What is a crypto vault?

A crypto vault means one of two things. In decentralized finance, it is a smart contract that takes deposits of a token and puts them to work to earn a return. At exchanges and custodians, it is protected storage where withdrawals are slowed down or need extra approval.

What is a DeFi vault?

A DeFi vault, often called a yield vault, pools many users' deposits of one token and follows a strategy to earn on them, such as lending them out or supplying a liquidity pool. In return, each depositor gets a receipt token, a share of the vault.

Yearn, one of the earliest vault projects, describes the pattern in its documentation. Deposits are pooled, strategies decide where the money goes, and the depositor receives an ERC-20 vault token. As the vault earns, each vault token becomes redeemable for more of the underlying token. Withdrawing burns the vault token. Yearn's newer vaults can spread funds across several strategies at once.

This automates the manual work described in what is yield farming, and it is similar to how exchange-rate tokens work in liquid staking.

What is an ERC-4626 tokenized vault?

ERC-4626 is the Ethereum standard for yield vaults, created in December 2021 and marked final. Ethereum.org says it was written because lending markets, aggregators and interest-bearing tokens each built vaults slightly differently, which made them error-prone to integrate.

The standard requires a vault's shares to be an ERC-20 token and defines shared functions: deposit and mint to put tokens in, withdraw and redeem to take them out, and totalAssets to report what the vault manages. Yearn says its third-generation vaults are fully ERC-4626 compliant. A standard interface does not make a vault safe, though. The EIP itself warns that a contract can match the interface without following the rules, so integrators should review each one.

What are the risks of a yield vault?

The depositor relies on the vault's code, the strategy's code and every protocol the strategy uses. Returns are not fixed and can turn negative.

Bugs can be costly. On April 13, 2023, an attacker took about $11.6 million from an older Yearn product, the yUSDT token, Decrypt reported, after a researcher traced the flaw to a configuration error that pointed it at the wrong underlying token. Exits can also be slow when a strategy's funds are lent out.

What is a Coinbase vault?

A custody vault is about security rather than yield. Coinbase's help center says its vaults sit inside a customer's account and can hold any crypto Coinbase supports, including bitcoin. Withdrawals carry a 48-hour delay after email confirmation, which support cannot skip, and an owner can add trusted people who must approve each withdrawal within 24 hours. Coinbase says vaults are free, but funds in them cannot be staked, and settings cannot be changed after the vault is created, as of October 2026.

The idea is close to an exchange's withdrawal allowlist. A self-custody "vault" often means a multisig wallet, where several keys must sign before funds move.