Vault
A smart contract that pools deposits and runs an automated strategy to generate yield, popularized by Yearn Finance.
Deposit a token into a vault and the contract puts it to work—lending it out, farming rewards across protocols—then compounds the proceeds back to depositors. You hold a share token that tracks your slice of the pool.
Yearn Finance made vaults famous in 2020 by automating yield strategies most users couldn't run by hand.
Vaults concentrate risk as well as capital. A bug in the strategy or a hacked protocol it routes through can drain the whole pool at once. Audits help; they don't guarantee safety.
Related terms
Chasing the highest returns by moving crypto between DeFi protocols to earn trading fees and bonus token rewards.
Smart ContractSelf-executing code on a blockchain that runs exactly as written when its conditions are met, with no party able to intervene.
YieldThe return on deposited crypto, usually quoted as an annual percentage earned by lending it out or staking it.
Real YieldProtocol returns paid from genuine revenue like trading fees, rather than from printing new tokens as rewards.