Penalties

Penalties in Withdrawal

The flowchart illustrates how penalties are applied during the withdrawal process in the InsomniaVault.

Key Logic

1. Lockup Check

   • When a user initiates a withdrawal, the system checks: Now < unlockAt[user]?

   • If true, the withdrawal happens before the lockup period ends, and an early exit penalty is applied.

   • If false, no penalty is charged.

2. Penalty Calculation

   • If locked:

     • Compute penalty = withdraw amount × configured early exit fee (basis points).

   • If unlocked:

     • Penalty = 0.

3. Liquidity Check

   • If vault balance is sufficient, the withdrawal is processed directly.

   • If not, the vault requests the StrategyRouter to unwind funds from strategies until the required amount is available.

4. User Payout

   • The vault transfers (withdraw amount - penalty) to the user.

5. Treasury Allocation

   • If a penalty > 0 exists, the penalty portion is transferred to the Treasury.

6. Finalization

   • A Withdraw event is emitted, ensuring transparency for users and off-chain indexers.

Purpose of Penalties

• Encourage Commitment: Reward long-term holders by discouraging premature exits.

• Sustain Protocol: Penalty fees flow into the Treasury to support ecosystem development and security.

• Balance Liquidity: Prevent sudden capital flight that may destabilize strategies or vault balances.