DeFi Vaults: Understanding the Hidden Liquidity Networks Behind Yield Strategies

DeFi vaults function as automated investment funds that pool user deposits to allocate capital across various protocols, chains, and strategies. These vaults are interconnected through shared assets, protocols, and managers, creating a complex liquidity web. As vaults increasingly incorporate real-world assets and leverage, their operational complexity grows, often leading to significant cross-protocol exposure that is abstracted away from the end user.