DeFi vaults represent the forefront of automated asset management in the realm of Decentralized Finance (DeFi), offering investors opportunities to maximize crypto market potentials.

The popularity of this DeFi niche surged in the summer of 2020 with the introduction of pioneering protocols like Yearn Finance, MakerDAO, and Compound, which debuted automated yield-bearing products. Powered by automated smart contract ecosystems and algorithms, most DeFi vaults aim to optimize returns through diverse strategies.

While DeFi vaults have been in existence for a while, they are continuously evolving to enhance offerings and address past challenges. This evolution encompasses a journey from simple yield farming vaults to more intricate, multi-layered strategies.

Yearn Finance, one of the early DeFi protocols to launch a vault, pioneered the concept of yield farming, offering a passive saving/investment avenue for crypto users. The introduction of Yearn's yVault series enabled users to deposit tokens, with the Yearn aggregator managing them to generate yield.

Simultaneously, MakerDAO introduced lending and borrowing vaults, allowing DeFi users to use their idle digital assets as collateral to mint the DAI stablecoin. This innovation mirrored traditional asset practices, enabling investors to borrow loans while retaining ownership as long as they fulfill their obligations.

These examples represent just a glimpse of the diverse landscape of DeFi vaults. Over time, more sophisticated vaults have emerged, including those offering complex financial products like options and undercollateralized lending. Currently, the total value locked across all DeFi protocols exceeds $96 billion, with a significant portion allocated to DeFi-oriented vaults.