Hot Tub FAQs

  • Updated

Everything you need to know about our Hot Tub vaults. If you have any queries that are not answered here, please join our Discord for more information.


  • What are Hot Tub vaults?

The Hot Tub vaults are trustless structured products that automates profitable arbitrage opportunities and makes alpha accessible to all. Cryptocurrency users of any level can passively grow their holdings and earn yield with sophisticated on-chain trading strategies.

  • Why should I use Hot Tub vaults?
    • Earn a stable yield with low risk using a non-custodial vault.
    • Reap the benefits of a ‘set-and-forget’ arbitrage trading strategy without needing any knowledge of coding or trading.
    • By joining the Hot Tub, you can stack more gwei or increase your stablecoin holdings. Earn yield in ETH or USDC, the decision is entirely yours.
    • There’s no need for trust, as you can earn yield in a way that’s decentralized.
  • How can I join the Hot Tub?

Go to the Hot Tub sign-up page, subscribe with your email for updates and to join the whitelist. For the whitelist, you’ll need to submit an email address, your name (or alias), how much you intend to deposit, and the wallet address you plan on using for Hot Tub.

During the initial launch phase, Optimism addresses must be whitelisted to be able to interact with the Hot Tub contracts. Please double check your wallet address before submitting the form, as non-whitelisted addresses will be unable to deposit to the Hot Tub vaults.

If you are successful in joining the whitelist, an onboarding call will be scheduled to introduce you to the Hot Tub vaults. You can then start growing your ETH and/or USDC holdings!

  • What is the strategy for the Hot Tub vaults? What happens exactly? How does the strategy manage to generate a return?

Hot Tub utilizes an arbitrage trading strategy and maintains a delta neutral position in ETH. Delta neutral means that the strategy’s performance is not affected by fluctuations in the price of ETH.

Arbitrage is the act of buying an asset at a lower price on one market then selling on another market that quotes a higher price for the same asset. It is one of the most competitive areas of trading since it can be profitable, and at the same time, carries very little risk.

Learn more about the strategy here

  • How does Hot Tub compare to other cryptocurrency vaults?

Hot Tub aims to be the best alternative to unsustainable high APYs and unstable returns by providing lower risk, stable returns for lower risk and a more stable return for depositors. The returns are correlated with volatility, so depositors looking to maximize their earnings should join the Hot Tub for longer periods of time to capture high volatility events.

For a more detailed look at how Hot Tub compares to other vaults, check out this article

  • What assets are the vault yields paid in?

The vault yields are paid out in the same asset you deposit.

The ETH-Hot Tub vault accepts WETH deposits and pays out yields in WETH.

The USDC-Hot Tub vault accepts USDC deposits and pays out yields in USDC.

  • When are arbitrage trades executed?

Whenever there’s a profitable arbitrage opportunity between Perp and spot markets on decentralized exchanges for ETH-USD.

  • Are the contract(s) open source?

Yes, the Hot Tub contracts will be open sourced and made available on GitHub at launch.

  • Are the contracts upgradable?

Yes, the contracts are upgradable to allow us to update the strategy and improve the performance. Currently, there are no timelocks for the contract but this precautionary measure may be added in the near future.

  • Where can I see the historical performance?

As of February 2023, the Hot Tub vaults offer an APR of up to 11%.

Prior to the launch of Hot Tub, we ran and fine-tuned the strategy for about a month while the R&D phase lasted several months. 

  • What is APY/APR?

Annual percentage yield is often shortened to APY, which defines the return of an investment that includes the compounding effect. Your APY is the real rate of return you receive on your assets if the returns are compounded over time.

Annual percentage rate is often shortened to APR, which is the percentage you earn on your investment that excludes the compounding effect.

  • How is the APY displayed on the UI calculated?

The APY is calculated via the underlying pool share price. The APR you can earn is denominated in the asset you deposit, e.g., WETH for the ETH vault and USDC for the USDC vault. 

  • Since Hot Tub utilizes an on-chain trading strategy, what’s stopping someone from copying it and executing the same strategy to siphon profits away from Hot Tub?

It is possible for someone else to use the same strategy. But it is complicated and requires active management, so even if someone copied the same strategy, they may not be able to generate the same returns or may fail to manage risk appropriately.

By drawing on the Foundation team’s experience and expertise, we ensure that the vaults operate optimally and also closely monitor the factors that may affect the strategy’s performance (see the risks section).


  • Is there a minimum/maximum deposit amount?

There’s no minimum or maximum deposit amount at this time. However, caps will be in place for each vault (starting at $100K) and these caps will be raised gradually over time. 

  • Are there any fees to deposit to Hot Tub vaults?

There will be no fee applicable for deposits. See the fees section below for more information.

  • Will I receive a token in return when depositing?

Yes, you’ll receive pool shares tokens that represents a claim to the profits generated by the Hot Tub vaults, proportional to the amount you deposit. The pool share tokens gain value as the strategy generates a return. When withdrawing your funds, the pool share tokens will have increased in value and can be swapped for the capital you initially invested and your share of the vault’s profit.

  • Where can I track the current value of pool share tokens?

You'll be able to track the current value of pool shares tokens through the UI.

This value can also be tracked from the contract with the following formula:

totalAssets / totalSupply


totalAssets = total underlying value of the vault in USDC or ETH (using index price on Perp)

totalSupply = total share token amount

  • Do I have to re-invest to compound my gains?

No, you do not have to re-invest to compound your gains. As long as your assets remain in the Hot Tub, you’ll continue to earn more WETH or USDC.

  • Can I use any address type other than EOA (e.g., multi-sig) to deposit into the Hot Tub vaults?

Yes, you can use externally owned addresses (EOAs) or multi-signature wallets.


  • Are there any fees to withdraw from Hot Tub vaults?

Initially, no fees apply to withdrawals. See the fees section below for more information.

  • How do withdrawals work?

There’ll be a two-step process to withdraw your funds, with a 15-minute cooling period for security reasons.


  • Are there any fees for the Hot Tub vaults?

Early adopters of the Hot Tub can earn yield in ETH or USDC without having to pay any fees. After the zero-fee period, a management fee of 2% and a performance fee of 20% will apply.

A small amount of ETH is required to cover gas fees and process transactions on the Optimism network when depositing or withdrawing.

  • When does the no-fee period end?

Join Hot Tub now to enjoy zero fees for a limited time only.

We will make an announcement before the no-fee period ends. Follow us on Twitter, join our Discord server or Telegram channel to stay up to date.

  • How is the management fee calculated?

At a later stage, a 2% management fee will be charged on an annual basis. So after the zero-fee period ends, if you join any of the Hot Tub vaults for one month, the management fee can be calculated as (1/12) * 2% = 0.17% of your deposit amount.

  • When will I be charged the management fee?

At a later stage, you’ll automatically pay the management fee when withdrawing from the vaults.

  • How does the performance fee work?

Once the vaults generate a substantial profit, a 20% performance fee will apply.

Let’s say that the total value locked is $100,000 and the vaults manage to return $160,000 through many successful arbitrage trades over the course of one year. From the total return of $60,000 return, depositors will collectively earn $48,000.


  • What are the risks of Hot Tub vaults?

The Hot Tub vaults carry minimal risk, since they are delta neutral and generate profit from arbitraging (the closest thing possible to a ‘risk free’ trading strategy). Everything is done on-chain, so there is complete transparency of the vaults’ performance. You can verify for yourself that the vault is executing the exact same strategy as outlined these FAQs.

But there are three potential factors that may reduce the expected returns or, in extreme circumstances, end up realizing a loss for depositors.

  1. Extreme funding rate: if the funding rate is negative for ETH-USD, then short positions opened for the USDC vault (to hedge spot ETH holdings) will incur funding payments. However, if the funding rate is positive for ETH-USD, then the long positions opened for the ETH vault will incur funding payments. If the funding rate becomes large enough, then the short/long positions for each vault’s strategy will incur larger funding payments and reduce the profits generated through arbitrage.
  2. Smart contract risk: while we have taken great care to create the smart contract that powers the Hot Tub vaults, there’s a very small risk that a bug may be found which could potentially put your capital at risk.
  3. An extremely illiquid ETH-USD market on Perp or spot DEXes on Optimism: although the likelihood is very small, if liquidity for ETH dries up rapidly and depositors want to withdraw their funds, this may adversely affect the profitability of the strategy since ETH may need to be sold or bought to make depositors whole and slippage may be incurred.
  • Is there a bug bounty for Hot Tub?

There’s no bug bounty at this time, although this may change in the future.

  • Is it possible to lose some of the assets I’ve deposited to the Hot Tub?

In very extreme circumstances where the risks of the Hot Tub strategy outlined above materialize, then your funds may be at risk. In the rare cases where the strategy realizes a loss, it is spread across all depositors, meaning the amount available to withdraw could be less than what you initially deposited.

Please only deposit an amount you can afford to lose.