Reward Vault Request for D2 Finance’s dgnUpside Strategy vault
1. Proposer Details
- Email: hwxfrank@d2.finance
- Proposer’s project name: D2 Finance
- Proposer’s X account: https://x.com/HWxFrank
- Best Telegram Handle for questions/fixes: @HWxFrank
- Affiliation: D2 team
2. Protocol Details
D2 Finance is a Multi-strategy Fund delivering Tokenized Derivatives Strategies and derivatives trading, in a 100% on-chain solution.
D2 Finance brings institutional expertise into DeFi, with a 10+ year history of managing capital for some of the largest allocators in the world (PAG, Northwest Investments HK, etc). This experience translates into robust, actively managed strategies capitalizing on market inefficiencies on-chain
- Protocol Name: D2 Finance
- Protocol Type: On-chain multi-strategy hedge fund, Tokenized Derivatives Strategies
- Protocol X profile link: https://x.com/D2_Finance
- Protocol docs link: https://gitbook.d2.finance/
- Protocol audits links: Paladin & Cyfrin audits have secured >$250m trading volume on D2 Finance Audits | D2.Finance
- Does the protocol have any relationship with current Berachain validators: In progress
3. Contract/Pool Details
- Contract Name: dgnUpside
- Contract Address: 0xBf075980792f8cc89DFb74b553acf6750a7E941b
- Contract Type / Configuration: ERC-4626 compatible vault with customized trading strategy smart contract
- Describe how the contract work:
The Vault is an ERC-4626 compatible single staking vault, which handles all deposits, withdrawals, and share accounting functions. When a user deposits funds in the vault, they receive an ERC-20 vault token representing their share in the vault
Strategy Vault Flow
– The strategies are deployed in cycles called “epochs.” Each epoch has a funding phase, a trading phase, and a withdraw phase.
– Funding Phase: When the vault opens in the funding phase, users can deposit the vault’s underlying currency.
– Trading Phase: During the trading phase, users may not deposit or withdraw, and the trader may take custody of the vault’s funds to run the strategy mandates.
– Withdraw Phase: At the conclusion of the epoch, the funds are returned to the vault +/- PNL for users to withdraw at NAV or rollover to next epoch.
- Contract Fees: 2% management fee annualized, 20% performance fee on profits
- Existing Liquidity / TVL: 300 WETH
- Identify any address(es) controlling more than 10% of the contract shares: Users holder distribution dgnUpside (dgnUpside) Token Tracker | BeraScan
- Is the contract upgradable?: No
- Contract Control: Multisig
- Additional details on Contract Control:
Security | D2.Finance
Vault Owner / Key Security
Each vault smart contract, when deployed sets an address as the owner of the vault.
The vault owner default is a 4/7 multi-sig consisting of 1 D2 team member and 6 trusted contributors/rangers
The vault owner at no time can access customer funds, function of the owner is:
- Start Epoch
- Set Whitelist / blacklist
- Set deposit caps
- Manage trader executor roles
In a case where the Executor Role (D2 trading team) private keys are exposed, the vault owners can remove permission and set a new trusted trader address as the executor role approved for trading. The executor role permissions are defined at deployment and limit interactional risk to an immutable set of pre-approved assets, protocols, and functions.
The executor role never overlaps with vault ownership role.
- Is the contract verified: Yes
- Can the contract be paused: Yes
- Does the contract rely on oracles: No
4. Token Details
Provide the following details for each token in the contract (up to 5):
For Major Tokens (Vault deposit asset):
- Name: WETH
- Symbol: WETH
5. Token / Project Background / Incentive Token Whitelist
Only two tokens can be whitelisted for use as incentives in a Reward Vault. Indicate which tokens will be used and provide all relevant information below.
- Incentive Token 1: WBERA
- Estimated 3000 BERA / month, exact distribution is dependant on vault strategy yield, tvl and market opportunities
- The D2 Finance team will manage the incentives distribution through a new team SAFE multi-sig 3/4 specific for incentive management
6. Growth, Community & Ecosystem Impact
Why This Contract Matters:
- How will it benefit Berachain?
- Will it deepen liquidity for a major ecosystem token (e.g., BERA or a core stable asset)?
- Does it enable high-impact trading pairs that boost adoption or integrate with other Berachain projects?
The dgnUpside strategy is a managed tokenized derivatives strategy vault designed to capture multi-asset upside across ETH, BTC, and BERA, enhanced by Berachain’s Proof of Liquidity (PoL) mechanism.
By deploying capital strategically across the Berachain ecosystem, this contract delivers tangible benefits that amplify growth, deepen liquidity, and foster community engagement.
Key Benefits:
- Deepens Liquidity for Core Tokens
dgnUpside boosts liquidity and trading volume for ETH, BTC, and BERA by directing activity through Berachain’s native protocols
dgnUpside represents the next evolution of our dgnETH strategy, originally deployed on Arbitrum. With an expanded asset scope and enhanced hedging capabilities, this migrated strategy builds on its predecessor, which achieved over $60 million in trading volume through 211 days, and a 300 WETH cap.
- Enhances Trading Pairs and Adoption
The strategy integrates with key Berachain projects—such as Ooga Booga, IVX, Dolomite, and Kodiak—supporting impactful trading pairs (e.g., ETH/BTC, BTC/BERA, ETH/BERA, BERA/USDC).
It leverages IVX’s 0DTE options for dynamic exposure and convex hedging, significantly strengthening the option market’s viability.
- Creates Net Positive Value
By tapping into Berachain’s PoL system, dgnUpside generates sustainable yield and earns BGT rewards. These rewards are either distributed directly to users as yield or used as collateral to increase trading volume and ecosystem upside.
As a reward vault, dgnUpside amplifies utility rather than extracts, by further re-deploying BGT rewards in collateral form across integrated protocols, benefiting both users in the form of higher potential yield and ecosystem protocols as greater volume
dgnUpside Strategy Details: Introducing dgnUpside: Up to 4X Crypto Upside, No Liquidations | by D2 Finance | Apr, 2025 | Medium
TL;DR: dgnUpside is a win-win-win: Berachain gains deeper liquidity and activity, users enjoy enhanced returns with built-in safety nets, and validators see higher revenue. This strategic, reflexive DeFi design aligns incentives across the network, creating a virtuous cycle that accelerates ecosystem growth.
Potential Volume / TVL:
The strategy hit the 300WETH cap limit upon opening for deposit, demonstrating demand.
This strategy has the capacity to scale to meet foreseeable demand, as the strategy focuses on the upside of bluechip assets (BTC/ETH/BERA) future constraints are primarily the liquidity of on-chain options.
dgnUpside represents the next evolution of our dgnETH strategy, originally deployed on Arbitrum. With an expanded asset scope and enhanced hedging capabilities, this migrated strategy builds on its predecessor, which achieved over $60 million in trading volume across 211 days, within a 300 WETH cap.
As a reward vault, we aim to utilize the additional BGT to enhance user yields and partner flow for distribution/marketing to scale Total Value Locked in phases, targeting an optimal capacity of 3,000 ETH.
Synergies with Other Protocols:
All D2 strategies have strong synergies with other Berachain protocols as our trading strategies leverage their protocol for flow and execution.
Although the vault receipt token itself is not typically traded, the underlying assets within the vault are actively deployed across the Berachain ecosystem, generating substantial trading volume through our partner protocols. This strategy vault primarily drives flow via OogaBooga, IVX, Dolomite, Euler, and Kodiak.
In the two months since Berachain’s mainnet launch, D2 Finance has executed approximately $20 million in organic trading volume across 10+ Berachain protocols using the underlying assets in our Berachain strategies. Notably, trading activity remained highly conservative during the first 30 days leaving room to scale.
Marketing / Promotion:
Are there plans to co-market with another project to bootstrap liquidity?
Yes
- Partner Protocols: The strategy includes collaboration with IVX initially, with potential expansion possible to projects like Dolomite and Kodiak following the first epoch. This depends on demonstrated trading volume and subsequent increases to the vault caps.
- Validators: By partnering with validators, we’ll emphasize the revenue upside, positioning dgnUpside as a sustainable, validator-aligned yield engine that benefits the broader ecosystem.
Long-Term Vision:
How could this reward vault evolve over time? (E.g., eventually becoming a core liquidity pair or a major stable pool for the chain.)
The D2 architecture tokenizes each derivatives strategy vault as a fully tradable, permissionless ERC-20 token. For dgnUpside, this creates future opportunities within the Berachain ecosystem:
- Prime Collateral: The dgnUpside token can serve as a yield-bearing asset, positioning it as premium collateral for lending, borrowing, and trading across Berachain protocols.
- Liquid Secondary Market: Pairing the dgnUpside receipt token with WBERA or USDC.e on Kodiak enables a fully liquid secondary market. This can be further incentivized as a reward vault or a speculative yield pool, driving adoption and liquidity and arbitrage opportunity.
- Creating new Trading Assets: This strategy could facilitate the creation of a unique basket option token, consisting of weighted ETH/BTC/BERA
7. Verification
Verification post: https://x.com/D2_Finance/status/1910068738289783023
8. Risk Mitigation
Details: Addressing Risk | D2.Finance
D2 Finance prioritizes capital protection and leverages institutional standards and risk controls:
Highlights:
- Stress-Tested: Positive returns during August 2024 / February 2025 market crashes.
- Secure Execution: All trades settled on-chain; audited by [Paladin] + [Cyfrin].
- Risk is auditable on-chain. There is no centralized exchange exposure, with all trades/hedges done through defi platforms, and settled/executed on-chain.
- Built by ex-PAG quants: Institutional rigor in every aspect of operation
- Vaults: This is an ERC4626 compatible smart contract and represents the secure user interface
- Strategy Contract / Trader OMS - This serves as the institutional grade internal interface for fund custody and active trading within the strategy & smart contract framework. The OMS embeds traditional hedge fund risk limit parameters within its smart contracts. While traders / pod can engage with compatible and approved DeFi applications/tokens using the allocated capital, direct withdrawals are restricted.
Our architecture has been audited and rigorously battle-tested with >$250 million dollars in notional value traded across various DeFi protocols.