Vaults: the New Capital Aggregator for Onchain Finance

A structural shift is happening in onchain capital allocation. 

Rather than selecting individual tokenized funds or standalone Treasury products, investors are increasingly allocating capital through a new investment management wrapper: vaults.

Capital flowing into vaults surpassed $6B last year, with projections suggesting that figure could double by the end of 2026.

Across the two largest vault platforms alone, AUM increased from $2.46B to $5.9B in 2025. Over the same period, tokenized Treasuries grew from $3.3B to $6.96B, according to data analytics platform Allium.

Vault inflows were effectively on par with the largest tokenized asset class in existence. Today, vaults command more AUM than any tokenized asset class except Treasuries.

This is not a marginal trend. It reflects capital gravitating toward programmable, onchain portfolio management infrastructure.

In this week’s Tokenization Insight, I unpack:

• What vaults are and how they function

• How vaults are structured, operated, and governed

• How vaults compare to traditional fund products

• The outlook for vaults as a scalable investment management vehicle

  
  

Let’s dive in.

What is a Vault?

A crypto vault is best described as a managed fund structure deployed on-chain via a smart contract.

Core structure and workflow:

• An investor deposits capital into a vault smart contract

• The vault issues a token representing a pro-rata share of the pooled assets

• A curator or strategy operator allocates that capital according to a defined mandate

• Portfolio constraints and allocation rules are often encoded directly into smart contracts

• The structure can be custodial or non-custodial

• Redemption terms depend on the liquidity profile of the underlying assets and the vault’s embedded rules

See below an illustrative example of the workflow of a Morpho vault.

This is “fund-like” economics with a different operating system - the blockchain. The distinction is not cosmetic. It changes transparency, control mechanics, liquidity behavior, and compliance perimeter.

Who Operates a Vault?

Vaults are operated across multiple layers.

Protocol Layer

Engineering teams at protocols abstract away the complexity of protocol-to-protocol capital allocation and provide the technological governance framework upon which vault products are launched. You can think of this as the back-end operating system on which specific investment strategies are built and enforced. Protocols compete on risk architecture, governance process, investment products and liquidity sourcing. Well-known vault protocol examples include Morpho, Euler, and Aave.

The key functions played by this layer include multi-sig signers, timelocks, governance processes, and integration rails across DeFi protocols. This layer determines how capital can move, how parameters can change, and how governance is enforced.

You can see the top vaults examples on Euler below.

Curator / Risk Management Layer

Curators are the entities that define mandate, eligible assets, parameters, and ongoing monitoring processes for the vaults they set up and operate.

These entities function as fund managers or GPs. They are responsible for return generation, capital sourcing, and risk management. Just like traditional fund operators, vault curators compete on performance, risk management and capital sourcing. Well-known curators include Gauntlet, Steakhouse Financial, MEV Capital, Chaos Labs and Sentora.

In the early phase of vault development, protocol layer teams themselves often acted as curators. For example, Maple a major player in prop trading lending vault space act as both the protocol and the risk curator in many products. However, as the ecosystem expanded and risk complexity increased, specialized risk managers often emerged.

For example, Gauntlet, a major curator, operates 70+ vaults across multiple blockchains totaling approximately $1.37B in AUM and earns a 10% performance fee on generated user returns. See Gauntlet’s top vaults by AUM below.

Distribution / Interface Layer

Just as traditional asset management relies on private banks, wealth platforms, and institutional distribution networks, vaults rely on wallets, exchanges and custodial platforms to scale. Why? Because wallets, exchanges and custodial platforms have aggregated hundreds of millions of users.

For the distribution partners, the vaults represent an innovative yield product that they can leverage to attract or retain users and capital and earn fees. Examples of distribution platforms include Coinbase, Binance and Kraken. 

Distribution is what transforms vault infrastructure into a scalable product category.

How Do Onchain Vaults Compare to Traditional Funds?

Functionally both vaults and fund products are vehicles for capital allocation. 

Operationally they run on different rails in terms of the underlying technology, settlement medium, fund admin and regulatory perimeter.

The most significant divergence sits in compliance and reporting. Unlike UCITS funds, most vaults operate outside a comprehensive regulatory wrapper. There is no embedded supervisory framework, no mandated disclosure template, and no standardized reporting regime.

A traditional fund product typically comes with:

• Mandatory investor onboarding with formal KYC

• Embedded AML programs and ongoing monitoring

• Clearly identifiable accountable entities, including manager, administrator, custodian, and transfer agent

• Standardized disclosures and reporting cycles

• Defined governance framework

  
  

Compliance is intrinsic to the product, not optional.

While permissioned vaults do exist, most of the vaults are permissionless:

• Open access via wallet addresses

• No native KYC or AML embedded at the smart contract layer

• Compliance pushed to the edges such as exchanges, onramps, and custodial intermediaries

• No standardized disclosure or reporting framework imposed on curators or protocol operators

In vaults, compliance is often modular. It can be added at the distribution layer, but it is not structurally embedded in the base layer.

From a traditional asset management perspective, that is a distribution constraint.

The solution is permissioning.

A relevant example is Apollo’s Diversified Credit Fund (ACRED), tokenized and distributed via Securitize under Regulation D. Participation is restricted to KYC-verified and accredited investors.

ACRED represents one of the largest and longest-standing tokenized private credit funds managed by a traditional asset manager. Approximately one year post-launch, it stands at roughly $130M AUM.

It also integrates with vault infrastructure, with a Gauntlet-managed vault deployed on Morpho. However, liquidity available for collateralized borrowing against that vault position stands at only $3.57 USDC.

This highlights a second-order challenge:

Tokenization plus vault structuring does not automatically solve distribution. Institutional adoption requires both compliance alignment and functional liquidity. Data so far signals compliance is a hindrance to distribution.

Outlook for Onchain Vaults in 2026

The acceleration of vault adoption in 2025 did not happen in isolation. It tracked the expansion of stablecoins.

Stablecoin supply grew from roughly $200B to $300B over the course of 2025. Idle balances required yield deployment. Vaults, particularly permissionless ones, became the default allocation layer.

Across Morpho and Spark alone, more than 90% of the ~$6B vault AUM is stablecoin-denominated.

As the stablecoin base increases, so does the pool of capital seeking structured yield solutions. Vaults function as the programmable investment layer on top of that liquidity.

Distribution is the second accelerant.

Major U.S. platforms such as Coinbase and Kraken are increasingly offering structured “DeFi earn” products powered by vault infrastructure. These products abstract away technical friction and place onchain yield strategies directly in front of millions of users.

For traditional asset managers, this may represent the first credible at-scale onchain distribution channel.

The first generation of vault strategies in 2022 left a lasting imprint. Losses and defaults were prevalent across ALL vaults. They were structural failures of risk management, liquidity design, and governance.

Vault quality is overwhelmingly determined by the curator.

Compared to many existing onchain-native curators, traditional asset managers possess clear structural advantages:

• Credit underwriting track record

• Institutional governance frameworks

• Brand credibility

• Regulatory familiarity

  
  

As more real-world assets move onchain, asset-manager-operated or asset-manager-aligned vaults are well positioned to catalyze the next phase of tokenization growth.

The constraint is not capability. It is permissioning.

The degree to which vault structures can integrate regulatory compliance without losing composability will determine how much institutional capital ultimately flows into this segment.

Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.