Author:Muyao Shen

Compiled by DeepTide TechFlow

The Tides of Depth: The 2022 collapses of BlockFi and Celsius plunged the crypto lending industry into an icy downturn, but now, a "transparent, non-custodial" Vault model is making a comeback with a total asset size of $60 billion.

This article thoroughly analyzes this new business model: how it uses smart contracts to avoid the black-box risks of traditional centralized lending, and how, under pressure to pursue high returns, it may repeat the mistakes seen in cases like Stream Finance.

With the "Genius Act" promoting the mainstream adoption of stablecoins, is Vault truly the cornerstone of a maturing crypto-finance industry, or is it the next shadow banking crisis in disguise, cloaked in transparency?

This article will reveal the old and new logic behind high returns.

The full text is as follows:

When the encrypted platform Stream Finance at the end of last year Bankruptcy(Which led to a loss of approximately $93 million in user funds), it exposed a familiar breaking point in digital assets: so-called "safe yield" promises often crumble when the market turns.

This failure is not only unsettling due to the losses incurred, but also because of the underlying mechanisms behind it. Stream once claimed to be part of a new generation of more transparent crypto earning products, designed to avoid the pitfalls of the previous cycle. drag down BlockFi and Celsius The implicit leverage of decentralized lending institutions, their opaque counterparty risks, and arbitrary risk decisions.

Conversely, it demonstrates how quickly the same forces—leverage, off-platform risk exposure, and centralization risks—can return when a platform starts pursuing profits, even if the market's infrastructure appears safer or more reassuring in terms of transparency.

However, the broader promise of more secure crypto returns remains. According to industry data, Vault—a blockchain-based investment pool built around this concept—is currently managing over $6 billion in assets. Crypto asset management company Bitwise PredictionWith the growing demand for stablecoin yields, the asset size in the Vault could potentially double by the end of 2026.

"Crypto 'Safe' Yield Trading Reaches $6 Billion"

At a fundamental level, Vaults allow users to deposit cryptocurrencies into shared pools, where the funds are invested in lending or trading strategies designed to generate returns. Vaults differ in their marketing: they are promoted as a complete break from the opaque lending platforms of the past. Deposits are non-custodial, meaning users never hand over their assets to a company. Funds are held in smart contracts, which automatically deploy capital according to pre-set rules, with key risk decisions clearly visible on the blockchain. Functionally, Vaults resemble familiar components of traditional finance: pooling funds, converting them into yield, and providing liquidity.

However, its structure exhibits clear characteristics of encryption. All of this occurs outside the regulated banking system. Risks are not cushioned by capital reserves nor supervised by regulatory authorities—they are embedded in the software. As market fluctuations occur, algorithms automatically rebalance positions, liquidate collateral, or unwind trades, thereby automatically realizing losses.

In practice, this structure can lead to uneven outcomes, as curators (the companies that design and manage Vault strategies) compete on returns, while users discover exactly how much risk they are willing to take.

"Some participants will mess up badly," said Paul Frambot, co-founder of Morpho, the infrastructure behind many lending and borrowing vaults. "They might not survive."

For developers like Frambot, this kind of change is less of a warning signal and more a characteristic of an open, permissionless market—where strategies are tested in public, capital flows quickly, and weaker approaches are gradually replaced by stronger ones over time.

The timing of its growth is no coincidence. With the Genius Act, throughStablecoins are moving toward mainstream finance. As wallets, fintech apps, and custodians compete to distribute digital dollars, platforms face a common challenge: how to generate returns without risking their own capital.

Vaults have become a compromise. They provide a way to generate returns while technically keeping assets off a company's balance sheet. Think of them as traditional funds—but without surrendering custody or waiting for quarterly disclosures. This is how curators promote the model: users retain control over their assets while benefiting from professional management strategies that automatically execute on-chain.

"The role of a curator is similar to that of a risk and asset manager, much like BlackRock or Blackstone does for the funds and endowments they manage," said Tarun Chitra, CEO of Gauntlet, a crypto risk management company that also operates Vault. "However, unlike BlackRock or Blackstone, it is non-custodial, so asset managers never hold users' assets; the assets are always within the smart contracts."

This structure is designed to address recurring weaknesses in crypto finance. In previous cycles, products marketed as low-risk often concealed borrowed funds, reused customer funds without disclosure, or relied heavily on a small number of fragile partners. The algorithmic stablecoin TerraUSD provided returns through subsidies. Provide Achieved a return rate of nearly 20%. Like Celsius Such centralized lending institutions quietly invest deposits into high-risk bets. When the market turns, the damage spreads rapidly—and without warning.

Most vault strategies today are more conservative. They typically involve floating-rate lending, market making, or providing liquidity to blockchain protocols, rather than pure speculation.Steakhouse USDC Treasury That is how it works: it lends stablecoins against blue-chip cryptocurrencies and tokenized real-world assets (RWA), offering a return of about 3.8%. Many Vaults are deliberately designed to be "boring": their appeal lies not in generating excess returns, but in the promise of earning income through digital cash without surrendering custody or making users creditors of a single company.

"People want returns," said Jonathan Man, portfolio manager and head of multi-strategy solutions at Bitwise, which recently launched its first Vault. "They want their assets to work for them. A Vault is just another way to achieve that."

If regulators take action to prohibit earning yield directly on stablecoin balances (a proposal included in market structure legislation), Vault may also gain more momentum. If this occurs, demand for yield will not disappear—it will simply shift.

"Every fintech company, every centralized exchange, and every custodian is talking to us," said Sébastien Derivaux, co-founder of Steakhouse Financial, one of the curators of Vault. "So are traditional financial institutions."

But this restraint is not hard-coded into the system. The pressures shaping this industry come from competition, not technology. As stablecoins become widespread, yield becomes the primary means of attracting and retaining deposits. Underperforming curators risk losing capital, while those offering higher returns attract more inflows. Historically, this dynamic has driven non-bank lenders (whether in crypto or other industries) to relax standards, increase leverage, or shift risk outside the platform. This shift has already reached large consumer-facing platforms. Crypto exchanges Coinbase and Kraken have both already... Launch To provide retail clients with access to Vault-like strategy products,Return on Advertising Investment As high as 8%.

In short, transparency can be misleading. Public data tools and visible strategies build trust—and trust attracts capital. But once the capital is in place, curators face pressure to deliver returns, sometimes achieved through off-chain transactions that users find difficult to evaluate.

Stream Finance later revealed this breaking point, as the platform had previously advertised returns as high as 18%, but then reported significant losses related to an unnamed external fund manager. This incident triggered a sharp drawdown across the entire Vault industry, with total assets falling from a peak near $10 billion to around $5.4 billion.

Supporters of the model said that Stream is not representative. Stream Finance did not respond to a request for comment via X's private message.

"Celsius, BlockFi, all of these, even Stream Finance—I sort of categorize them all as failures in terms of disclosure to end users," said Man from Bitwise. "People in the crypto space tend to focus more on what the upside potential might be, rather than paying as much attention to what the downside risks could be."

This distinction may be significant at present. The Vault was established in response to previous failures, with the explicit goal of making risks visible rather than hidden. The unresolved question is whether transparency alone is sufficient to constrain behavior—or, as in the case of the previous shadow banking episode, a clearer structure may merely allow investors to tolerate risk more easily until the music stops.

"At the end of the day, it's about embracing transparency, and it's also about having proper disclosures for any type of product—whether DeFi or non-DeFi," said Man.