Plain English
A DeFi vault is a smart contract that takes your deposit and auto-executes a yield strategy on it — moving between lending markets, harvesting and re-investing rewards, rebalancing positions. Yearn popularized them in 2020; today Morpho, Pendle, Beefy, and dozens of others offer vault products.
How it actually works
You deposit a single token (USDC, ETH, etc.) and receive a “vault share” token representing your fractional ownership. The strategy contract executes on a schedule or trigger — claiming farming rewards, swapping them back to the deposit asset, redepositing. Performance fees (10–20%) and management fees (0–2%) are the strategist’s payment.
What it means for you
Vaults are the best operational answer for “I want DeFi yield without checking it daily.” Stick to vaults with at least one major audit, transparent strategy descriptions, and TVL above $5M. Morpho’s curated vaults and Pendle’s PT-vault wrappers are good 2026 venues for HNW deposits.
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Educational content only. Not investment, tax, or legal advice.