---
# System prepended metadata

title: Duration Vault Strategy — Audit Handbook

---

# Duration Vault Strategy — Audit Handbook

---


| Table of Contents | 
|---|
| [Scope](#Scope) |
| [Context](#Context) | 
| [Core Changes](#Core-Changes) | 
| [How It Works](#How-It-Works) |
| [Invariants](#Invariants) |
| [Known Issues](#Known-Issues) |

---

## Scope

### New Contracts

<!-- TODO: provide links --> 

| File | Description |
|------|-------------|
| `src/contracts/strategies/DurationVaultStrategy.sol` | Main implementation |
| `script/releases/v1.11.0-duration-vault` | Deployment and upgrade script |

:::spoiler :information_source: About upgradeScript :
Our upgrade scripts use a deploy/metadata manager called "zeus" – however, this is not in scope. The purpose of including our upgrade script here is to get some input on the steps of the upgrade and if it can break anything in the already existing protocol.
:::

### Modified Contracts

| File | Changes |
|------|---------|
| `src/contracts/core/StrategyManager.sol` | Added `beforeAddShares` / `beforeRemoveShares` hook calls |
| `src/contracts/strategies/StrategyBase.sol` | Added virtual hook functions for strategies to override |
| `src/contracts/strategies/StrategyFactory.sol` | Added `deployDurationVaultStrategy()`, duration vault beacon and some new related state variables |


- **Commit** : [eb09ca46d0d8c6a9cb9bc74bfcd583d55a51c04c](https://github.com/Layr-Labs/eigenlayer-contracts/tree/release-dev/duration-vaults)

For full diff check PRs : 
  - main PR :  [PR-1671](https://github.com/Layr-Labs/eigenlayer-contracts/commit/bcb070730cdb14cc5abab86e081c43ba210db80e)
  - arbitrator PR : [PR-1700](https://github.com/Layr-Labs/eigenlayer-contracts/pull/1700)

---

## Context

The `DurationVaultStrategy` is a **time-bound, single-use EigenLayer strategy** designed for use cases requiring guaranteed stake commitments (e.g., insurance pools).

### High-Level Flow

1. *AVS creates vault* via `StrategyFactory` with duration, caps, operator set config, and arbitrator
2. *Vault self-registers as an operator* — stakers must delegate to the vault before depositing
3. *Stakers deposit* during the open window, subject to per-deposit and total caps
4. *Admin locks the vault* — deposits/withdrawal queuing blocked; full magnitude allocated to operator set
5. *AVS submits rewards* — stakers can claim rewards via normal EigenLayer reward flow 
6. *Vault exits lock* — either:
   - **Normal**: duration elapses → anyone calls `markMatured()`
   - **Early**: arbitrator calls `advanceToWithdrawals()` before duration elapses
7. *Stakers withdraw* — receive principal minus any slashing that occurred

### Key Design Points

| Concept | Description |
|---------|-------------|
| **Vault = Operator** | Vault registers as EigenLayer operator; all deposited shares are delegated to itself |
| **Arbitrator** | Trusted address that can unlock the vault early via `advanceToWithdrawals()` if external terms are violated |
| **Active Share Cap** | TVL cap uses `operatorShares` (excludes queued withdrawals) |
| **Allocation Delay** | Set to `minWithdrawalDelayBlocks + 1` — ensures pre-lock queued withdrawals complete before allocation becomes slashable |
| **Deallocation Delay** | After maturity, vault remains slashable for `DEALLOCATION_DELAY` blocks |
| **Single-Use** | Vaults cannot be re-locked after maturity; deploy new vault for new commitment |

### Related Documentation

<!-- TODO: add links --> 

- [DurationVaultStrategy docs](https://github.com/Layr-Labs/eigenlayer-contracts/blob/release-dev/duration-vaults/docs/core/DurationVaultStrategy.md)

---

## Core Changes

### Strategy Hooks

**Problem**: Standard `StrategyBase` has no mechanism to enforce custom constraints on share movements after they are already deposited. Duration vaults need to block deposits after lock, require delegation to the vault, enforce caps, and block withdrawal queuing during the allocation period.

**Solution**: Add hook functions that `StrategyManager` calls before any movement of shares. Strategies can override these to implement custom logic, like vetoing re-delegation or preventing withdrawal queuing.

#### StrategyManager Integration

In `_addShares()` — called when crediting shares after deposit or withdrawal completion as shares:

```solidity
// allow the strategy to veto or enforce constraints on adding shares
strategy.beforeAddShares(staker, shares);
```

In `_removeDepositShares()` — called when queuing a withdrawal or undelegating:

```solidity
// allow the strategy to veto or enforce constraints on removing shares
strategy.beforeRemoveShares(staker, depositSharesToRemove);
```

#### StrategyBase Virtual Hooks

```solidity
// Default: no-op. Derived strategies override to add constraints.
function beforeAddShares(address, uint256) external virtual onlyStrategyManager {}
function beforeRemoveShares(address, uint256) external virtual onlyStrategyManager {}
```

**Why hooks instead of modifying StrategyManager directly?**
- Keeps core contract minimal and generic
- Allows per-strategy customization without forking `StrategyManager`
- Existing strategies unaffected (default no-op)

---

### StrategyFactory — Deploying Duration Vaults

Duration vaults are deployed via `StrategyFactory.deployDurationVaultStrategy(config)`. This mirrors how regular strategies use `deployNewStrategy(token)`, but with a separate beacon and different tracking.

**Deployment flow:**

1. AVS provides a `VaultConfig` (token, admin, duration, caps, operator set, etc.)
2. Factory deploys a `BeaconProxy` pointing to `durationVaultBeacon`, calling `initialize(config)`
3. Factory registers the vault in `durationVaultsByToken[token]` — multiple vaults per token allowed (unlike regular strategies which are 1:1)
4. Factory whitelists the vault in `StrategyManager` for deposits
5. Vault's `initialize()` handles operator registration, operator set registration, and reward split config

**Changes from main:**

- Added `durationVaultBeacon` immutable — new beacon for duration vault implementations
- Added `durationVaultsByToken` mapping — new state variable that tracks all duration vaults per token
- Both beacons are now set in constructor (previously `strategyBeacon` was set in `initialize()`)

---

## How It Works

### Vault as Operator

On initialization, the vault:

1. **Registers itself as operator** via `delegationManager.registerAsOperator()`
2. **Sets allocation delay** to `minWithdrawalDelayBlocks + 1` 
3. **Registers for operator set** via `allocationManager.registerForOperatorSets()`
4. **Sets reward split to 0%** — 100% of rewards go to stakers

---

### Lifecycle & State Machine



```
    ┌──────────────┐   lock()    ┌──────────────┐  markMatured()  ┌──────────────┐
    │   DEPOSITS   │ ──────────► │  ALLOCATIONS │ ──────────────► │ WITHDRAWALS  │
    └──────────────┘             └──────────────┘        │        └──────────────┘
          │                            │                 │              │
    ✓ Deposits                   ✗ Deposits              │        ✗ Deposits
    ✓ Queue withdrawals          ✗ Queue withdrawals     │        ✓ Queue withdrawals
    ✗ Slashable                  ✓ Slashable*            │        ✓ Slashable**
                                                         │
                                 advanceToWithdrawals() ─┘ (arbitrator, early exit)
    
    * After allocation delay passes
    ** Until deallocation delay passes
```


| Transition | Trigger | Who | Requirements |
|------------|---------|-----|--------------|
| `DEPOSITS → ALLOCATIONS` | `lock()` | `vaultAdmin` | State is `DEPOSITS` |
| `ALLOCATIONS → WITHDRAWALS` | `markMatured()` | Anyone | `block.timestamp >= unlockAt` |
| `ALLOCATIONS → WITHDRAWALS` | `advanceToWithdrawals()` | `arbitrator` | `block.timestamp < unlockAt` |

---

### Deposits (State: `DEPOSITS`)

The `beforeAddShares()` hook enforces:

1. **Vault must be in DEPOSITS state** — deposits blocked after lock
2. **Token must not be blacklisted** — checked against `StrategyFactory.isBlacklisted()`
3. **Delegation check** — stakers must be delegated to the vault (since it's an operator) before depositing
4. **Deposit amount must not exceed per-deposit cap** — single deposit can't be larger than `maxPerDeposit`
5. **Post-deposit total must not exceed stake cap** — total active shares (in underlying) can't exceed `maxTotalDeposits`

 
> The cap uses `operatorShares` which is the active shares of an operator for any given time. Queued withdrawals reduce `operatorShares`, so they don't count toward the cap.


---

### Lock (Transition to `ALLOCATIONS`)

When `vaultAdmin` calls `lock()`:

1. Records the lock timestamp and calculates unlock time (`lockedAt + duration`)
2. Allocates full magnitude (100%) to the configured operator set

:::spoiler Allocation delay protects pre-lock withdrawals
The allocation doesn't become slashable immediately. It takes effect after `allocationDelay` blocks, which is set to `minWithdrawalDelayBlocks + 1`. This ensures any withdrawals queued before lock won't be slashed.
:::

During `ALLOCATIONS`, new withdrawal queuing is blocked via `beforeRemoveShares()`. However, withdrawals that were already queued before `lock()` can still complete — the hook only prevents *new* queuing, not the completion of existing ones. This gives stakers an exit window.

:::info
*NOTE* that Withdrawals are allowed during `DEPOSITS` state so users can exit if the admin never locks the vault — they're not forced to wait indefinitely.
:::

---

### Mark Matured (Transition to `WITHDRAWALS`)

Once the duration elapses (`block.timestamp >= unlockAt`), anyone can call `markMatured()` to transition the vault to `WITHDRAWALS` state. This function:

1. Records maturity timestamp and opens withdrawals
2. Attempts to deallocate magnitude to 0 (removes slashable stake)
3. Attempts to deregister from the operator set

Both deallocation and deregistration are wrapped in `try/catch` — failures are silently ignored so the function always succeeds. This is intentional: external conditions (e.g., `AllocationManager` paused, AVS already deregistered the vault) should not prevent users from withdrawing their funds after maturity.

:::info 
*NOTE* that even after `markMatured()`, the vault remains slashable for at least `DEALLOCATION_DELAY` blocks until the deallocation takes effect on the `AllocationManager`.
:::

### Early Exit via Arbitrator

The `arbitrator` (set at deployment) can call `advanceToWithdrawals()` to unlock the vault **before** the duration elapses. This is intended for cases where external agreement terms are violated (e.g., insurance premiums not paid). Same effects as `markMatured()` — deallocates, deregisters, opens withdrawals.

**Rewards:** Follow standard EigenLayer flow — AVS submits to `RewardsCoordinator`, stakers claim normally. Operator split is set to 0% at init, so 100% goes to stakers. Reward claims are not blocked by vault state.

---

## Invariants

***State Machine***

| # | Invariant |
|---|-----------|
| 1 | State only progresses forward: `DEPOSITS → ALLOCATIONS → WITHDRAWALS` |
| 2 | `lockedAt > 0` ⟹ `state ≠ DEPOSITS` |
| 3 | `maturedAt > 0` ⟹ `state == WITHDRAWALS` |
| 4 | `unlockAt == lockedAt + duration` when locked |

***Deposits & Delegation***

| # | Invariant |
|---|-----------|
| 5 | Any successful deposit requires staker delegated to the vault strategy |
| 6 | Any user with active shares in this strategy MUST always be delegated to this same strategy |
| 7 | Vault shares cannot be delegated to any operator other than the vault itself |
| 8 | Any normal deposit cannot exceed `maxPerDeposit`  (see known issues)|
| 9 | Post-deposit active shares (in underlying) cannot exceed `maxTotalDeposits` |
| 10 | `maxPerDeposit <= maxTotalDeposits` always |

***Withdrawal & Slashing Protection***

| # | Invariant |
|---|-----------|
| 11 | Users should always be able to queue withdraw before lock or after maturity |
| 12 | Vault delegated shares may only decrease due to slashing during the `ALLOCATIONS` state |
| 13 | Any queued withdrawal created before `lockedAt` MUST NOT be subject to slashing (unless dealocation delay changed)|

---

## Known Issues

### 1. Cap Bypass via Direct Token Transfer

**Issue**: Donations (direct token transfers) to the vault bypass `beforeAddShares()` and inflate the share value without triggering cap checks.

- The `beforeAddShares` hook is only called through the `StrategyManager` deposit flow. Direct ERC20 transfers to the strategy contract increase the underlying balance without minting new shares, which inflates the exchange rate.

- The attacker gains nothing —and they should be the first depositor or they'll be donating value to existing shareholders. While this can be used to exceed the TVL cap in underlying terms, the cap's primary purpose is to limit protocol risk exposure, and donations don't really increase that risk.

---

### 2. Best-Effort Cleanup State Inconsistency

**Issue**: If `_deallocateAll()` or `_deregisterFromOperatorSet()` silently fails during `markMatured()`, the vault transitions to `WITHDRAWALS` state but may still have active allocation/registration on `AllocationManager`.

- These calls are wrapped in `try/catch` to prevent external conditions (e.g., `AllocationManager` paused, AVS already deregistered the vault) from blocking user withdrawals after maturity.

---

### 3. Short Duration Edge Case

**Issue**: The allocation delay is set to `minWithdrawalDelayBlocks + 1` to protect pre-lock withdrawals. If the vault's duration is shorter than this delay, the vault matures before the allocation becomes active.

- AVSs deploying duration vaults should ensure the duration is meaningful for their use case, and stakers can always check the duration of each duration strategy vault.

---

### 4. Front-Run Lock

**Issue**: A depositor can front-run the admin's `lock()` call to queue a withdrawal, causing the vault to lock with less capital than expected.

- During `DEPOSITS` state, withdrawal queuing is allowed (so users aren't trapped if admin never locks). It's the admin's responsibility to avoid front-running and make sure that they lock the strategy with the desired capital.

---

### 5. Admin Can Set Cap Below Current

**Issue**: The `vaultAdmin` or `unpauser` can set the TVL limit to a value less than currently invested funds.

- This is intentional flexibility. Setting a lower cap doesn't affect existing deposits — it only blocks new deposits until withdrawals bring the balance below the new cap.

