Vault

Yield vaults pool deposits, execute a strategy such as supplying a lending market and reinvesting rewards, and account for each depositor with a share whose redemption value rises as the strategy earns. Collateral vaults are a different use of the word, describing the contract that holds a borrower's collateral against tokens minted from it. Vaults typically charge a management or performance fee and are controlled by an administrative key or governance process that can change the strategy, pause deposits, or upgrade the code. Unlike a regulated fund, there is no manager with fiduciary duties, no prospectus, and no independent custodian, so a depositor's protection is the code and whatever the controlling parties choose to do.

In de praktijk

An auto-compounding vault harvests reward tokens on a schedule, swaps them back into the deposited asset, and reinvests, saving each depositor from doing this individually.

Het veelvoorkomende misverstand

A vault is not a managed fund with legal obligations to depositors; it is code plus, in most cases, administrative keys able to change what the code does.