Basis Strategy Smart Contract System

Overview

The basis strategy smart contract system is designed to execute a strategy that buys assets in spot markets and hedges these positions by selling perpetual contracts. This approach offsets market exposure and generates revenue from funding payments on perpetual contracts. The system includes four main components:

1. LogarithmVault - Manages user deposits and withdrawals and approves the strategy to access its funds.
2. BasisStrategy - Implements the basis strategy by orchestrating trades between SpotManager and HedgeManager.
3. SpotManager - Handles trading in spot markets (e.g., Uniswap).
4. HedgeManager - Manages perpetual positions on protocols like HyperLiquid to offset spot exposure.

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Components and Interactions

1. LogarithmVault

Purpose: The LogarithmVault serves as the user interface for depositing and withdrawing funds. It also approves the BasisStrategy to use its funds, allowing it to execute trades. LogarithmVault tracks individual user balances and overall vault balance.

Core Functions:

• deposit/mint: Accepts user funds, adding them to the pool available for the basis strategy.
• requestWithdraw/requestRedeem: Allows users to withdraw their funds, including any accrued gains.
• isClaimable/claim: Allows users to claim assets from the executed withdraw requests.

2. BasisStrategy

Purpose: The BasisStrategy contract manages the basis trading logic by utilizing SpotManager for spot trades and HedgeManager for perpetual trades. It maintains a market-neutral position by holding opposite positions in spot and perpetual markets, generating funding payment revenue.

Core Functions:

• utilize: Uses SpotManager to buy assets in the spot market and HedgeManager to place short positions in the perpetual market, thereby hedging the spot exposure.
• deutilize: Reallocates spot and perpetual holdings based on funding rates, user withdrawals, and market volatility.
• pendingUtilizations: Helps operators determine the parameters of calling utilize/deutilize functions by returning the maximum amounts.
• checkUpkeep/performUpkeep: Allows keepers to safe the perpetual position's leverage, claim funding payments, and rehedge the spot.

3. SpotManager

Purpose: SpotManager is responsible for executing trades in the spot market, such as Uniswap, to gain exposure to the underlying asset.

Core Functions:

• buy: Executes buy orders for specific assets in the spot market.
• sell: Executes sell orders to reduce spot exposure or free up liquidity.

4. HedgeManager

Purpose: The HedgeManager adjusts the perpetual hedge, selling short to offset spot exposure. It interacts with perpetual protocols (e.g., HyperLiquid) and manages funding payments to generate revenue.

Core Functions:

• adjustPosition: Places short orders in the perpetual market to hedge the spot position. Closes or adjusts short positions in response to changing conditions or withdrawal demands. Modifies the short position size based on market prices and funding rate trends.
• keep: Collects funding payments and distributes them back to the collateral of the perpetual position.

Implementations:

Different protocol-specific managers are implemented to operate across different perpetual protocols.

• OffChainPositionManager: HedgeManager specific for off-chain perpetual protocols including HyperLiquid.

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