It's always been natural to try and protect yourself by putting your money away and keeping it safe.

More recently, with the 2008 financial crisis and the spotlight on the role of multinational banks in this economic meltdown, public confidence in these institutions has been impacted: people's desire to own safe money has been catalyzed.

Being both the full owner of your crypto-assets and being able to dispose of them without the intervention of a trusted third party is the principle behind the blockchain So I can keep my cryptos in a classic portfolio or provide liquidity in an AMM, so why create vaults ?

First, let's look at the difference between a vault and an ordinary portfolio :

" Portfolios are instantly accessible tools. The problem their subject is that users only have their own security model at their disposal to protect them. If someone gets his key there is no recourse.

Unlike wallets, vaults offer a plan B. They are much safer places to store crypto-assets.

Cryptographic safes are not connected to the network, so users don't have to worry about people who would like to access their funds if the linked account to the safe is finally hacked.

Cryptographic assets stored in vaults have specific encryption methods, making them useless to attackers at Unless they have specific codes.

If safety of a safe fails, users have a recovery mechanism at their disposal. " –Ioana Alexandra Frincu (How do Crypto-vaults work? ?)

Safe-deposit boxes are particularly useful for people wishing to keep their assets for the long term, without having to make regular movements. They may also offer tax advantages. It is also possible to create vaults groups.

Thanks to their safety and composability characteristics, the vaults have rapidly found their place in increasingly optimized investment strategies.

Indeed, following the yield farmingthe vaults offered the solution to one of the main drawbacks of yield farming: the complexity of managing its LPs (+ or - its positions of farmingmore details in the article on the Yield Farming #link#).

In fact, you can deposit your cash in a vault This makes passive income strategies much more... passive!

Let's take an example, and not the least since we're talking about Yearn Finance :

" Yearn Finance is a suite of decentralized financial products (DeFi) to create a simple way to generate interest via prime lending protocols, liquidity pools and yield farming strategies on Ethereum.

The main advantage of yVaults is that they allow users to "drop and forget". The yVault will then manage everything. This includes finding the best strategy to optimize the interest received. But perhaps most importantly, the yVault will also compound the interest. In other words, interest received is re-injected into your starting capital to generate interest on interest.

It's something anyone can do themselves. All you have to do is claim your rewards and put them back into the protocol in question. But it takes time (you have to think about it) and it's not free. You need to make several transactions. As the price of gas is quite high, this is sometimes an impossible thing to do. for users with a "small initial capital. Transaction costs can be higher than the interest generated.

yVaults get around this problem, since the interest claim and composition are done automatically, without the user having to think about it or do anything about it. This saves time and money. " - Cryptouf (All about Yearn's yVaults)

"So yVaults get around this problem, since interest claiming and compounding is done automatically without the user having to think about it or do anything. This saves money and time." - Cryptouf (All about Yearn's yVaults)

Using this type of product involves risks, and it's essential to be aware of them. Here is a non-exhaustive list:

- While the assets deposited cannot be reduced, the debt of a vault may decrease. If a strategy fails to outperform debt, then part of the funds may be blocked. If the strategy outperforms debt again, the assets are released. There are mechanisms in vaults to achieve these blockages, but nothing is perfect.

- The vaults are audited. However, this is no guarantee of a potential problem or hack.

- There is a risk of smart contract linked to each contract (and protocol) with which the vault interacts.

To conclude, the vaults are initially used to store cryptos with added security when you don't want to touch them for a while, but they also offer opportunities in many passive income strategies.