# Vault valuation

Vault valuation defines the **NAV (Net Asset Value)** and price per share used during settlement. It is proposed by a **valuation provider** and then applied when the curator settles deposit and withdrawal batches.

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In Lagoon, the valuation provider propose the vault’s valuation on-chain. Accuracy is critical because it sets the price per share used for settlement, which determines how many shares users receive, how much they redeem, and how fees are applied.
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### What valuation determines <a href="#determines" id="determines"></a>

<table data-view="cards"><thead><tr><th></th><th></th></tr></thead><tbody><tr><td><mark style="color:$primary;"><strong>Shares on deposit</strong></mark></td><td>The number of shares minted for a user when their deposit request is settled</td></tr><tr><td><mark style="color:$primary;"><strong>Assets on redemption</strong></mark></td><td>The amount of assets returned to a user when their redemption request is settled.</td></tr><tr><td><mark style="color:$primary;"><strong>Fee calculation</strong></mark></td><td>Management and performance fees are computed based on the vault's NAV at each valuation update.</td></tr></tbody></table>

### How to compute a valuation ?

A valuation must exclusively reflect the **positions held by the curating address**. Valuation excludes pending deposits, which sit in silos until they are settled. **They are not yet part of the vault's managed assets.**

Please see the following example:

| Value               | Amount                                           |
| ------------------- | ------------------------------------------------ |
| Curating balance    | <mark style="color:$primary;">**10 USDC**</mark> |
| Deposit Requests    | 5 USDC                                           |
| Redemption Requests | 2 USDC                                           |
| Valuation expected  | <mark style="color:$primary;">**10 USDC**</mark> |

In practice, the 10 USDC will be spread around different yield generating positions. It is the responsibility of the Valuation Provider to value the positions in the underlying asset of the vault, in the above example in USDC.

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**First valuation**

At deployment, the vault starts with no priced assets, no positions have been opened yet. The initial valuation is therefore set to <mark style="color:$primary;">**0**</mark> until the first NAV update is provided by the valuation provider.
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Valuation can be computed **off-chain** (e.g. by a external or internal valuation provider ) or derived **on-chain** via a smart contract that fetches position data directly. The vault accepts both approaches.
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### A 2-steps procedure

For greater security, applying a valuation requires two separate actions. Neither the valuation provider nor the curator can act alone.

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#### <mark style="color:$primary;">Valuation provider proposes a NAV</mark>

The valuation provider submits a new NAV to the vault contract. This value is stored but not yet applied. No settlement can occur at this stage.
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#### <mark style="color:$primary;">Curator reviews and accepts</mark>

The curator verifies the proposed NAV and, if correct, calls `settleDeposit` or `settleRedeem` to apply it. Pending requests are then settled at this valuation point.
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<details>

<summary>Why 2-steps ?</summary>

Valuation is a critical factor in ensuring the vault's correct operation. To support this, it’s essential to give vault administrators flexibility in their valuation process.&#x20;

This 2-steps approach offers several benefits:

* <mark style="color:$primary;">**Flexible valuation source:**</mark> The valuation provider can be any address: an off-chain backend service, an on-chain smart contract, or a trusted third party. Admins choose the most appropriate setup for their strategy.
* <mark style="color:$primary;">**Curator cannot act unilaterally:**</mark> The curator approves but cannot push a valuation themselves, preventing any single actor from manipulating settlement pricing.

</details>

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See [<mark style="color:$primary;">**How to update the vault valuation and settle requests**</mark>](https://docs.lagoon.finance/vault/how-to/update-the-vault-valuation-and-settle-requests) for a step-by-step guide.
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