Vaults & Yield Aggregation

**Definition:** Yield vaults are smart contracts that pool user funds and automatically execute yield-generating strategies to maximize returns while minimizing risk and complexity for users. **Key Components:** • **Strategy Contract**: Implements the yield-generating logic • **Vault Contract**: Manages user deposits and withdrawals • **Governance**: Oversees strategy approval and parameters • **Fee Structure**: Compensation for protocol and strategists **How Vaults Work:** 1. Users deposit tokens into the vault 2. Vault issues shares representing ownership 3. Strategy deploys funds across multiple protocols 4. Yields are automatically harvested and compounded 5. Users can withdraw their share of the pool anytime **Benefits:** • **Automation**: No manual position management • **Optimization**: Professional strategy management • **Gas Efficiency**: Shared costs across users • **Diversification**: Complex multi-protocol strategies • **Compounding**: Automatic reward reinvestment