What is an onchain vault? A treasury team's guide

Vaults for treasury and fund teams · 1 of 3

A vault is a wrapper for sweeping and accounting. It takes your balance in kind, deploys it under rules you approve, and holds a buffer so you can get it back the same day.

An onchain vault is a smart contract that accepts a deposit, issues you a receipt token for your share of the pool, and routes the pooled balance into a defined set of strategies run by a named manager. You hold the receipt token in your own wallet or at your custodian. Return accrues to the share price, with no separate income stream to reconcile.

Settling any part of your business in stablecoins leaves you carrying a stablecoin balance, and that balance needs the same treatment as any other idle currency position.

Why are treasury teams looking at this now?

Converting between fiat and stablecoins costs money at both ends. If you regularly receive or pay in stablecoins, you stop round-tripping and start holding a working balance instead. That balance then sits on your books earning nothing.

A treasury function holding a meaningful stablecoin position asks what it asks of any currency: where it's safe, how fast it comes back and what it earns. Traditional answers run on banking hours and a settlement calendar, which fits badly with balances that move seven days a week.

Regulatory clarity accelerated it. The US framework taking shape around payment stablecoins has made holding them a normal treasury decision, which we cover in how the GENIUS Act and CLARITY Act reshape stablecoin yield.

How does the money actually move?

The vault sits between your balance and the strategies. It handles the sweep, the accounting and the exit.

Two things in that flow do the work. Deposits and redemptions happen in the asset itself, with nothing waiting on a bank. And the buffer means a redemption doesn't require selling a position at whatever price is available that minute.

Who does what?

Four parties operate inside the structure, and separating them answers most custody questions. The one people miss is the vault owner, because the mandate has to be set by somebody before a curator can allocate against it.

Most vaults implement ERC-4626, a token standard for exactly this shape. Because it's a standard, the share token behaves like any other token your custodian and accounting system already handle.

For the full role map, including what changing a mandate actually requires and which seats Upshift can help you fill, read who does what in an onchain vault.

Who holds the assets?

You hold the claim. The receipt token sits in your wallet or with your qualified custodian, and neither Upshift nor the curator can move depositor funds to an external wallet. The contracts themselves enforce that restriction.

The assets themselves sit in the vault and its segregated subaccounts while deployed. Segregation separates a vault from an arrangement where several clients share one account. Positions taken for your vault are held in accounts belonging to that vault.

Four operational details that come up in every diligence conversation:

• Private or public. A vault can be whitelisted to a single depositor rather than open to anyone, which is the usual structure when a firm is allocating its own or its clients' balances.
• Custodian compatibility. You deposit from your custody account, but your custodian has to be willing to hold the receipt token. That makes them a party to the arrangement. Confirm it early with Anchorage, BitGo or whoever holds your assets.
• Key management. Operator keys sit in MPC wallets via Fireblocks or Fordefi. Administrative control over a vault's proxy sits behind a multi-signature arrangement with signers from more than one organisation.
• Reporting. NAV and position data are available by API as well as in the app. You can pull a valuation on your existing reporting cycle.

The risk management framework documents the controls in full.

Where does the return come from?

The return comes from what the curator does inside the vault. Strategies fall into a handful of shapes: lending into an over-collateralised market, holding yield-bearing collateral and borrowing against it, extending term loans to institutional borrowers, or holding tokenised credit and passing through the coupon.

Each earns its return by taking a different risk. Two vaults quoting the same rate can be doing unrelated things, one unlevered and one running close to two turns of leverage on credit collateral. Our companion piece on the strategies onchain vaults run and the risk in each one maps them against live examples and measured returns. Read it before comparing any two rates.

One component to isolate early: several strategies earn protocol incentives on top of the underlying rate. You do receive them, and an honest APY includes them, but they expire on a schedule the sponsor controls.

What's the difference between a tokenised money market fund and a vault?

Treasury teams usually compare a vault with a tokenised money market fund first, and there are two separate comparisons in that. One is fund versus vault as a wrapper. The other is a vault that simply holds tokenised funds, which is a common and often sensible configuration.

A vault holding tokenised money market funds pays slightly less than the funds themselves. You give up that yield to the fee and take on contract risk. In return you get same-day exit on an instrument that otherwise settles on the issuer's calendar, several issuers in one position, and one accounting line instead of several. If you need those, the fee buys them. If you don't, hold the fund directly.

How fast can you get your money out?

Every Upshift vault processes claimable redemptions daily. The lag between requesting and receiving varies by vault, depending on what has to be unwound. Most vaults also offer instant redemption for a fee, subject to available liquidity, which the buffer makes possible.

If your balances move at the weekend, this is the detail that decides the product. Tokenised money market instruments commonly settle on a five-day week. A Friday afternoon need waits for Monday. The Financial Stability Board treats this as structural, devoting a section of its 2024 review to the liquidity and maturity mismatch that appears when a tokenised claim trades continuously but the asset behind it settles slowly. Upshift RWA Clear applies the buffer approach to tokenised real-world assets for that reason.

What can go wrong?

Three categories, and they price differently.

• Smart contract risk. No analogue in a bank deposit. The contracts holding your assets can contain defects. Upshift's have been through 11 audits by 6 independent firms, which reduces the risk without removing it. There's no smart contract insurance on these vaults today. Raise that internally early.
• Strategy risk. Familiar territory. A levered position can be liquidated, a borrower can default, a tokenised issuer can miss a redemption, and a lending market can accumulate bad debt if its price feed misbehaves. Yields move with borrowing demand and none are guaranteed.
• Operational risk. Administrative control sits behind a multi-signature arrangement rather than with one party, and operator actions run through pre-transaction simulation with maker-checker approval. Independence between roles is enforced procedurally, outside the contract code. Ask about it specifically.

Always make sure to do your own research and be aware of the above and any other risks before depositing.

What should you ask before allocating?

• Which strategies does the curator run, and is the position levered? Ask for gross assets over net value.
• What does the policy engine restrict, named at protocol and token level?
• Is this vault whitelisted to us, and are our positions segregated from other depositors?
• What is the largest drawdown since inception, and what caused it?
• What does redemption look like on a Saturday, and does the answer depend on the buffer or on unwinding?
• When is NAV struck, and can we pull it by API on our own schedule?
• How much of the quoted return is incentives, and when do those programmes end?

The FAQ covers custody, redemptions, fees and integrations, and the protocol overview covers the curator model.

Frequently asked questions

Is an onchain vault custodial?

No. You hold the receipt token representing your claim, in your own wallet or at your custodian. Neither the infrastructure provider nor the curator can move depositor funds to an external wallet. The assets sit in the vault and its segregated subaccounts while deployed.

Can we have a vault that only we deposit into?

Yes. A vault can be whitelisted to a single depositor, which is the normal structure for a firm allocating its own balance sheet or its clients' assets. You can also set the lockup terms on your own vault.

Can a company treasury use a vault, or is it only for funds?

Both use them, and the constraint is usually internal. Your risk function needs the strategy explained in terms it can underwrite, and your payments calendar needs the balance reachable when it's needed. Buffer-backed redemption and clear strategy documentation tend to matter more than the headline rate.

Does putting a tokenised fund inside a vault earn more than holding it directly?

No, and it shouldn't. You give up a little yield to the vault fee and take on contract risk. In exchange you get same-day exit on an instrument that settles on the issuer's calendar, exposure to several issuers in one position, and a single accounting line.

How is the return reported for accounting?

Return accrues to the share price. You value a position as shares held times current share price. There's no separate income stream to record. NAV and position data are available by API for pulling on the schedule your reporting already runs on.

Which assets can a vault hold?

Vaults exist for stablecoins, bitcoin, ether and other major assets, and a vault can hold one asset or several. Stablecoin vaults are where most institutional interest starts, since the balance being put to work is usually already a stablecoin balance.

Keep reading

This series: Part 1 covers what a vault is. Part 2 covers using one inside a treasury product, including the comparison against an ETP. Part 3 covers what launching a vault for your own clients involves.

• The DeFi yield strategies onchain vaults run: the strategy shapes, what risk each takes, and measured returns on live examples.
• How traditional asset managers are controlling risk in DeFi: what the policy engine restricts and why allocators ask about it first.
• Why every financial product will run on vaults: the case for the vault as the wrapper these products ship inside.
• Single-asset vault architecture: the contract structure behind a one-asset vault.
• Vault-as-a-Service: what launching a branded vault involves, covered in Part 3.
• Securitize Fund Services and Upshift: independent fund reporting for onchain vaults.