DeFi Vaults: Hedge Funds in Disguise

DeFi vaults are becoming increasingly popular among investors, but they come with risks that are often misunderstood. Unlike traditional savings accounts, DeFi vaults resemble hedge funds and engage in yield strategies across various protocols.

The main risk associated with DeFi vaults is no longer smart contract exploits, but rather operational risks such as key management and multisig governance setups. Veda's vault infrastructure has processed over $16 billion without any major issues related to smart contracts, demonstrating a significant achievement in operational security.

Onchain vaults like BoringVault, which adheres to standards like ERC-4626, facilitate transparency and make it easier for users to understand the vault's operations. However, even with robust architecture, the strategies employed by these vaults can introduce new risks.