Vaults make capital easier to raise and allocate on-chain. But the activity that pays the yield may remain off-chain. That points toward more hybrid finance.
Analysis
2026-10-25 - 2 min read
Vaults are making it easier to raise and allocate capital on-chain . What I find more interesting is where that capital goes next, and who’s actually paying the yield . The value of a vault is straightforward: it pools deposits, sets rules for allocation and gives investors a manageable position. That makes capital easier to deploy. It doesn’t, by itself, create more demand for that capital. Take Gauntlet Prime, Steakhouse Prime and similar products. Where they allocate to crypto-backed lending, returns depend on borrowers paying for liquidity. Curation can improve the allocation and control risk, but the underlying borrowing demand still has to be there. Then consider Janus Henderson’s tokenized AAA CLO fund, JAAA . At a hypothetical 5.5% yield on both products , I’d argue there’s a reasonable case for preferring JAAA’s senior credit exposure to Gauntlet Prime’s crypto lending exposure.
That’s a judgment about the underlying risks, rather than a conclusion you can draw from the APY alone. Yes, access comes with more friction. Permissionless access and composability are valuable. But investors still have to decide how much return they’re willing to give up, or additional risk they’re willing to accept, for that convenience. This is why I think the opportunity for vaults extends well beyond native DeFi yield: Aggregate capital on-chain. Allocate it wherever the return justifies the risk. Represent the investment through shares that can integrate with DeFi. Trade finance is a good example. Some products advertise around 8–9% from financing trade activity. Investors can access the position on-chain, while the underlying return depends on goods being delivered and payments being collected. The shares become an on-chain claim on an opportunity whose economics remain largely off-chain .
Using that position as collateral adds another financing option. It doesn’t remove the need for underwriting, asset management or recovery when something goes wrong. That leaves me positive on vaults, but more cautious about how much capital native on-chain yield can absorb. If investors find better returns for the risk outside crypto, vaults can help direct capital there. The next phase may involve much more on-chain capital formation funding off-chain activity . More CeDeFi, I guess. With better infrastructure for connecting the two.