Mellow Vaults Overview

Mellow offers a liquid vault primitive built around a suite of vault smart contracts, each with a customizable risk profile and managed by curators. These vaults tap into multiple yield sources—restaking rewards, protocol incentives, and traditional DeFi strategies—while mitigating AVS risks through the security and composability of Ethereum and leading restaking providers.

To further enhance its robustness and functionality, Mellow Protocol integrates with a variety of DeFi primitives and infrastructures. This integration provides best user experience, enabling seamless interaction with other financial tools and services within the ecosystem. Future iterations of Mellow Protocol are planned to include advanced features such as dynamic rebalancing of vault allocations to optimize risk-adjusted returns and minimize potential losses due to market volatility.

The core architecture is designed to flexibly adapt to depositor needs without compromising on security or transparency. Permissionless vault curation means anyone can launch a new vault with tailored risk/reward parameters. Once live, each vault dynamically allocates capital across various yield-generating opportunities:

• Restaking Rewards (except for DV Vault)

  • Through restaking protocols, stakers can choose to accept additional slashing conditions on their staked ETH for rewards from protocols whose state is secured by stakers’ assets.

  • Typical design enables the validation of various modules, including consensus protocols for L2s and appChains, data availability layers, virtual machines & application layers, creating new revenue opportunities for restakers.

  • Restaking protocols share the abundant security of Ethereum consensus by spilling it over to these modules, enhancing the reliability of their consensus and adding extra revenue source to restakers.

• DeFi Liquidity Incentives: Vault strategies can route a portion of assets into liquidity pools (Uniswap, Curve, Balancer) or lending markets (Aave, Compound), capturing swap fees, gauge rewards, and interest.

• Protocol Native Incentives: Some vaults integrate directly with incentive programs—for instance, by depositing into newly launched yield-bearing tokens or participating in loyalty point systems—unlocking bonus distributions from governance or ecosystem grants.

Launching LRTs will be permissionless for curators/users

• Although LRTs permit delegation to multiple AVS operators, permissioned LRT holders and LRT node operators have little to no choice in how these delegation sets are formed or how risks are managed.

• Holders can only make adjustments by changing the amount of LRT to which they are exposed.

• Allowing LRT curators to issue new LRTs with refined risk/reward ratios in a permissionless manner makes the possibility of malfunctions causing ripple effects and liquidation cascades across the entire ecosystem remote and unlikely.

Fees mechanism for curators

• LRT curators are incentivized to set a competitive fee on restaking revenue. Mellow plans to aid LRT curators to launch permissionless LRTs with deployment, maintenance and DeFi integrations.