// GLOSSARY -- DEFI

What is Vault (DeFi)?

1 min read Updated

A DeFi vault is a smart contract that automatically executes yield-generating strategies on deposited assets — handling compounding, rebalancing, and optimization without manual user intervention.

WHY IT MATTERS

DeFi vaults automate complex yield strategies. Instead of manually farming, compounding rewards, and rebalancing positions, you deposit into a vault and the strategy runs automatically. Yearn Finance popularized this model.

Vault strategies range from simple (auto-compound staking rewards) to complex (leveraged yield farming, delta-neutral positions, cross-protocol arbitrage). The vault operator or community creates and maintains strategies.

For AI agents managing DeFi positions, vaults are both tools (agents can deposit into vaults) and competitors (vaults do some of what yield-optimizing agents would do manually).

FREQUENTLY ASKED QUESTIONS

How do vaults make money?
Vaults typically charge a management fee (0-2% of deposits) and a performance fee (10-20% of profits). The net yield to depositors is after these fees.
Are vaults safer than manual farming?
Mixed. Vaults reduce user error and ensure compounding, but add smart contract risk (the vault contract itself). Reputable vaults are audited; new ones carry additional risk.
What is Yearn Finance?
The original and largest vault protocol. Yearn vaults automatically allocate deposits across the highest-yielding opportunities, rebalancing as conditions change.

FURTHER READING

Enforce policies on every tool call

Intercept is the open-source MCP proxy that enforces YAML policies on AI agent tool calls. No code changes needed.

npx -y @policylayer/intercept
github.com/policylayer/intercept →
// GET IN TOUCH

Have a question or want to learn more? Send us a message.

Message sent.

We'll get back to you soon.