Glossary
Vault
A smart contract that pools user deposits and executes an automated strategy — yield farming, leverage, options writing — issuing receipt tokens for shares.
Yearn pioneered the modern DeFi vault: users deposit a single asset, the contract auto-allocates it to the most attractive strategy, harvests rewards, and compounds. Vaults abstract gas costs and rebalancing for retail users while concentrating capital that is expensive to manage solo.
The trade-off is governance and strategy risk: a buggy or compromised strategy can drain the entire vault. Modern vault frameworks (Yearn v3, ERC-4626) standardize the interface so that vaults compose with the rest of DeFi.