Protocol Operations

This page covers how Toros vaults are managed, how rebalancing works, and what price oracles are used across different products.

Vault Management

Toros vaults are built on the dHEDGE protocol. Each vault has a manager with defined permissions.

• dHEDGE multisig controls vault configuration and whitelisted contracts

• Trader account executes the actual trades — rebalancing, position adjustments, and strategy operations

• Vault managers can only interact with whitelisted contracts and assets, preventing unauthorized transactions with depositor funds

• New protocol integrations are added through DAO-governed whitelisting

The trader account operates within the constraints set by the multisig. It cannot withdraw funds, change vault parameters, or interact with non-whitelisted contracts.

Rebalancing

Toros leveraged tokens use automated rebalancing to maintain their target leverage ratio. Rebalancing is not on a fixed schedule — it is triggered based on how far the effective leverage has drifted from the target.

When the underlying asset price moves:

• Price rises (long position): Effective leverage decreases. The protocol increases exposure to restore the target ratio.

• Price falls (long position): Effective leverage increases. The protocol reduces exposure to lower risk.

This drift-based approach reduces the number of unnecessary trades compared to a fixed daily rebalance, which helps limit volatility decay and slippage costs.

Rebalancing Mechanism by Product Type

Product Type	Rebalancing Mechanism
Money market-based leveraged tokens	Adjusts Aave borrow/collateral positions
Perpetuals-based leveraged tokens	Adjusts GMX perpetual futures position size
Protected Leveraged Tokens	Leverage and protection managed through Toros Everlasting Options
Yield Vaults	Reallocates across DeFi protocols based on yield conditions

Price Oracles

Toros products use different price oracles depending on the underlying mechanism and asset. Accurate price feeds are critical for rebalancing, minting, and burning tokens at fair value.

Oracle Sources

Oracle	Description
Chainlink	Industry-standard decentralized oracle network with broad asset coverage
Pyth	High-frequency oracle with sub-second updates for faster price resolution
GMX Oracle	GMX's internal oracle combining multiple price feeds for futures pricing
TWAP	Time-weighted average price calculations that smooth out short-term price manipulation

Different products may use different oracles depending on the underlying protocol and asset. Toros products typically use two or more oracle sources for redundancy and accuracy. Oracle selection is part of the vault configuration managed by the dHEDGE multisig.

Oracle Risks

• Stale prices: If an oracle fails to update, positions may be rebalanced or valued using outdated prices

• Manipulation: TWAP and multi-source oracles reduce but do not eliminate manipulation risk

• Dependency: Each oracle introduces a trust assumption on the oracle provider's infrastructure

Trust Assumptions

Using Toros products involves the following trust assumptions:

• Smart contracts: Toros vaults, dHEDGE protocol, and underlying protocols (Aave, GMX, Flat Money) function as intended

• Vault manager: The trader account executes rebalancing correctly within its whitelisted permissions

• Oracles: Price feeds are accurate and timely

• Governance: The dHEDGE multisig and DAO governance act in users' interest when updating parameters

For audit details and bug bounty information, see Security and Audits.