What are Crypto Vaults? Since it’s still early in crypto, there are a few different applications where the term has been used.
Crypto Vaults, as in the storage concept, is a more secure type of wallet. There are pros and cons to both wallets and vaults. A regular crypto wallet can make transactions whenever the user wishes, and so a hacker can very easily move funds if the wallet is hacked.
With a Vault however, there is an added level of security. Before a withdrawal can be made, the owner is notified and must approve the transaction. The transaction can be canceled if the owner changes their mind or if the transaction is suspicious. Additional approval methods can be added to layer more security.
The drawbacks though are evident, transactions can go through days of approvals before the funds are moved.
Crypto vaults have also been defined as an algorithm strategy for yield farming. A popular platform called Yearn.Finance was the first to introduce this concept. Yearn.Finance takes your funds and automates transactions and where the crypto is pooled and farmed in order to get the maximum return on investment.
The investor has complete control over the time the capital is locked and can cash out and withdraw whenever they wish.
A few other platforms have applied this concept and built on it such as Tomb.Finance and Grim.Finance, the vaults here have a set rebase time and run the funds through a 3-4 step cycle to get the highest returns.
Only time will tell which type of Vault will take over the official definition of the term, but both have solid use cases for investors and long term holders looking for steady gains and secure holding.