Grayscale recently published a piece arguing that vaults will be the next crypto innovation to break into traditional finance, following stablecoins, tokenized assets, and perps. Their comparison was to CLOs. Both CLOs and vaults pool investor capital into managed portfolios and pay out yield generated by the assets. The difference is that vaults do it with smart contracts instead of a long chain of spreadsheets, trustees, custodians, and fund admins.
Nonetheless, the comparison sounds right and probably even undersells it.
Simply put, a vault is a fund wrapper rebuilt onchain – most here are familiar with this. You deposit an asset, receive a token representing your share, and a curator allocates the capital under a defined mandate. Unlike a traditional fund, the books are often public in real time, settlement is instant, and your fund share is itself a token you can transfer, sell, or borrow against.
This category is already bigger than most people realize today. Curated lending vaults hold almost $9B, up more than 50% over the past year even as overall DeFi lending TVL fell 36%. Counting every kind of vault structure, S&P put total deposits near $131B in April, up from $24B three years earlier. The CLO market these products resemble is roughly $1.5 trillion on its own.
Most vault capital today is doing something pretty simple. Around 80% of curated vaults run stablecoin strategies, and USDC alone is 44% of the curated asset base. Most depositors are basically buying managed exposure to onchain dollar lending.
The distribution of these stable vaults has moved much faster than the underlying strategies. Coinbase routes its USDC lending through Morpho vaults curated by Steakhouse. Kraken’s DeFi
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