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.

General

What are Hot Tub vaults?

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 Hot Tub, you can stack more gwei or increase your stablecoin holdings. Earn yield in ETH, WBTC, OP 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 Hot Tub?

As of July 19th, 2023, the whitelist process has been removed. 

The Shower Room replaces the whitelist system and acts as a queueing mechanism for the vaults. Depositors can earn yield through Yearn while they wait until space opens up in Hot Tub! 

Go to vaults.perp.com to start growing your WETH, WBTC, OP and/or USDC holdings. 

Instead of signing up for the whitelist, you'll now see the number of people in the queue and an option to join the Shower Room (the "Queue" button). 

Screenshot 2023-07-19 at 15.49.22.png

Approve the amount you want to deposit and you'll then being earning yield through Yearn's Optimism vaults. Once space opens up in Hot Tub, your deposit into Shower Room will be moved over to start earning arbitrage profits! 

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Click on view details to see more information about the queue, such as the number of people waiting in the queue, the estimated yield you'll earn in the Shower Room until your deposit goes into Hot Tub, the maximum amount that will be added to Hot Tub.  

Screenshot 2023-07-19 at 15.49.55.png

Click on "Notify me" and enter your email to be stay up to date with new vault launches, your queue status and more via email.

What is the strategy for 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, WBTC or OP. Delta neutral means that the strategy’s performance is not affected by fluctuations in the price of ETH or OP.

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 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. For example:

  • The ETH-Hot Tub vault accepts WETH deposits and pays out yield in WETH.
  • All USDC-Hot Tub vaults accept USDC deposits and pay out yield in USDC.

When are arbitrage trades executed?

Whenever there’s a profitable arbitrage opportunity between Perp and spot markets on decentralized exchanges for the relevant market (currently ETH-USD, BTC-USD and OP-USD). 

Is there a guide to walk me through the process?

Yes, you can check out our Hot Tub walkthrough. 

What are the vault contracts?

    • ETH Vault
      • ETHUSDCBaseVault (user’s entry point): 0x722Ef09F933f09069257C68563B715486365B895
      • ETHUSDCBaseVaultPerpPositionManager (Vault’s Perp account): 0x3d03748A0FbBa8DD5F07b16c0178cdd1327FC58a
      • ETHUSDCBaseVaultToken (Vault’s ERC20 LP token): 0xf2c886623309c93b56537C8c4d4321813ef78439
    • USDC-ETH Vault
      • ETHUSDCQuoteVault (user’s entry point): 0x748A38f4a430504Deb15fD5BB157dd466f8284B9
      • ETHUSDCQuoteVaultPerpPositionManager (Vault’s Perp account): 0x54E32c4c28f6e9B3F428635FD8e52b1C5742FC88
      • ETHUSDCQuoteVaultToken (Vault’s ERC20 LP token): 0x83d6675FE072928132c1B98ca3647De2fA9c8d84
    • OP Vault
      • OPUSDCBaseVault (user's entry point): 0x5039cDE9ed71256BE27A36440380F36cAD45d270
      • OPUSDCBaseVaultPerpPositionManager (Vault's Perp account): 0xe72716C65d99c477C7E381E30Fb29F602CA784B8
      • OPUSDCBaseVaultToken (Vault's ERC20 LP token): 0xeF9d827408C52C0F87278e1068Ef652Ad7274356
    • USDC-OP Vault
      • OPUSDCQuoteVault (user's entry point): 0x7AF98C4edc50cd7EC18C8B28A34200a16f53F3a4
      • OPUSDCQuoteVaultPerpPositionManager (Vault's Perp account): 0xf4880599EB67F932df64ec1ED7b163c16Cd3929B
      • OPUSDCQuoteVaultToken (Vault's ERC20 LP token): 0x0A8C0b205549589FEAdFB954282fBd187E541D83
    • WBTC Vault
      • BTCUSDCBaseVault (user's entry point): 0x6e9205B734455b578D06135de51E87D742d32cF2
      • BTCUSDCBaseVaultPerpPositionManager (Vault's Perp account): 0x2D97d9714B6ccd75F5EA109a0B220b978a8C6F84
      • BTCUSDCBaseVaultToken (Vault's ERC20 LP token): 0x78Ef3a1Dfb1Cee9B62b55a96fc076F2Ad09D8B6D
    • USDC-BTC Vault
      • BTCUSDCQuoteVault (user's entry point): 0x243e5F2CedDf3C7098832bCB890eF70A34099415
      • BTCUSDCQuoteVaultPerpPositionManager (Vault's Perp account): 0x3d99EB56fA430503ffE85E7A8064a467C85DeaA1
      • BTCUSDCQuoteVaultToken (Vault's ERC20 LP token):  0xA825825F3C0E7D0e6413981ad940AfD8a8b1B976
    • KtbArbitrageur (whitelisted contract that can swap between Hot Tub and DEX but need to transfer all profits back to Hot Tub): 0xEE1aDAEa27E97440DF594d601E366b3a1f1703dd
    • Router: 0x2D9949BbeBfBEC3dd087781Ae546202E708B841b
    • VaultConfig (store config for all Hot Tub vaults, including deleverageMarginRatio, etc.): 0x5Da8E71EA120DE22447BC8aE339FE398c17178fA

All Hot Tub contracts are also listed here: https://metadata.perp.exchange/kantaban/optimism.json

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 view the code for Hot Tub smart contracts?

The smart contracts for Hot Tub are verified on EtherScan. Got to “read as proxy” tab then click the implementation contract address using the links below:

Where can I see the historical performance?

The historical performance is displayed in charts on each vault page.

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 APY you can earn is denominated in the asset you deposit, e.g., WETH for the ETH vault, WBTC for the BTC vault, OP for the OP vault and USDC for the USDC vaults. 

How can I obtain the real-time APY?

The real-time APY for Hot Tub vaults can be obtained buy programmatically calling the contracts to get the total supply and total assets. 

The steps are shown below:

share_price = vault.totalAssets() / vaultToken.totalSupply() 
total_pnl = share_price - 1 
apy = total_pnl / total_days_live (since contract was deployed) * 365 
7_day_apy = (total_pnl - total_pnl (7 days ago)) / 7 * 365

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. 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).

Deposits

Is there a minimum/maximum deposit amount?

There’s a minimum deposit of:

  • 50 USDC for all stablecoin vaults. 
  • 0.005 ETH for the ETH vault.
  • 0.001 WBTC for the BTC vault.
  • 50 OP for the OP vault.

There's no maximum deposit but caps will be in place for each vault, which 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.

Depositors need to have a small amount of ETH in their wallet to pay for gas fees on the Optimism network.

I want to deposit into the ETH vault. How can I get WETH?

ETH can be wrapped on a DEX like Uniswap or by using DeFiLlama's meta-aggregator to obtain WETH.

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 Hot Tub vaults.

Important: Share price changes according to vault profits and losses. Starting share price is always 1. If the vault has earned profit before you deposit, you will pay a share price above 1. If the vault pays funding, share price may decrease gradually. Any arbitrage profits earned by the vault will add to the share price.

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

where:

totalAssets = total underlying value of the vault in USDC, OP 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 Hot Tub, you’ll continue to earn!

Can I use a contract address (e.g., multi-sig) to deposit into Hot Tub vaults?

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

Withdrawals

Are there any fees to withdraw from Hot Tub vaults?

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

A small amount of ETH is required to pay for gas fees on the Optimism network and process withdrawals.

How do withdrawals work?

After you deposit, there is a 15 minute cooldown period. After the cooldown, you can withdraw any time.

Hot Tub is designed for long term investment (3-6 months, or more). Withdrawing early may result in a small loss due to funding payments and other market conditions.

Is there slippage on withdrawals?

Yes, there may be slippage. Always check the amounts shown on the UI before withdrawing. If you see an unusual amount, please try again after a few minutes. If the issue continues, contact support using the support icon on the lower right corner of the Hot Tub UI.

Fees

Are there any fees for Hot Tub vaults?

Early adopters like you currently pay no fees for Hot Tub. After the zero-fee period, management and performance fees will apply. Details will be announced in advance of any change to fees.

Although there are currently no fees for Hot Tub, you should hold a small amount of ETH in your wallet pay for gas fees on the Optimism network.

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.

Risks

What are the risks of Hot Tub vaults?

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, BTC-USD or OP-USD, then short positions that are opened for the USDC vaults (to hedge spot ETH, WBTC or OP holdings) will incur funding payments. However, if the funding rate is positive for ETH-USD or OP-USDC, then the long positions opened for the ETH, WBTC or OP vaults 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 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, BTC-USD or OP-USD market on Perp or spot DEXes on Optimism: although the likelihood is very small, if liquidity for ETH or OP dries up rapidly and depositors want to withdraw their funds, this may adversely affect the profitability of the strategy since ETH, WBTC or OP may need to be sold or bought to make depositors whole and slippage may be incurred.
  4. USDC loses its peg: there's a risk that the value of USDC may fall below $1 under extreme circumstances which will impact the vault's performance. Please see this article for more details of what happens if USDC depegs. 

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 Hot Tub?

Hot Tub is designed for long term investment (3-6 months, or more). Withdrawing early may result in a small loss due to funding payments and other market conditions.

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.