the black box ◾️
the first actively managed, adaptive vault in crypto
It all started with a
The response was immediate. Traders, investors, and founders were in our DMs. “What is this vault?”… “Who is mrgn research?”… “Are you ok?”
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We weren’t just ok, we were locked in.
Over the past few weeks we’ve been working with a few vault protocols who benefit from the marginfi infrastructure. This has been exciting for us — we’ve gotten to witness how marginfi can modularize operations for protocols across the ecosystem.
We’re also excited to see this continue, and to continue work with teams concerned about capital efficiency. DeFi is still basically a blank canvas for new financial products & approaches to emerge. Cross-DEX margining will be needed. We’re excited for marginfi to be an ever-improving solution to that gap.
But back to the tweet.
Working with vaults enabled us to experiment with the marginfi infra on ways we could package strategies to retail. The deeper we explored, the bigger the opportunity became. So we decided to run a new strategy on our own.
mrgn research, the twitter account that gets way too much engagement for a now-600 follower account, started with an onus: work with the smartest traders in the world to capture on-chain opportunities.
Soon after, we built a club — more specifically the mrgn research collab club to share opportunities with a close group of traders. We’ve been pretty active there (IYKYK), but some of the strats we’re worked thru are pretty big… there’s room for more.
It’s even more than that. Trading is capacity restrained. You can’t infinitely size up your capital base and expect the same returns. DeFi suffers more acutely from this principle. Liquidity is scarce in this new arena.
We’re not happy with that. We want to roll with the big guys. The black box is a vector from which we can test capacity restraints, see how fast we can increase them, and basically see “what size is size”. In fact, we even want to see where size comes from. Who will lend into this vault? Will your wallet have a “b” in it? Remember, “b” is for black box.
TODAY WE INTRODUCE THE black box
This was coming all along. Have you not seen it? It’s been pointed to countless times. It’s in our names, it’s in our core.
You have seen it. If we’re being real, it’s seared in the back of your eyelids. Every time you go to bed at night, these boxes are there to lull you to sleep. They’re there when you work out, when you work, when you’re at the WeWork. Cringe.
But get used to it. Or we’ll use you. No really, we’ll use you with the black box. Submit an order? BAM. Used. black box.
What is in the black box?
The black box is the first actively managed, actively hedged vault in crypto. What does that mean? It means the box doesn’t run a set strategy. A host of strategies are evaluated based on the markets in which marginfi provides access. When the optimal strategy is found, capital is deployed accordingly. If a better strategy arises while your capital is at work, the box rebalances.
Arbitrage, MEV, market-making… your capital could be used across any of these verticals to achieve the best return. While this is happening, the black box scans for new opportunities in the background. We’re getting quantitative.
OK so maybe now you’re sitting there in that contemplative state you get into sometimes and asking “why would I deposit into a strategy where I don’t know exactly what’s going to happen?” I mean, the answer’s kinda obvious. If we told you exactly how we were doing things, you could just do it yourself. So yeah, no, ok, nah, u good? tequila.
Thing is, this still occurs on-chain. You get to watch what’s happening, real-time. The mrgn team has been running these strategies behind the scenes, and it’s been pretty fantastic ngl. Now we’re increasing capacity and doing a little public stunt.
If other vaults were focused on risk minimization, then the black box is focused on return maximization. Yeah I’m going to roll with that. (Both are great btw)
Why should I deposit into the black box?
We’re a team that’s building modular infra for the best traders in defi. We get into the heads of our users and proactively solve problems by trading ourselves — hence mrgn research. We come from Goldman, Citadel Securities, Morgan Stanley, Credit Suisse, among others… (don’t call us boomer, I swear, don’t call us boomer right now).
“Show me the returns.” Well, the approach we’re using for black box v1 is currently at:
Will this strategy scale? We tend to think yes. At that rate? Not initially. There’s a few things we’re also doing behind the scenes to increase capacity around our strategies. As we open to the public, the black box v0 vault will probably be closer to 25% APR. Still… pretty good. This is definitely an exercise in scaling capacity, and we’re ready for it. “Will I lose money with the black box?” I mean, sure it’s possible. Isn’t the saying, “the only things risk free in life is death and taxes”, or did I mess that up.
Think of the black box like a good, actively managed allocation for your personal portfolio. Get some exposure, test it out, then go from there :)
When can I deposit into the Black Box?
The answer to that will be announced on the mrgn research account. I’ll advise you to turn on post notifications… we might pull some strings for early depositors. This is the time to be early.
There will also be lockup periods with the black box. We’ll need some time to perform good trade execution and let the strategy play out before you have the ability to withdraw. Right now we have these epochs set at 2 weeks (which I personally think is pretty great considering the strategies we’re running). This could change. Stay updated. If you leave your deposit in, it will auto-compound into each following epoch. Feel free to grab a drink and watch number go up.
We’re using the marginfi engine to capture these opportunities. We’re the team building marginfi, and we’re shaping the engine to better take advantage of the opportunities we’re pursuing. It’s a symbiotic relationship between protocol & users. We’re both.
Alright, so here we go…
ANNOUNCING OUR WHITELISTING PROCESS 🎉
You wanted access, now you’re getting it. Here’s the rough outline of how we’ll admit depositors to this vault:
First things first, we had well over $17M in commitments in 2 days. 1) That’s crazy, we love you. 2) We’re going to handle all of that as soon as possible (plus all the new commits we’re now fielding).
We’re confident we can deploy the total amount committed in a timely manner, so we’ll be accepting all commits — no one is being turned away :).
Anyone who filled out the deposit form will get access to our broader strategies delivering yield. A primary destination for excess capital not initially deployed into the first epoch of the black box will be the marginfi borrow/lend pool.
It will be a balance between our pool (where leverage for the strategy comes from), the strategy (where we’re capturing yield), and other black box-centric strategies (focused on increasing capacity while delivering yield).
However, a smaller group of depositors will get initial access to the black box (v0). Here’s how that works:
black box v0 initial size: $112,500
v0 cap per depositor: $2,500
This means we will accept $2,500 of committed capital from each of the 45 selected initial depositors — for the first epoch of the black box vault (v0).
If someone committed less than $2,500, we will automatically fill the remaining capacity in their slot from the other 44 members, pro-rata (increasing their share).
We’re intentionally starting small — we want to make sure things are running smoothly, all questions are answered, and that our team is around to help anyone who needs it.
However, from here, we’re going to size up.
Our team just poached an experienced trader you’ve probably seen around from Citadel Securities. (Look out for an announcement soon on that). He’ll be leading our operations as we increase capacity. The black box is really just a v0 right now… we have so much we want to add. With that, comes capacity. With that, comes more depositors.
Attaining Initial Access
People want to be first, and we get that. That’s the power of compounding.
We’re already going thru the deposit form filled out by members of the black box community. That’s a great place to start if you want access.
Some additional things you could do here:
subscribe to this Substack
(we’ll make future announcements here)
follow our twitter @mrgntrade + @marginfi (post notifications are often ideal)
refer your friends (we just added a “referred by” section in the form)
also, the people want to make money.
make sure you’re in our telegram (timely updates will be sent here)
tweet “vault me daddy @mrgntrade” because why not
I think someone on our team is going to iron out a real marketing campaign soon, so far we’ve just been tweeting. Stay tuned to the mrgn research twitter account.
Let us know if you have any questions in the telegram. The first cohort of 45 will be announced very, very soon. Stay tuned.
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