TLDR

• Enzyme V4 comes with a new Gas Relayer feature that allows managers to run vaults without worrying about paying for high gas fees out of their own pocket
• This new feature has financial implications for the vault depositors that managers must be aware of before implementing
• Using this powerful new feature should be a thoughtful decision and this article will help you make up your mind about it

Why the Gas Relayer is a real game changer

Since the launch of Enzyme in early 2021, Ethereum gas fees have been the biggest challenge for smaller vault managers that want to experiment with on-chain asset management, create their own investment vaults and run their unique DeFi strategy to ultimately build up a successful track record. Smaller managers have been either discouraged or outright forced to interrupt the execution of their strategy because of the insurmountable cost burden of high gas fees.

One of our founding values is to reduce barriers to entry and facilitate access to decentralised asset management for all. For that reason we decided to do something about it in our Enzyme v4, Sulu. One of our goals is to inspire a new generation of DeFi asset managers and help them show their talent on our platform.

A tangible outcome of this effort is a gas relief solution called Gas Relayer.

The Gas Relayer is a brand new v4 feature that sits on the Open GSN network and allows vault managers to rely on the WETH balance in their vault to execute transactions instead of spending ETH from their own external wallets.

The same feature is available for vault managers who deploy on Polygon, with two obvious remarks: a) in such case WMATIC is the token used by the gas relayer and b) on Polygon gas fees are not an existential issue therefore the relayer is not an actual necessity.

For that reason, the example below will demonstrate how to enable the Gas Relayer on Ethereum (though a manager could also enable this on Polygon, should they wish).

How can you enable the Gas Relayer?

First off, the gas relayer is not active by default so vault managers need to go to Settings → Fees → Enable Gas Relayer and manually turn on this feature.

Once enabled, the Gas Relayer checks the WETH balance among the vault holdings and sets aside a buffer reserve of 0.5 WETH. That means you must hold at least 0.5 WETH in the vault in order to implement the change. From that moment on, whenever the manager submits a new transaction they will be prompted with the option of using the relayer. Note that using the relayer is always optional, even when it’s turned on (i.e. managers can still opt for the traditional external route if they wish so).

It’s important to note that the Gas Relayer is drawing funds straight from the vault, which implies that the AUM is directly impacted by this feature. Whenever the relayer is called upon to run a transaction, a certain amount of WETH is subtracted from the initial balance. As usual, the specific amount depends on the gas price at the moment of the transaction. More thoughts on the overall financial implications later on.

It’s also worth mentioning that using the relayer per se does not bring any actual gas savings or cheaper gas fees, it simply means that the gas is redirected to the vault instead of being charged to the manager’s wallet.

Once the initial gas budget is depleted, the protocol automatically tops it up, provided that there is a sufficient WETH balance (or WMATIC) in the vault. If the balance is zero, the relayer cannot be refilled and thus can no longer be used. Managers can always check the balance among Settings→Fees and manually top up if needed.

Can I run all transactions through the relayer?

Good question! You can run most transactions through the gas relayer, although not all are covered.

A few transactions that can’t be executed with the relayer are:

• Claiming management and performance fees
• Redemption of vault manager’s shares
• Redemption of depositors’ shares (probably needless to say)

As you can see, the bulk of the vault operations can be funded via the Gas Relayer, which should be sufficient for anyone to sustainably run a vault strategy on Ethereum. For further technical information, please refer to our docs here: Gas Relayer Specs.

Are you using a Gnosis Safe multisig as vault owner?

Please keep in mind that if you’re using a Gnosis Safe as the vault owner you won’t be able to use the Gas Relayer directly. The issue can be easily worked around though: you can delegate trading permissions to a single asset manager wallet (which could be one of those included in the multisig) and then connect with that one in order to enjoy the relayer functionality. In order to do that you must go to Settings → Asset Management → Add Asset Manager

A word of advice

Before you go crazy with this new feature, let’s be clear that the Gas Relayer does not equal gas free. As previously mentioned, it takes funds straight from the vault and impacts your AUM and share price.

Time to get real: what’s the actual financial impact?

Turns out it’s not so bad. Let’s do simple maths: assuming $200/tx and a vault with 10 positions rebalanced monthly, it’s approximately $2000/month. For a vault that holds $1,000,000 the share price would shift by 0.2%, which is far lower than the average daily market swings. Still, you should never go full degen with it and assume that running the vault is kinda “free”.

Always remember that your depositors are impacted by the relayer, although on the flipside, they may ultimately benefit from your increased focus on market dynamics and yield opportunities (rather than how much longer you can run your vault before fees become unsustainable).

To relay or not to relay? That is the question

Every manager reading this is now confronted with a decision: is it wise to use the Gas Relayer or not? What impact will this have on my depositors? Will they accept it? Will they think it’s unjust of me?

Let us help you clarify this.

So far, creating and running a vault on Ethereum has been only accessible to those that could afford not to care about high gas fees. The only option for smaller managers has been to factor in the gas costs and charge a higher management fee (or worse, an entry fee) to offset the upfront costs required to steer the ship in the right direction.

However, if we want to spur financial innovation, democratise access to decentralised finance and help managers employ the powerful money lego of Ethereum, we had to do something better to break down this barrier. The Gas Relayer is designed to do exactly that and using it responsibly is 100% fair game for smaller managers.

A quick best practice that may help you smoothen the transition: whenever possible, communicate with your depositors and explain openly your intention to change the gas policy. Accepting that everyone has to take their fair share of gas costs is probably easier than you think. It’s the price of flying on DeFi first class and keep in mind that for your depositors it’s much cheaper than paying 100% of the gas themselves outside the Enzyme vault.

Get started or upgrade!

It’s time to connect your wallet and create your own vault if you haven’t done it yet. And if you already have one, it’s time to upgrade to V4 Sulu to enjoy a fully revamped vault management experience!

If you’re still on the fence, we have prepared for you a quick and convenient overview of the main reasons why you should upgrade to V4 Sulu which you can read here.

For business enquiries, please contact: luca@avantgarde.finance

For marketing enquiries, please contact: conor@avantgarde.finance

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