# Transparency

Dawn Vault fully decomposes and discloses the source of every basis point of yield. We believe depositors deserve to know exactly **where their returns come from**.

## Yield Provenance

Many DeFi yield products advertise an APY number without explaining its composition. Dawn Vault provides a full breakdown by source.

### USDC Vault Yield Decomposition

| Component            | Source                                                                 | Typical Range | Risk Level |
| -------------------- | ---------------------------------------------------------------------- | ------------- | ---------- |
| **Multiply Yield**   | Leveraged stablecoin loops via Kamino Multiply (ONyc/USDC, USDG/PYUSD) | 9-16%         | Low-Medium |
| **Lending Yield**    | Interest from USDC lending (Kamino, Jupiter)                           | 3-8%          | Low        |
| **Funding Rate PnL** | Net payments received from SOL-PERP shorts                             | 8-23%         | Medium     |
| **Staking Yield**    | dawnSOL staking rewards on spot leg                                    | \~7%          | Low        |
| **Borrowing Cost**   | Interest paid on borrowed assets (Multiply borrow leg)                 | -(0-3%)       | N/A        |
| **Execution Cost**   | Swap slippage, gas fees, position entry/exit costs                     | -(0.1-0.5%)   | N/A        |
| **= Net Vault APY**  | Weighted average across allocations                                    | **9-20%**     | —          |

### Example: Base Layer Only (Current Mode)

```
Multiply Yield:    +14.2%   (ONyc/USDC @ 2.5x, majority allocation)
Lending Yield:      +6.1%   (Kamino USDC, supplementary)
Funding Rate PnL:   +0.0%   (DN strategy inactive)
Execution Cost:     -0.0%   (minimal rebalancing)
─────────────────────────
Net Vault APY:     ~12-16%  (Multiply-dominant)
```

### Example: Base + Alpha (High FR Period)

```
Allocation:  Multiply 30% / Lending 20% / DN 50%

Multiply Yield:    14.2% × 0.30 =  +4.3%
Lending Yield:      5.2% × 0.20 =  +1.0%
Funding Rate PnL:  18.4% × 0.50 =  +9.2%
Staking Yield:      7.1% × 0.50 =  +3.6%
Execution Cost:                     -0.3%
─────────────────────────────────────────
Net Vault APY:                     ~17.8%  (weighted average)
```

> We will never report a blended APY number without providing its full decomposition.

## Proof-Based Reporting

Dawn Vault publishes structured performance reports at regular intervals.

### What We Report

| Data Point                            | Frequency   | Verification                        |
| ------------------------------------- | ----------- | ----------------------------------- |
| **Yield Breakdown** (by source)       | Every epoch | On-chain transaction data           |
| **Hedge Ratio** (spot vs. short)      | Every epoch | On-chain + CEX position data        |
| **Allocation Split** (base vs. alpha) | Every epoch | On-chain vault state                |
| **Reserve Balance**                   | Every epoch | On-chain account balance            |
| **Share Price**                       | Continuous  | On-chain LP token accounting        |
| **Cumulative PnL**                    | Daily       | Dashboard + historical data         |
| **Drawdown Metrics**                  | Daily       | Calculated from share price history |

### Independent Verification

Depositors can independently verify:

* **Share price**: Query the on-chain vault program directly
* **LP token balance**: Check their wallet
* **Vault TVL**: On-chain total assets visible to anyone
* **Protocol positions**: On-chain adapter positions are public

Important scope note: this repository currently exposes the off-chain operator stack, not the on-chain vault program itself. Independent on-chain verification therefore depends on Dawn Vault publishing the deployed program addresses, vault addresses, and proof/report endpoints separately.

### Skin in the Game

Dawn Labs deploys its own capital under the **exact same conditions** as depositors — same vault, same strategy, same fee structure. No preferential treatment or separate accounts.

## Yield Smoothing Reserve

The Yield Smoothing Reserve (YSR) is a stabilization mechanism funded by Dawn Labs' validator commission revenue.

### How It Works

```mermaid
graph LR
    VC[Validator Commission<br>Revenue] --> YSR[Yield Smoothing<br>Reserve]
    YSR -->|FR Negative Period| SUB[Subsidize<br>Vault Yield]
    YSR -->|FR Positive Period| ACC[Accumulate<br>Reserve]
```

1. **Accumulation**: Validator commission revenue flows into the Reserve
2. **Stabilization**: When funding rates turn negative, the Reserve supplements vault yield to reduce APY dips
3. **Recovery**: When conditions improve, the Reserve replenishes

This mechanism is only possible because Dawn Labs operates a Solana validator — the commission revenue is an external income stream that doesn't come from depositor funds.

{% hint style="info" %}
The Yield Smoothing Reserve is a **stabilization mechanism**, not a guarantee. It does not guarantee any minimum APY, does not insure against losses, and reserve size may be insufficient during prolonged adverse conditions.
{% endhint %}

The Reserve balance is disclosed in every epoch report. Depositors can track current balance, utilization rate, and accumulation vs. distribution history.


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