Crypto glossary
DeFi vault
A DeFi vault is a smart contract that pools user deposits and runs a strategy automatically, such as lending, farming or hedging, in exchange for vault shares.
Instead of managing positions by hand, users deposit an asset into a vault and receive shares, often as an ERC-4626 token, that represent their claim on the pool. The vault's strategy then puts the funds to work: allocating across lending markets, providing liquidity, running looping or delta-neutral trades, or selling options. Gains are reflected in a rising share price, and withdrawals return the user's portion of the assets.
Vaults are the main way DeFi packages complex strategies for ordinary users, wallets and institutions. Yearn popularised them, and today lending vaults managed by curators, automated liquidity managers, options vaults and the earn products embedded in wallets and exchanges all follow the same pattern.
Users add layers of risk with each vault: the vault contract, the strategy, every protocol it touches, its oracles and whoever controls its parameters. Displayed yields are usually historical and can include temporary rewards. Some vaults have withdrawal queues or lockups, and admin keys can change strategies, so audits and governance matter.
Example
A user deposits 20,000 USDC into a lending vault, receives vault shares and lets the curator spread the funds across several lending markets; three months later the shares redeem for about 20,350 USDC.