Reserve design
Stratifying reserve assets for a resilient reserve design

Design philosophy

The Gyroscope reserves have been designed to maximize resilience of the system. To that goal, risk must be 'stratified' or isolated. Problems that occur in one system should not cascade into other connected systems.
For example, LP positions in the Y Curve pool take on the composed risks of USDT, Dai, USDC, TUSD, Compound, Aave, and Curve. In the design of a Curve AMM pool, if one of these components were to fail, the value of the whole pool would cascade to zero.​
This is commonly referred to as 'composability risk' or also 'contagion risk'.

Implementation

As such, the Gyroscope reserve is separated into lower-level vaults (triangles in the below figure) with contained risks. There are little overlapping risks between the vaults. The failure of an individual vault then has no effect on the remaining vaults.
If vaults should fail (if a triangle is removed in the below figure), the Gyroscope system may still remain stable at $1 through algorithmic price bounding backed by the unaffected reserves (described fully here). After a vault failure, the Gyroscope reserve can also recover back to full strength through the yield earned on reserve assets in the remaining vaults. This resilience, i.e., the ability of Gyroscope to maintain its functionality even if parts of the system fail, and ability to recover are key elements of the Gyroscope design.
A stylized representation of Gyroscope's reserve configuration is depicted below.
Gyroscope stratifies composability risks. The failure of individual vaults (triangles) does not cascade.
Last modified 1mo ago