If you know NFTs, you know the token standard ERC-721. But are you catching up with ERC-4626?
According to data from, the total TVL (locked total) for all DeFi protocols is about $ 193 billion. DeFi llama.. Since the explosion of decentralized finance in the summer of 2020, a concept called “yield agriculture” has emerged. Users deposit funds on platforms such as compounds, which are lending protocols, and receive some of the profits that are reminiscent of traditional bank interest payments when the deposits are lent out.
However, yield farming was not attractive to individual users without knowledge of important capital and concepts. That’s why we’ve introduced a set of smart contracts, the Yield Aggregator, that pools user funds and optimizes yields. These soon became known as vaults.
However, these vaults had no mounting standard, creating multiple complications. Eel door riggers, vaults, lending markets, and native yield tokens have always been implemented in small variations. Building apps on top of the vault was difficult and created potential security vulnerabilities. Scaling was also limited.
Because the vault runs on smart contracts, the average user couldn’t interact directly with the vault, only increasing the importance of potential decentralized apps (dapps) that could be built on top of the vault.
Vault standard
Ethereum improvement proposal (EIP) Created on 22 December, led by Joey Santoro, founder of the Fei protocol, set out to change it. Enter ERC-4626.
The main goal of this proposal was to establish a robust implementation standard for vaults, but also outlined the potential security implications of vaults without specific standards.
EIP-4626 was approved on March 18th. Since then, a number of DeFi protocols (Yearn Finance, Balancer, Rari Capital, mStable, etc.) have begun implementing ERC-4626 on vaults. (Approved EIPs are called ERC, or Ethereum comment requests.)
All applications built on the ERC-4626 vault work with the ERC-4626 vault with all other yields, making it easier to integrate these contracts and new innovations centered around yield strategies. Was born.
With ERC-4626, vaults are now in two main categories. Transferable and non-transferable.
Transferable vaults will issue a representative ERC-20 token to the user. This token represents part of the user-owned vault pool. Non-transferable vaults do not use tokens.
Establishing a standardized vault opens up new possibilities for interoperability between different protocols. This can also pave the way for protocol compatibility across multiple blockchains.
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