximum amount of assets the vault can hold
**Round** - The round number in which your pending request will be executed
**Action** - The type of request that is pending
**When** - Countdown timer till your pending request is available
**Amount** - The amount of asset involved in relation to your corresponding pending request
**My TVL** - The sum total of all your assets in AlgoRai
**My Total P\&L** - Your overall profit or loss from the first day till the date stated
**Platform TVL** - Current Total Value Locked (TVL) in AlgoRai
**Premiums Realised** - Total premiums AlgoRai has paid to users
**Total Platform Fees** - Total historic amount of fees collected by AlgoRai
## Activities Page
This page shows the history of all transactions made across the AlgoRai platform.
# Introduction to Option Vaults
Option Vaults are vaults that run an automated options selling strategy, which earns yield on a weekly basis through writing out of the money options and collecting the premiums.
## What are Option Vaults?
AlgoRai’s Option Vaults will automate various options writing strategies for its users by implementing smart contracts. These vaults will be running covered call strategies for BTC, ETH, and ALGO and selling put options on Stablecoins which have weekly expiries.
**AlgoRai’s vaults are designed to be simple and intuitive for the user.** As the principal strategies are automated, user interactions with our vaults are simple: deposit your assets, wait for yield at expiration if options settle out of the money, and eventually withdraw your assets when you choose to. In addition, your asset balance and selected strategies will be easily managed and transparent. After all, we only make money when our vault depositors do and aligning our objectives with growing your assets is our defining mission at AlgoRai.
## How do Vaults Work?
Users deposit their assets into the vaults through interaction with smart contracts. The vaults automatically run option writing strategies on all deposited purchases on weekly rounds (the defined period of operation from vault commencement to expiry of the option). As the vaults perform the option selling strategies on behalf of all deposits, gas costs of all participants are socialised, making the strategy affordable and easily accessible to all.
# What are Structured Products?
Structured products are pre-packaged financial instruments with predefined features that offer returns based on an underlying asset and are often linked to derivatives.
Structured products can take many forms and provide great flexibility in formulating investment strategies, from simple to complex. Counterparty risk, underlying asset liquidity, hedging applications by liquidity providers, and macroeconomics play roles in proper risk management, which defines a framework for creating the investment objectives.
These could be tailor-made to individual investors or groups of individuals who share a common investment objective or asset and, by nature, are usually not traded on traditional exchanges, given their inherent flexibility.
AlgoRai offers these structured products in the form of option vaults that generate yield for its users through automated option writing strategies. Current AlgoRai vaults are offered on native Algo, as well as wrapped BTC and ETH, and generate yield for users by writing (selling) covered calls and put options on the underlying vault assets.
### Our Option Writing Strategies
There are 2 main strategies that AlgoRai vaults employ:
1. **Writing covered calls** - The vaults sell “out of the money covered calls”, call options with a strike price above the prevailing spot market price of the underlying asset held (Algo or goBTC and goETH in the case of wrapped coins). This strategy receives premiums paid in the underlying asset. Hence the vault depositor’s holdings of the native support over time grow. If the spot market price of the underlying asset exceeds the strike price or is “in the money” at the end of the round, an amount equal to the difference between the settlement and strike price will be withdrawn and paid to the market makers.
2. **Writing puts** - The vaults sell “out of the money” put options with a strike price below the prevailing spot market price on an asset, i.e., Algo, BTC or ETH, with the underlying USDC deposits. This strategy receives premiums paid in USDC. Hence the vault depositor’s holdings of the stable coin over time grow. If the spot market price of the reference asset is below the strike price or is “in the money” at the end of the round, an amount equal to the difference between the settlement and strike price will be withdrawn and paid to the market makers.
These yield focused strategies collect premiums on weekly written options and reinvest the premiums into the vaults, effectively compounding the yield.
# DOV Strategies
DOVs offer end-users the ability to deposit crypto into vaults, through either covered call or put selling strategies. These vaults represent a Total Value Locked (TVL) that market makers then buy options against for a weekly premium at a strike price determined by AlgoRai. This premium is the yield that depositors receive.
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If the options settle “out of the money”, the vault keeps the premium and distributes pro-rata to the depositors. If the options that the market maker buys end “in the money” (i.e. the spot price is above the strike price at expiry for calls or below in the case of puts), there is a net financial payment at the end of the week by the vault.
### **Covered Call Vaults**
**Like** traditional call selling, AlgoRai’s DOV covered call vaults sell upside calls based on the seller possessing the underlying reference asset. The options pricing mechanics are based on universally accepted pricing theory and practices of option valuation.
**Unlike** traditional options operations, the options are priced, and the premium paid is in the asset, not the reference currency (such as USD, etc.). This innovative feature results in growth in the quantity of the reference asset over time.
AlgoRai is the first DeFi protocol on Algorand, where there is a transparent and sustainable yield, paid in the same token the user deposits. So you deposit ALGO, you get your yield in ALGO (hence there is no impermanent loss, which is a feature of many DeFi strategies) and the yield comes from the value capture of the inherent volatility of the price of the asset. Market liquidity is facilitated from market makers who have native economic risks in ALGO (or other coins) which they need to manage.
### Put Selling Vaults
**Like** traditional put selling, AlgoRai’s DOV stablecoin vaults sell puts based on the underlying reference asset. The options pricing mechanics, as with covered call selling, are based on universally accepted pricing theory and practices of option valuation.
**Unlike** traditional finance strategy, AlgoRai's put selling vaults are based on the holders' assets being used as collateral to mitigate the risk of the put sales instead of being used to gain exposure. The traditional strategy when short puts end in the money result in an asset being acquired at the strike price (resulting in a net position slightly below the strike taking into account the premium received at the outset). While AlgoRai's strategy features a yield pickup unless the options settle below the strike price, there is no asset delivered. Instead, it is simply a financial settlement in a stablecoin based on the spot price at maturity and strike price which the vault user pays.
The advantages of AlgoRai’s stablecoin put selling vaults are they offer an additional yield pickup for crypto asset holders in a stable, rising, or range bound market without compromising potential gains from price appreciation. Because they are also paid in stablecoin, there is some embedded protection against price declines in the reference asset over time by their accumulation.
Read more in our [Decentralised Option Vaults (DOVs)](https://medium.com/@algorai.finance/decentralised-option-vaults-dovs-83f858d532b2) article.
# Settlement and Auction Process
There are 4 primary states:
1. Round Start, Auction Pending
2. Round In Progress, Auction Completed
3. Round End, Settlement Pending
4. Round End, Settlement Complete
### Friday SGT 18:00, GMT 10:00 - Round Start, Auction Pending
* Vaults are closed to new deposits and withdrawals from investors for the current round, sequential vault auctions commence and conclude, winning bids confirmed and settled.
**Vault Auction Process**
1. An auction for a Vault is conducted
2. Auction concludes
3. Ops Team agrees and accepts bids
4. Market Maker pays premium to Admin
5. Admin deposits premium into the Vault
### Friday SGT 19:00-16:00 +7 days**,** GMT 11:00-08:00 +7 days - Round in Progress, Auction Completed
* This state commences immediately following completion of the Vault Auction Process and remains until Round End.
* Vault options contracts are run till expiry on round end, the following Friday at SGT 16:00, GMT 08:00.
* User deposits and withdrawals initiated during this period are pending and only processed on round end, the following Friday at SGT 17:00, GMT 09:00.
### **Friday SGT 16:00, GMT 08:00 - Round End, Settlement Pending**
* Settlement price is determined, options contract is deemed In The Money (ITM) or Out of The Money (OTM).
**Options Settlement Process**
**If an option expires ITM:**
1. The settlement amount calculation equals the difference between the calculated exercise-settlement price and the strike price of the option, multiplied by the vault asset volume, in the asset held by the DOV. For sake of clarity, this means put selling vaults which settle in the money will result in payout of USDC, and calls which settle in the money will be paid out in respective tokens, BTC, ETH, ALGO, or wrapped versions as appropriate.
2. The settlement price, strike price, and settlement amount are communicated to the Market Maker.
3. The Market Maker confirms the settlement price and amount.
4. The Vault pays out the settlement amount to the AlgoRai Administrator.
5. The AlgoRai Administrator pays out the settlement amount to the Market Maker.
**If an option expires OTM:**
No further action or settlement occurs for the Market Maker.
### Friday SGT 17:00, GMT 09:00 - Round End, Settlement Completed
* New Round DOV parameters set, communicated, and indicative bids provided by Market Makers
* User deposit and withdrawal windows are open, all pending user deposits and withdrawals initiated during the prior round are completed.
\*Subject to changes, valid as of 10 Aug 2022
# Deployed Contracts
| Vault Contract | Network | App ID | Address |
| -------------- | -------- | --------- | ---------------------------------------------------------- |
| ALGO-Call | Algorand | 919531421 | TCVHISX5ZX3WMB3J46HNS5GDXXP4LEW2XSPS6YSNAOJQWLCQZOUGJFHKNY |
| ALGO-Put | Algorand | 919539218 | UFEGR4QLQJFRCMJ2436XWIC6VI4NHN47WU2IVPN5I7TH7JUD3EAQCJMN6M |
# Contact Us
If you have any feedbacks or questions, do reach out to **** or through any of our social platforms.
