Introduction

Nested is a decentralized protocol providing customizable financial products in the form of NFTs. The platform allows users to put several digital assets, i.e. ERC20 tokens, inside an NFT (abbreviated as NestedNFT).

Each NestedNFT is backed by underlying assets:

• Purchased or sold on a decentralized exchange (AMM).
• Collected/earned after adding liquidity or staking.
• Exchanged/Minted on a protocol that is not a decentralized exchange.
• (...)

The main idea is to allow adding modules (operators) to interact with new protocols and enable new assets, without re-deploying.

The tokens are stored on a self-custodian smart contract.

At the end of the creation process, the user receives the NFT which allows to control all underlying assets of the portfolio. Furthermore, we allow users to copy other users NestedNFTs. The creator of the initial NestedNFT earns royalties.

Further documentation and details can be found here: https://docs.nested.finance/

Architecture

Core contracts

Name	Purpose
NestedFactory	Entry point to the protocol. Holds the business logic. Responsible for interactions with operators (submit orders).
NestedAsset	Collection of ERC721 tokens. Called NestedNFT across the codebase.
NestedReserve	Holds funds for the user. Transferred from the NestedFactory.
NestedRecords	Tracks underlying assets of NestedNFTs. (Amount, NestedReserve).
FeeSplitter	Receives payments in ERC20 tokens from the factory when fees are sent. Allows each party to claim the amount they are due.
NestedBuyBacker	Pulls tokens from the FeeSplitter, buys back NST tokens on the market, and burns a part of it.

Upgradability

The contracts NestedAsset, NestedReserve, and NestedRecords are whitelisting multiple factories (to create NFTs, update records, withdraw from reserve,...).

However, we are also using the TransparentUpgradeableProxy for NestedFactory. Then, the users doesn't have to approve multiple times.

We have kept both mechanisms to get the best flexibility.

Lock

The users can lock their NFTs until a certain date (timestamp) by calling updateLockTimestamp. This feature allows the "hold by design".

Operators (modularization)

What is an operator?

NestedFactory is the main smart contract, but it can't work without the Operators.

As mentioned in the introduction, we designed the protocol to be modular. We want to be able to interact with any protocol in exchange for an ERC20 token.

So, we had to deal with two issues :

• How to interact with 5, 10, or 20 protocols without blowing up the bytecode size and having too much logic?
• How to add new interactions without redeploying the NestedFactory contract?

Our solution is called the "Operator"... A new interaction is a new operator and can be added on the fly. They kind of work like libraries, but since we don't want to redeploy the factory, they are contracts that are called via delegatecall and referenced by the OperatorResolver.

Operator Resolver

An operator allows performing a precise action, like "swap my token A for a token B" with a specific function, but the operator/interface will change depending on the action/context. To interact with new operators on the fly, we must expose new interfaces to the Factory. The OperatorResolver will whitelist all the Operator (address) with the selectors (bytes4) since we can't trust the caller to provide these informations.

struct Operator {
    address implementation;
    bytes4 selector;
}

The caller will send the (imported) bytes32 name of the Operator/Function, for example "ZeroEx::performSwap".

The OperatorResolver will return the address + selector if the call is whitelisted and revert if not.

Storage

Since the operators are called via delegatecall: how can we store/retrieve useful data?
In fact, we cannot trust the Factory to provide all the data, like the address of the protocol. It must be stored and managed by the owner.

When deploying an operator, it will also deploy the storage contract and transfer the ownership to msgSender().

Diagram

Contracts

Name	Purpose
OperatorResolver	Allows the factory to identify which operator to interact with.
MixinOperatorResolver	Abstract contract to load authorized operators in cache.
ZeroExOperator	Performs token swaps through 0x (read more).
ZeroExStorage	ZeroExOperator storage contract. Must store the 0x swapTarget.
FlatOperator	Handles deposits and withdraws. No interaction with any third parties (read more).
BeefyVaultOperator	Handles deposits and withdraws in a Beefy single vault (native or non-native).
BeefyZapBiswapLPVaultOperator	Handles deposits and withdraws in a Beefy Biswap LP vault using zapper.
BeefyZapUniswapLPVaultOperator	Handles deposits and withdraws in a Beefy UniswapV2 LP vault using zapper.
BeefyVaultStorage	Handles whitelisting of Beefy Vault or Zapper.
ParaswapOperator	Performs token swaps through Paraswap.

More operators will be added. e.g. CurveOperator or SynthetixOperator

Orders

The NestedFactory is using the operators to interact with other protocols. The call from the Factory to an Operator is an "Order".

An Order has several information:

• The operator/selector to use
• The token processed (swapped, stacked,...) by the operator (from the portfolio or wallet).
• The calldatas (without the selector).

struct Order {
    bytes32 operator;
    address token;
    bytes callData;
}

It helps us to make one interaction, but we want to make multiple interactions. For example, to create a portfolio with multiple tokens, we need to "batch" these orders.

There are two types of "Batched Orders" processed by the Factory to create or edit Portfolios :

Batched Input Orders

• One same input for every orders but multiple outputs.
• 0.3% fee on the input.
• The input (source) is from a wallet or a porfolio owned by the transactions signer.
• The ouput (destination) is the portfolio owned by the transactions signer (only).

struct BatchedInputOrders {
    IERC20 inputToken;
    uint256 amount;
    Order[] orders;
    bool fromReserve;
}

Batched Output Orders

• Multiple inputs for every orders but one output.
• 0.3% fee on the output if operation does not reduce TVL, 0.8% if it does.
• The input (source) is the portfolio owned by the transactions signer (only).
• The ouput (destination) is from a wallet or a portfolio owned by the transactions signer.

struct BatchedOutputOrders {
    IERC20 outputToken;
    uint256[] amounts;
    Order[] orders;
    bool toReserve;
}

Example processInputOrders flow

Nested Factory interaction with the Nested Reserve and Nested Records

The Nested Reserve stores underlying assets of all NestedNFTs. The Nested Records keeps track of which underlying assets are associated with a specific NestedNFT. Hence, each time the Nested Factory needs to interact with user funds (which are represented as a NestedNFT), it will first check the balance of tokens associated with the NestedNFT through Nested Records. If needed, it will then transfert funds to the Nested Reserve or withdraw funds from it.

Native Token Management

The Nested protocol only handles ERC20 when calling operators.
If the msg.sender is not the withdrawer, the sent ETH used to feed a portfolio are automatically converted to WETH when received.

WETH Conversion

The conversion from ETH to WETH is done when submitting an order through _submitInOrders or _submitOutOrders.

Before submitting orders, the NestedFactory transfers the input tokens from the NestedReserve (or the msg.sender) to the factory and converts the sent ETH to WETH.

Use of ETH in operators

There are some operators who use ETH directly and not WETH.
In this case, the operator uses the Withdrawer to get the ETH back from the WETH contract before using it.

Only the Withdrawer can send ETH to the NestedFactory without automatic WETH conversion.

Royalties

Royalties are a part of the fee collected by the protocol and they are collected during every step of a copied portfolio lifecycle (copy, update, deposit, withdraw).

Fees distribution

For now, the fees are shared equally between portfolio creators (as royalties) and Nested.

First scenario: When a portfolio is created from scratch, all fees go to Nested Finance Ltd and there are no royalties.
Second scenario: When a portfolio is replicated, the fees are shared equally between Nested Finance Ltd. and the original creator of the Nested portfolio.

This distribution is done in the feeSplitter.sol with the ratio between the royaltiesWeight and the shareholders weights. Currently, we have royaltiesWeight = 50 and one shareholder (Nested) with weight = 50.

totalWeights always equals royaltiesWeight + all shareholders weights

Ownership & Governance

Some functions of the protocol require admin rights (onlyOwner using Ownable from OpenZeppelin). Same with the TransparentUpgradeableProxy which need an Admin.

The contracts are owned by the OwnerProxy which is a DSProxy fork without a cache, where only the Timelock can execute the scripts.

The TimelockControllerEmergency is a TimelockController fork. It introduces the "Emergency Role" to execute a transaction in an instantaneous way. Only the "Emergency Multisig" has this role, with 5 members and 5 approvals needed (in the case of an urgent fix). On the other hand, the "Operational Multisig" can schedule/execute transactions with a 6-hours delay, with 3 members and 2 approvals needed.

Development & Testing

Setup

• Install Node > 12
• Install Yarn
• Run yarn install
• Copy .env.example to a new file .env
• Insert a dummy mnemonic and a mainnet api key in the .env
• Configure forks in .env

Commands

• Start a local blockchain yarn run

• Start a hardhat console yarn console

• Compile yarn compile

• Generate typechain files yarn typechain

• Run tests yarn test

Testing

We have tests for BSC and ETH, with and withtout forking from mainnet.
In order to configure tests, you need to copy .env.example to .env and a fork url (through Alchemy or other providers) to retrieve mainnet state.
You will be able to run tests for ETH and BSC, with and without forking by changing your .env

License

GNU General Public License v3