black box // PHASE 1
What is the black box? ◾️
The idea was simple — what if we democratize our actively managed, actively hedged trading systems? What if we gave retail access to delta-neutral arbitrage? Better yet, what if, for the first time in their lives, we gave retail a sophisticated financial instrument — a vault — that enables them to lend into strategies they’ve never been able to access before.
This is groundbreaking. In finance, retail is always told No. No, you’re not allowed to invest in these funds. No, you’re not allowed to trade these products. No, you don’t get access to these markets. No, you don’t get preferred pricing. No, you don’t get access to this private deal. No.
That endless gatekeeping… We hate it. DeFi hates it. You should hate it.
Then entered vaults. Vaults have been a driving function for DeFi adoption thus far. Covered calls, for instance, give retail an option to hedge directional risk. These products are essential to the future of DeFi, and we’re glad they’re here.
We believe the black box is the next step in DeFi’s evolution. Retail has never had access to HFT firms, and they generally aren’t building quantitative trading models. These models are able to generate a return when the market is ranging. However, retail often only benefits when a market is trending (often just up). Outsized returns are hard to come by this way. If retail could achieve outsized returns agnostic of the market direction, would they take that opportunity? What if we productized this? Well, we did.
the black box primarily captures arbitrage. This area of trading is particularly inaccessible to retail, and that’s a big reason why we’re excited to launch this vault. The box constantly scans for arb opportunities and sets up delta-neutral positions to capture market inefficiencies. More strategies will be added to the black box soon.
The Waitlist.
We’re in the process of adding the finishing touches to the black box now. All that’s left is some testing & adding the UI. While we do this, we’re excited to introduce the Waitlist. This is an essential instrument to reward early adopters while we prepare to admit ALL applicants. Yes… we said ALL :) Here’s how this works.
The Waitlist applies to everyone. Because the vault isn’t live yet, whitelisted applicants and non-whitelisted applicants must join the waitlist to secure access to the vault. Once you join the waitlist, you can see your spot in line. As we size up capacity, you’ll be next in line. Here’s how the waitlist works:
User Flow:
To join the waitlist, go to our soon-to-be-announced UI and click “Deposit”
Turn on post notifications for @mrgntrade so you’re first in line when our UI drops
Deposit the total amount you want committed to the vault (you can’t change the amount later)
There are no deposit caps. This is your chance to allocate the total amount you want committed to the vault. If you edit your amount, you lose your spot in line (more details below).
You heard that right. In the last article we wrote that whitelisted applicants will have an initial deposit cap of $2,500. This is only true for the first epoch of the vault. As we increase capacity, individual deposits will also size up. We don’t want depositors to be left behind when this happens.
So what about the capital that’s not in the vault yet? That brings us to Step 3:
In the lead up to the vault, and when the vault is live, deposits that exceed the initial black box limit will be lent into a variety of yield bearing destinations within the marginfi ecosystem.
Where specifically? There’s 3 primary destinations:
The vault
For those who are initially whitelisted. Soon for everyone as the vault increases capacity.
marginfi’s borrow/lend pool
To increase liquidity for the vault’s strategies. To earn yield for depositors as they wait in line for the vault.
marginfi UTP liquidity pool (e.g. Mango USDC pool)
To earn yield for depositors as they wait in line for the vault.
Exciting right? Waitlisters & Vaulters with excess capital yet to be deployed into the black box still earn yield!
But wait, there’s more.
Soon we’ll enter Phase 2. In Phase 2, excess capital will benefit from yield-boosting strategies, significantly increasing the expected rate-of-return for those with capital waiting to enter the vault. We’re super excited to announce Phase 2 very, very soon. We’re democratizing everything we do.
So that’s it — three steps and you’re in.
1) Enter the site, 2) deposit the total amount you want committed to the vault, and 3) yield whether or not you’re fully allocated into the black box yet.
But ser, you have over $30M in commits… How are you going to make sure the Waitlist works for everyone?
Ah yes, we’ve been blown away at the amount of interest in this new vault. In order to ensure we can field all commitments fairly and efficiently, we’ve designed a framework for the Waitlist…
Rules
Phase 1
When the UI goes live, people will be able to enter the waitlist, starting at #46 in line (45 have been whitelisted to the vault)
Waitlist is first-come-first-serve
We will intentionally leave open spots in the waitlist for community members showing strong merit
To enter the waitlist, go through the user flow described in the previous section and deposit the total amount you want allocated to the vault (no limits)
Make sure you deposit the correct amount! After you enter the waitlist:
If you withdraw your deposit, you lose your spot in line
If you edit the amount you deposited, you lose your spot in line
If you trade with the marginfi account you create upon deposit, you lose your spot in line
This culminates Phase 1. Next comes Phase 2. There’s some details there you should know before we release full details. Phase 2 is included below.
Extra
Alpha
The Waitlist will have some fun incentives rolled into launch. There will be a chance to move up a spot, or two, or three… Stay tuned to our twitter (@mrgntrade). Waitlist games will begin at the commencement of Phase 2.
Phase 2
Important things before we release Phase 2 full details:
We’re going to introduce an automation before the black box goes live
The automation will lock-in user deposits for the black box, removing the need to manually deposit into the vault.
All Waitlisters must enter the automation so they are automatically submitted to the vault.
The mrgn team requires this step to manage trade execution before the black box goes live.
Waitlisters must enter the automation WITHOUT withdrawing their funds (or they’ll lose their spot in line)
The automation will be a button that goes live on our site. We will alert you when it’s time.
Because getting alerted matters, we’ll allow you to link your twitter/telegram account when you join the waitlist. This will also let you show off your spot in line to others.
Users who do not enter the automation fail Phase 2 and lose their spot in line.
Users who pass Phase 2 are ready for Phase 3 — the black box going live.
We’ve been intentional about this process to make sure all depositors earn yield at every step, regardless if they’ve been accepted to the vault yet or not. Early adopters are rewarded, and deposit caps are alleviated.
Once the UI goes live, we’ll alert the community at mrgn research. When that happens, everyone will be able to enter the Waitlist, first-come-first-serve. Then, we’ll begin Phase 2 shortly after.
Building something new for DeFi isn’t easy, but when people love what you’re doing, it makes us work that much harder.
Vault.
Thanks to the author for the article, it was quite interesting and, most importantly, clarified the situation with the phases of the project. I look forward to further news and information.