Bond Vaults Explanation

A brief rundown of how Stream's bond vaults work

Bond vaults allow for the optimization of one time expenses, primarily gas fees and bond associated fees. A vault forces all money in a vault to be managed uniformly and sent at the same time, splitting the associated expenses between all the users. This makes smaller deposits more doable and lowers costs, thus increasing yields. Vaults also allow for users to get exposure to very specific levels of risk attached to certain bonds.

Flow of Funds

Vaults have a deposit period, wherein users deposit their tokens which are collected together. After this deposit period closes, the tokens are then sent to a multisig, which then sends the assets to an exchange which off ramps the assets into a bank, and which then uses the assets to buy the associated bonds. As the bonds reach maturity, users can decide to withdraw or not, and depending on how many people have decided to withdraw, a corresponding amount of the assets will be taken out to pay out the withdrawals. Deposits will also then be processed, and any money that was not withdrawn is reinvested.