A vault in DeFi is a smart-contract-based arrangement for holding and managing assets according to defined rules. The name describes a financial container, but its purpose varies. A yield vault invests deposits through strategies, while a collateral vault records assets pledged against debt. These structures do not necessarily offer the same rights or returns.
Shares and managed assets
Many yield vaults issue shares representing a claim on managed assets. Depositing mints shares, and withdrawing or redeeming burns them under the vault's rules. The amount of assets per share can change with strategy gains, losses, and fees, so one share need not equal one underlying token.
ERC-4626 standardizes common interfaces for vaults with a single underlying token. It helps applications interact with deposits, shares, and redemptions; it does not prescribe a safe investment strategy or guarantee immediate withdrawals.
What the label leaves unanswered
Understanding a vault requires checking what it holds, where funds are deployed, who can change its strategy, and how exits work. Limits, queues, insufficient available assets, or paused functions may affect withdrawal.
A vault's risks include its own contracts and the systems its strategies use. The reassuring name does not imply insured deposits, guaranteed principal, or a uniform custody model.