Aave Vaults

Aave Vaults are ERC-4626 compliant yield-bearing vaults that allow users to supply and withdraw ERC-20 tokens supported by Aave V3. Vaults manage the supply and withdrawal of assets in the Aave Protocol while enabling vault managers to take a fee on the yield earned.

To deploy a vault, clone and deploy from the Aave Vault contract repository.

Aave ERC-4626 Vaults

Overview

Aave Vaults follow the ERC-4626 Tokenized Vault Standard, which standardizes the interface for yield-bearing vaults. This standard simplifies integration with various applications and aggregators while improving interoperability across the DeFi ecosystem.

Each vault allows depositors to:

  • Deposit supported tokens (assets) and receive vault shares in return

  • Redeem vault shares for the underlying assets plus accrued yield

  • Automatically earn yield from Aave V3 markets without direct interaction with the protocol

Architecture

Aave Vaults consist of three key components:

  1. ERC-4626 Interface: Standardized methods for deposit, withdrawal, and accounting of assets.

  2. Yield Strategy: Manages deposits into Aave V3 markets and handles yield accrual.

  3. Fee Management: Enables vault managers to collect a percentage of the yield generated.

When a user deposits an asset into a vault:

  • The vault mints proportional vault shares (ERC-20 tokens) to the user

  • The vault deposits the underlying assets into the corresponding Aave V3 market

  • The vault receives aTokens from Aave, which automatically accrue yield

  • Yield is reflected in the increasing value of vault shares over time

Fee Structure

Vault managers can set a fee percentage on the yield generated by the vault. This fee structure includes:

  • Performance Fee: A percentage of the yield earned that goes to the vault manager

  • Max Fee: A maximum limit on the performance fee that can be charged

  • Fee Recipient: The address that receives the collected fees

Fees are collected when yield is realized through:

  • User withdrawals or redemptions

  • Explicit fee collection by the vault manager

The fee is only applied to the yield portion of the assets and not to the principal amount deposited by users.

Interacting with Vaults

Vaults implement the standard ERC-4626 interface with methods such as:

  • deposit(uint256 assets, address receiver): Deposit assets and receive vault shares

  • withdraw(uint256 assets, address receiver, address owner): Withdraw assets by burning vault shares

  • mint(uint256 shares, address receiver): Mint exact amount of shares by depositing assets

  • redeem(uint256 shares, address receiver, address owner): Redeem shares for underlying assets

Additionally, vaults provide view functions to check:

  • totalAssets(): Total assets managed by the vault

  • convertToShares(uint256 assets): Convert asset amount to vault shares

  • convertToAssets(uint256 shares): Convert vault shares to asset amount

  • previewDeposit(uint256 assets): Preview shares received for a deposit

  • previewWithdraw(uint256 assets): Preview shares needed for a withdrawal

For a detailed contract reference, see here.

Benefits for Users

  • Simplified Yield: Earn yield from Aave V3 without managing multiple transactions

  • Gas Efficiency: Lower gas costs compared to direct protocol interactions

  • Standard Interface: Easier integration with other DeFi protocols and applications

  • Composability: Vault shares can be used in other DeFi applications

Benefits for Vault Managers

  • Yield Capture: Earn fees on yield generated by user deposits

  • Customization: Configure fee parameters to suit different strategies

  • Standardization: Leverage the ERC-4626 standard for broader integration

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Aave.com provides information and resources about the fundamentals of the decentralised non-custodial liquidity protocol called the Aave Protocol, comprised of open-source self-executing smart contracts that are deployed on various permissionless public blockchains, such as Ethereum (the "Aave Protocol" or the "Protocol"). Aave Labs does not control or operate any version of the Aave Protocol on any blockchain network.