# Loss Buffer Vault

### Overview

The **Loss Buffer Vault** (also referred to as the loss protection vault in the protocol) is a **protection layer for LPs** that smooths PnL volatility. It collects a share of **trader losses** (when the pool wins) and uses that buffer to **cover trader profits** (when the pool loses), so LP payouts are less jagged.

### Why it exists

* **Lower LP volatility** — Part of trading losses is set aside instead of going straight to LP liquidity; when traders win, the vault can cover some of that payout.
* **More stable yields** — LPs see a more smoothed stream of gains and losses instead of large swings on big trader wins/losses.
* **Configurable** — Each vault (per collateral type) has its own parameters and can be enabled/disabled by governance.