Understanding vaults: what happens beyond the yield

Crypto vaults are managed fund structures deployed on-chain where investors receive a token representing their share, and a curator allocates capital based on a defined mandate. Understanding a vault requires knowing the yield source, asset custody, parameter controls, and stress event procedures, focusing on three risk layers: smart contract risk (audits, timelocks), underlying asset risk (credit quality), and redemption risk (liquidity and recourse). Unlike traditional funds, vaults offer transparency as all actions are verifiable on-chain. Curators are crucial risk managers, setting asset eligibility and actively monitoring portfolios, often targeting 9-15% annual returns. A key advantage is composability, allowing on-chain actions like borrowing against collateral without traditional documentation overhead. The integration of Real World Assets (RWAs) will increase correlation with macro interest rates but offers superior capital efficiency through layering strategies unavailable in traditional finance.

(Source：CoinDesk)