# Vaults 101

{% hint style="success" %}
**A vault is:**

1. A non-custodial smart contract
2. Transparent and verifiable
3. Defined by parameters that govern allowable actions by vault curators
   {% endhint %}

### Why Vaults?

#### **Operational Simplification**&#x20;

Users can access diversified yield strategies without managing individual allocations across multiple protocols, chains, and markets. Vaults consolidate the complexity of position management, risk monitoring, and performance tracking, enabling a dedicated curator to oversee the multiple aspects of a vault.

#### **Non-Custodial Architecture**&#x20;

Vault participants retain custody of their assets throughout their interaction with a vault. Users can verify a vault's holdings, curator actions, and withdraw assets at any time.

#### **Strategic Versatility**&#x20;

Vaults serve as flexible infrastructure enabling multiple institutional use cases:

* Supporting institutional stablecoin growth and utility
* Powering fintech and banking earn programs
* Creating productive use cases for tokenized real-world assets
* Enabling payments companies to optimize treasury holdings

As banks, fintechs, and payment providers expand their onchain operations, vaults provide a critical integration layer between traditional financial services and DeFi protocols.

### Core Vault Features

A DeFi vault is fundamentally composed of three elements:

1. **Non-Custodial Smart Contract**: Code deployed onchain that holds user assets and executes defined strategies.
2. **Transparent Operations**: All transactions, holdings, and allocations are publicly verifiable onchain.
3. **Defined Parameters**: Predefined rules that constrain allowable actions by vault curators.

### **Common Vault Strategies**

<table><thead><tr><th width="233.17578125">Strategy</th><th>Example</th></tr></thead><tbody><tr><td><strong>Lending</strong> </td><td>Allocate supplied assets to decentralized lending markets, optimizing for risk-adjusted returns. For example, USDC, ETH, or BTC lending vaults on <a href="../../vaults/morpho-vaults">Morpho</a> and <a href="../../vaults/kamino-vaults">Kamino</a>.</td></tr><tr><td><strong>Trading</strong></td><td>Execute delta-neutral strategies using derivatives and spot positions to generate returns. For example, <a href="../../vaults/drift-vaults">hJLP vaults on Drift</a>.</td></tr><tr><td><strong>Multi-chain</strong></td><td>Deploy capital across multiple chains and protocols simultaneously, dynamically rebalancing based on market conditions and risk parameters. For example, <a href="../../vaults/gauntlet-usd-alpha-vault">Gauntlet USD Alpha on Aera</a> may allocate supply to a blend of Gauntlet USDC Core on Mainnet and Gauntlet USDC Prime on Base.</td></tr></tbody></table>

### Transparency and Verifiability

Every vault action is recorded immutably onchain:

* **Performance**: Historical return data verifiable against onchain transactions
* **Allocations**: Current deployment across protocols and strategies
* **Fee Structure**: Transparent management and performance fee parameters
