DeFi vaults are smart contracts that put crypto deposits to work. Rather than leaving digital assets idle, they can automatically earn returns through lending, liquidity provision, and staking, without relying on a bank or broker.
How DeFi vaults work
The appeal is simplicity. Without a vault, earning yield onchain involves selecting protocols, approving transactions, monitoring rates, and reinvesting rewards manually. A vault brings these steps together into a single deposit.
Who manages the strategy
Many modern vaults use a curator model, meaning a risk manager sets the parameters for how a vault deploys funds.
Companies like Gauntlet, Chaos Labs, Steakhouse Financial, and Bitwise act as curators, setting parameters like which markets a vault can access, how much exposure it can take, and when adjustments should be made. Risk managers operate within predefined constraints and cannot directly move or withdraw user funds.
The bigger picture
Yield has traditionally required institutional access, active management, or both. DeFi vaults expand access to these types of strategies by automating how funds are deployed and managed. And unlike traditional investment vehicles, everything is recorded onchain, giving users full transparency into where their funds are deployed.