# Overview

Mellow ALM arm creates products that increase DeFi ecosystem efficiency. It evolved from active liquidity management system called Mellow Permissionless Vaults.

Mellow Permissionless Vaults is a set of smart contracts that allows anyone to create a multi-ERC20 token [Vault](https://docs.mellow.finance/mellow-alm/definitions#vault) and a [Strategy](https://docs.mellow.finance/mellow-alm/definitions#strategy) on top of different DeFi protocols (like Uniswap, Yearn, etc.) and blockchains (like Ethereum, Optimism, etc.)

### **Users**

There are three types of actors using permissionless vaults:

* [Liquidity provider](https://docs.mellow.finance/mellow-alm/definitions#liquidity-provider) provides liquidity into [Vaults](https://docs.mellow.finance/mellow-alm/definitions#vault) to earn profits
* [Strategist](https://docs.mellow.finance/mellow-alm/definitions#strategist) manages liquidity in the [Vaults](https://docs.mellow.finance/mellow-alm/definitions#vault) by distributing it among different DeFi protocols. Typically [Strategist](https://docs.mellow.finance/mellow-alm/definitions#strategist) would create a [Strategy](https://docs.mellow.finance/mellow-alm/definitions#strategy) smart contract that transparently manages [Vault](https://docs.mellow.finance/mellow-alm/definitions#vault) liquidity. However, [Strategy](https://docs.mellow.finance/mellow-alm/definitions#strategy) can also be an offline algorithm or manual liquidity management.
* [Governance](https://docs.mellow.finance/mellow-alm/definitions#governance) manages common protocol parameters

### Vaults

Vaults are smart contracts that put liquidity into different underlying protocols. The underlying protocol could be some well-known DeFi protocol like Uniswap, Sushiswap, Yearn, Compound, etc., or another Vault.

The tokens managed by Vault are fixed and immutable, i.e. Vault cannot start managing additional tokens or stop managing existing tokens. Each Vault can only put liquidity into one fixed underlying protocol.

Examples of the Vaults are:

* Vault that puts ETH and USDC into Uniswap V3
* Vault that puts WBTC, DAI and USDT into Aave
* Vault that puts ETH into Yearn

When the [Liquidity provider](https://docs.mellow.finance/mellow-alm/definitions#liquidity-provider) deposits liquidity into the Vault, he received LP tokens back (or NFT token - that depends on a particular Vault). On withdrawal, the [Liquidity provider](https://docs.mellow.finance/mellow-alm/definitions#liquidity-provider) burns the LP tokens and receives his liquidity and earned profits back.

The [Strategy](https://docs.mellow.finance/mellow-alm/definitions#strategy) can only redistribute ERC-20 tokens between protocols. The tokens can leave the Vault only when the  [Liquidity provider](https://docs.mellow.finance/mellow-alm/definitions#liquidity-provider) withdraws it.

### Why use vaults

The [Liquidity provider](https://docs.mellow.finance/mellow-alm/definitions#liquidity-provider) would use vault to earn profits generated by the strategy. Note that the [Strategy](https://docs.mellow.finance/mellow-alm/definitions#strategy) generally bears some risks so the [Liquidity provider](https://docs.mellow.finance/mellow-alm/definitions#liquidity-provider) may earn profits but can also incur losses depending on the Strategy behavior. The liquidity can be provided and withdrawn at any time.

The [Strategist](https://docs.mellow.finance/mellow-alm/definitions#strategist) would earn performance fees from profits generated on the Vault liquidity. The term profits generally refer to the profits of the underlying protocol like fees generated by Uniswap V3 or yield generated by Aave. For example, profits don't capture any price movements in UniswapV3.

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