What is a vault in DeFi (the closest TradFi cousin is a managed fund share class)

A vault in DeFi is a smart contract that pools deposits from many users and deploys that combined capital according to a predefined strategy, then issues each depositor a token representing their share of the pool. Deposit, get a share token. The vault's value moves, your share token's value moves with it. Redeem the share token, get your proportional slice back out.

How it works

The closest TradFi comparison is a mutual fund or ETF share class. You don't pick individual trades; you buy into a fund that already has a stated strategy, and a manager (human, or in DeFi's case, often a mix of code and a human curator) executes that strategy on behalf of every depositor at once. In DeFi, that standard interface is largely defined by ERC-4626, a token standard that specifies how a vault should handle deposits, withdrawals, and share-price accounting so that other protocols, wallets, and dashboards can all interact with any compliant vault the same way.

Behind the ERC-4626 interface, the vault's actual strategy is where the variation lives. A vault might allocate deposits across several different Morpho Blue lending markets, chasing the best risk-adjusted yield among them and rebalancing as conditions change. It might run an automated market-making strategy on a DEX. It might just hold a single yield-bearing asset. The share token's price, how much of the underlying asset each share is worth, rises as the vault's strategy earns returns, and that rising exchange rate is how depositors see their yield without needing a separate rewards claim transaction.

A curator, the entity or team setting the vault's strategy and risk parameters, sits between the depositor and the underlying markets. That role carries real responsibility: cap allocations too aggressively toward one market, and depositors are exposed to a concentration risk they never explicitly signed up for.

Why it matters

Vaults abstract away a decision most depositors don't want to make themselves: which specific market, at which specific parameters, to lend into today. That convenience is exactly what mutual funds provided TradFi investors decades ago, translated onto a transparent, always-auditable settlement layer.

The risk that comes with the convenience is trust in the curator. A vault depositor is delegating an active allocation decision, and the quality of that decision (not just the underlying market's risk) determines the depositor's actual return.

Where this shows up in Rekord

Rekord's deposit-facing and deployment-facing structure uses vaults on both sides of the capital cycle, each with curator oversight suited to its role. For the architecture, see Dual-vault architectures: deposit-facing vs deployment-facing.