Yield Vault
A smart contract that pools deposits, deploys them into a yield strategy, and mints share tokens whose value grows as the strategy earns.
A yield vault is a smart contract that pools user deposits, deploys them into a yield-generating strategy, and mints share tokens representing each depositor's proportional claim on the pooled assets.
The lifecycle is simple. A user deposits an asset, USDC for example, and receives shares priced at the vault's current assets-per-share rate. The vault routes the capital into its strategy: lending it out, staking it, or providing liquidity. As the strategy earns, the vault's total assets grow while the share count stays fixed, so each share becomes redeemable for more of the asset than it cost. Withdrawing means burning shares for the underlying at the current rate.
ERC-4626 standardized this design so that every compliant vault exposes the same deposit, withdraw, and conversion functions. Yearn, Beefy, Morpho, Moonwell, and Euler all issue ERC-4626 vaults, and Aave supports the standard through its wrapped static aToken. Standardization matters because integrators can treat any vault as a building block: Tessera, for instance, routes a single trade across DEXs and ERC-4626 vaults, which lets an index basket hold yield-bearing vault positions alongside ordinary tokens.
The risks live in the strategy and the code. A strategy can lose money, a contract can have bugs, and vaults with upgrade keys can be changed under depositors unless the contract is immutable. Yield vaults automate work, but they do not remove risk, and past vault performance says nothing certain about future returns.