Ten Thousand Characters Breakdown of On-Chain Vaults: Eight Major Tracks, Who is Rising and Who is Declining?

Author: Castle Labs

Compiled by: Jiahua, ChainCatcher

This article is excerpted from our research on "Financial Vaultization."

Download the full report here

Vault Classification

This section of the report provides a quantitative analysis of the vault landscape to offer a comprehensive picture of the field and its evolution. We analyze the ecosystem by category, tracking the transfer of TVL among different vaults and curators.

We break down the concentration of curators and provide an outlook on major capital flows, placing this year's structural changes in vaults within a concrete context.

Vaults should not be viewed as a single, all-encompassing market, but rather evaluated based on their different implementations, each with distinct parameters, risk vectors, and responses to stress tests. Aggregated data can only provide a partial picture, necessitating a more detailed analytical perspective.

Before we begin the analysis, it is important to define the term "vault" as the foundation of our methodology.

Our definition is based on deployment paths. Vaults are classified as "tools for users to acquire active yield strategies." Any asset that is purely an off-chain tool is excluded from our analysis.

Maple's syrupUSDC meets the vault standard: users deposit stablecoins into the protocol, which lends them to institutional borrowers, accumulating annualized returns through credit activities involving token issuance.

Lido stETH is a vault: users deposit ETH, the protocol earns staking rewards, which are distributed through rebase tokens. Centrifuge JAAA is a vault: users obtain AAA-rated CLO yields through tokenized wrappers, which generate returns through their credit positions.

BlackRock's BUIDL does not qualify as a vault by this definition: it is a direct token issuance representing a 1:1 claim on off-chain U.S. Treasury funds.

We have defined eight structural categories: Lending Vaults, Liquid Staking, Re-staking, Risk Curated Vaults, Vault Infrastructure Providers and Yield Optimizers, RWA Credit Vaults, Perpetual Contract LP Vaults, Options Vaults.

For the purposes of this analysis, we treat Risk Curated Vaults as a distinct category to better understand their dynamics and growth.

Before delving into these categories one by one, let's first take a look at the overall performance of vaults.

Current State of the Vault Ecosystem

The net TVL of all defined vault categories totals $120.4 billion, down about 50% from the peak of around $241 billion in October last year. The downward trend following the October peak was driven by the "October liquidation event," which triggered a cascade of liquidations across DeFi.

Due to overlaps, the vault TVL figures exceed the current DeFi TVL (approximately $86 billion). For example, liquid staking protocols like @LidoFinance issue stETH, a rebase asset representing staking ETH yields, which is used as collateral in lending protocols like @Aave and @Morpho.

If we shift to category-level analysis, the overall situation changes dramatically. Recent events have led to TVL outflows and prompted the entire industry to undergo a broader reality check regarding security and risk management (and hopefully shift towards a safety-first approach).

Categories such as lending, liquid staking, and re-staking have been hit hardest, as they have the greatest risk exposure to on-chain assets and drive the on-chain economy; meanwhile, RWA vaults continue to show unrelated growth due to their lack of exposure to crypto asset risks.

Categories like options vaults peaked in April 2022 and have struggled since. Following the "October liquidation event," risk-curated vaults suffered hits comparable to other major categories. Their TVL peaked around the end of October and subsequently declined due to the collapse of Stream Finance.

The three events between October 2025 and May 2026 (Stream Finance, Resolv, and Kelp hack) provide a good stress test window, as these collapses/exploits had cascading effects across the entire DeFi.

In the chart below, we highlight the TVL history of these categories during this specific period. As mentioned, most performed poorly, with only RWA vaults growing by 37.8% during the same period, while other categories experienced significant pullbacks.

Next, we continue to analyze the growth of each vault category, focusing on recent trends and shifts.

Lending Vaults

Lending is the largest vault category, accounting for the vast majority of DeFi TVL. Last year marked a widespread shift towards curated vaults, driven by products like Morpho, which helped expand this trend.

On Morpho, curators can create their own vaults, which can have risk exposure to multiple markets and earn yields for depositors. These vaults can ultimately be curated by any provider, including traditional financial institutions.

Morpho's recent Vaults V2 upgrade has provided curators with more features, including the ability to embed approved adapters to source yields from multiple sources, fine risk controls (such as setting absolute or relative caps on vault risk exposure), built-in KYC controls, and other functionalities.

In the same context, Aave has also launched its V4 version, introducing Spokes (market spokes) and a unified liquidity hub architecture. Spokes provide stronger functionality through customizable risk parameters, isolated collateral types, and oracle configurations for each market.

Unlike Morpho's curator-led model, Aave's governance still requires review and approval for the implementation of these Spokes, while Morpho is permissionless. This marks Aave's shift from monolithic lending to modular lending.

The curator model has allowed Morpho to amass over $7.5 billion in TVL across Ethereum mainnet and Base. Base has significantly contributed to Morpho's growth, increasing from $604 million to over $2.8 billion.

This demonstrates the power of the distribution partnerships Morpho has pursued, such as its collaboration with Coinbase: currently, approximately 40% of TVL in USD terms is cbBTC, while it has facilitated over $1 billion in loans for Coinbase users.

In response to finding product-market fit (PMF) for the curator model among institutional investors, Aave is competing in the institutional space through Horizon, which has accumulated over $350 million in TVL since its launch.

Additionally, Aave has undergone many changes in recent months, including the departure of service providers like BGD and ACI from Aave Labs, as well as the announcement and approval of the "Aave will Win" framework, which allocates all revenue from Aave's products to token holders.

These events have not had much direct impact on Aave users. The only impact has been on the price performance of Aave tokens, but the recent KelpDAO attack changed the landscape: Aave lost over $12 billion in TVL, bringing it closer to its competitor Morpho in terms of TVL.

The ratio of Aave TVL to Morpho TVL used to be between 5 and 6 times, but due to this event, it has now dropped below 2.

@sparkdotfi is part of the Sky ecosystem and is one of the lending protocols that benefited the most from the influx of funds following the rsETH hack.

The chart below shows the changes in TVL for this protocol:

Notably, Bitcoin supply nearly tripled, stablecoin borrowing increased by 78% to $752 million, with utilization remaining within manageable limits, and WETH borrowing increased by 44.1% to 325,000 WETH.

@0xfluid's unified liquidity layer also introduced a different liquidity design approach, where lending, borrowing, and DEX share the same funds. Users' collateral acts as LP (liquidity provider) in Fluid DEX, earning trading fees, while borrowed funds are deployed as smart debt into DEX pools, earning fees to offset borrowing interest costs.

Another interesting initiative from Fluid is its collaboration with protocols like @JupiterExchange and @VenusProtocol, launching white-label products such as JupLend (Solana) and Venus Flux (BSC), which currently have TVLs of $926 million and $21 million, respectively.

This stems from Fluid's broader positioning to collaborate with major players across chains and gain more market share, sharing fees with these participants.

It is worth mentioning @kamino vault, which is a major lending stack on Solana with over $1.6 billion in TVL. The protocol has achieved significant growth through its K-Lend model (the Solana equivalent of Morpho). This has allowed Kamino to collaborate with established curators like Gauntlet and target institutional integration.

The largest vault on the platform is currently @SentoraHQ PYUSD, with over $219 million in TVL, followed by RockawayX's RWA USDC vault at only $33 million, indicating that Kamino and the entire Solana still have significant room for growth.

Liquid Staking and Re-staking

Liquid staking and re-staking occupy a large share of vault TVL, at $42.4 billion and $20.6 billion, respectively.

The main players in liquid staking are Lido ($21.8 billion), Binance Staked ETH ($8.9 billion), @Rocket_Pool ($1.2 billion), and @Coinbase cbETH ($320 million).

Over time, Lido has maintained its dominance, with its issued asset stETH having high composability across DeFi. At the same time, Lido's dominance also signifies concentration risk. They have expanded their product line by introducing Earn products, which act as an aggregation layer to deposit users' funds across DeFi to earn yields. However, due to its exposure to $rsETH, this product was impacted following the recent Kelp DAO hack.

Binance Staked ETH has leveraged Binance's user base, growing by 121.8% since last year.

For other protocols and the entire category, growth has been slow, and at the cost of diluted staking yields, the current staking yield is around 2.5%.

On the other hand, re-staking and liquid re-staking have grown as a category to enhance yields earned from liquid staking.

@KelpDAO was once a liquid re-staking protocol, and its hack and the broader DeFi cascading failures highlighted the composability risks these assets bring, as they are accepted as collateral across DeFi, making this more of a vulnerability than a feature during this event.

The main players in re-staking and liquid re-staking are @EigenCloud ($7.8 billion), @ether_fi ($5.7 billion), Kelp DAO ($1.6 billion), and Renzo ($167 million).

Re-staking products like EigenCloud and EtherFi have expanded over time, encompassing more services.

EigenCloud's rebranding in 2025 helped position them as the AWS of the crypto space, driving the development of verifiable computing.

EigenDA is Eigen's data availability layer, used by multiple L2s, including @megaeth, @Mantle_Official, and @Celo. Data published on EigenDA exceeds 1.8 TB and has generated approximately $90,000 in total fees.

EigenCloud's TVL, priced in ETH, has remained stable over the long term but recently declined after the Kelp hack, as users tend to withdraw funds during uncertain times.

Similarly, EtherFi has expanded into a new type of bank (neobank), with thousands of active card users who have cumulatively spent about $440 million through its products.

Additionally, they have a Liquid product (remember EtherFi was initially launched as a liquid staking protocol), supporting various strategies to enhance yields across DeFi. One of its top ETH yield vaults has a TVL of $177.5 million.

Risk Curated Vaults

Risk curated vaults are one of the fastest-growing categories, reflecting the shift from monolithic lending to modular lending. The curated vaults they offer on platforms like Morpho earn them performance and management fees, similar to the operation of traditional financial funds, deploying user capital across various strategies to generate returns.

This category currently has a TVL of approximately $6.5 billion, with 75% held by three curators: Sentora ($1.85 billion), @SteakhouseFi ($1.63 billion), and @gauntlet_xyz ($1.5 billion), indicating less competition in this category.

The fees charged by these risk curators are lower than those of traditional financial hedge funds and venture funds, which typically charge management fees (around 1-2% of total AUM) and performance fees (around 10-20% of earned interest). For example, the largest curator by revenue, Steakhouse Financial, generates $3 million in annualized revenue on $2.13 billion AUM (annualized fee rate of about 0.14% of total AUM).

These curators typically charge only performance fees, and in some cases, management fees, but these fees are currently much lower. This is a result of the competitive landscape, as curators compete to offer the lowest fees to attract the most TVL.

However, despite this, risk curators are concentrated at the top, with dominance shared among three providers, which is better than liquid staking, where Lido is far ahead.

Additionally, what does this concentration mean? The Steakhouse team stated: "Concentration may follow the power law found in traditional asset management analogs (e.g., ETFs), where most AUM is concentrated around leading managers.

This is not necessarily a bad thing, but rather a reflection of scale and trust compounding towards top managers who compete on performance, product range, and fee load.

The benefit of DeFi is that the arena is open. Anyone can come in and compete. We expect top-level concentration to persist while healthy competition exists at the margins, with room for specialization."

Following the Stream Finance incident, the dynamics of concentration have recently changed; prior to this, MEV capital and Re7 also had strong representation, peaking at $1.49 billion and $830 million, respectively. They later shrank, with Sentora growing to become the second-largest curator.

Moreover, the impact on risk curators following the KelpDAO hack is evident, but a few winners, such as @kpk_io (+159.6%) and Gauntlet (+42.7%), saw net positive inflows.

For KPK, this growth comes from their recently launched Morpho V2 vault, which attracted deposits from ensdomains, CoWSwap, NexusMutual, and others.

They integrated agent-driven automation for rebalancing and vault exits, improving their risk management. For Gauntlet, growth stems from its expansion on the BSC chain and its collaboration with the Lista DAO lending protocol, attracting new capital inflows.

As Juan Pellicer of Sentora pointed out, "DeFi insurance is also becoming a real part of the institutional landscape. The ability to provide economic insurance changes the calculus for treasurers or asset managers, who must justify to their investment committees, marking a structural unlocking."

Multi-Strategy Vaults

Yield optimizers as a category are maturing and seeing a large influx of new participants. With the increase in on-chain yield sources, optimization or aggregation models will become better vault models, providing depositors with the best available yields across the board.

Protocols like @Veda_labs ($1 billion), @upshift_fi ($380 million), and Fluid Lite Vault ($164 million) are leading in the overall category.

Each protocol offers different models, but the goal remains to seamlessly integrate vaults that optimize yields and provide depositors with the best available yields across DeFi. Due to ongoing market pullbacks and the pressure period since last October, they are currently far below their peaks.

It is best to view providers like Veda and Upshift not just as aggregators but as infrastructure for creating isolated yield products. Upshift uses its own strategy engine to execute vault authorization rules and ensure self-custody attributes by limiting deployments to whitelisted chains/protocols/tokens/smart contract calls.

Additionally, Upshift is better classified as a multi-strategy vault, as its vaults provide risk exposure to a range of DeFi strategies, including lending, basis trading, arbitrage trading, liquidity provision (LPing), RWA, and more.

Veda leverages a modular architecture, separating operations into a "boring" vault whose sole purpose is to hold assets, while any specialized tasks are performed by external modules. The protocol enforces permissions through Merkle trees by whitelisting specific vault operations.

Infrastructure providers make it extremely easy for institutions to start from a single integration, allocating to a lending protocol, and adding more complex strategies as product offerings expand for higher yields and deeper liquidity.

Other products like Fusion from @ipor_io ($30 million) and @GearboxProtocol ($29 million) also serve as yield optimization layers. For example, Fusion's main goal is on-chain vault infrastructure, enabling independent entities like curators and asset managers to build and operate yield strategies such as leveraged looping loans and arbitrage trading.

Each Fusion vault is unique in curation, strategy, and allocation. Automation is built at the strategy level, with different triggers set for optimization, leverage maintenance, liquidation risk management, routing, and more.

For instance, executing swaps when negative spreads occur, using flash loans to migrate leveraged positions across markets, or exiting during risk events. As the Fusion team noted, "This automation was crucial during the recent rsETH/Aave crisis, when the IPOR DAO stETH looping vault on the mainnet was one of the first vaults to completely cut off exposure to Aave v3 core."

Overall, automation and execution enable curators to manage risk quickly when rapid action is needed.

Among all categories of funds managed by protocols, leveraged looping loans are the largest, at about $80 million. This number is higher because TVL is an inadequate metric for yield optimizers.

Instead, these providers should be analyzed based on their assets under management (AUM), as they allocate funds to other protocols, meaning their TVL does not reflect real growth.

Gearbox has launched a vault architecture for passive lenders and active borrowers.

The core of the protocol is to provide access to leveraged exposure or delta-neutral exposure for liquidity mining or liquidity provision strategies. While most vault mechanisms are built around curators' asset management, Gearbox focuses on the risk management infrastructure for lenders.

Borrowers can open credit accounts to interact with Gearbox and external protocols while funds remain non-custodial. V3 introduced strategy-level firewalls to protect the protocol in case of credit account or strategy failures.

In the event of an incident, they cannot drain funds beyond the shared liquidity pool allocated to it, thus protecting passive lenders from contagion.

Recently, the protocol also announced a focus on RWA looping loan vaults.

RWA Vaults

RWA vaults have achieved sustained growth over the past five years, with a compound annual growth rate (CAGR) of 231.3%, reflecting the growing interest of retail and institutional investors in RWA yield exposure. Even after the recent exploits of @ResolvLabs and Kelp, the RWA vault category remains sticky and has not experienced significant volatility due to limited exposure to on-chain assets.

The largest participants in this category include @maplefinance ($2.1 billion), @centrifuge ($1.6 billion), @anemoycapital ($1.1 billion), and @re ($263 million).

Maple Finance has rapidly grown over the past year, with TVL climbing nearly tenfold since early 2025. This growth can be attributed to various factors, including the launch of Syrup, which is part of the protocol's transition from a purely institutional model.

This launch opened the door to retail-facing products (like syrupUSDC and syrupUSDT) that have high composability in DeFi. The composability and deep liquidity of DeFi allow assets to be leveraged through looping loan protocols and integrated with products like @pendle_fi, facilitating a growth flywheel.

Reflecting product demand, the platform's current total active loans amount to approximately $1.7 billion. These loans are dominated by USDC, accounting for about 75% of total active loans, followed by USDT, which makes up the remainder.

Other products have also witnessed tremendous growth. For instance, Centrifuge positions itself as a private credit infrastructure protocol. Its collaboration with Anemoy has led to an $1 billion treasury pool running on Centrifuge infrastructure. Centrifuge was also recently chosen by Coinbase as its tokenization partner.

Products like Re bring reinsurance underwriting risks on-chain, allowing users broader access to real-world yields. Additionally, the Upshift USDC vault provides loans to over-collateralized institutional funds, granting its depositors exposure to institutional lending.

Despite RWA witnessing all the growth in DeFi, it still represents only a small fraction of the on-chain tokenized value. Currently, active RWA DeFi TVL accounts for about 1/10 of the total RWA value.

The vast difference between these two values is because these assets belong to different categories, exceeding the general considerations for ordinary assets, as they involve redemption periods, compliance, and liquidity issues in certain cases.

For any asset to scale in DeFi, it requires active redemption and secondary liquidity, as users may need to sell these assets to regain liquidity, or in the case of lending protocols, liquidators repay loans and sell assets at prices close to mark to profit, but given all the constraints RWA brings, these often become harder to achieve.

Additionally, income-generating assets like RWA have another important part of their growth flywheel: looping.

RWA looping involves borrowing stablecoins against tokenized treasuries as collateral and repeatedly redeploying them into yield vaults. A 4-5% base treasury yield, under 2-3x leverage, can generate 7-12% returns, but this is only achievable if borrowing costs remain low (around 1%).

On-chain stablecoin interest rates are highly volatile and can significantly compress this spread. The leverage used to execute such trades amplifies liquidation and oracle risks, and this strategy relies on the stability of RWA collateral values. Consequently, some RWA settle on T+1, while others settle on T+5, and redemption issues also play a role.

To address this issue, several solutions are currently available:

ERC-7540: Introduces asynchronous ERC-4626 vaults, allowing users to redeem their claims as liquidity while the underlying assets settle off-chain. Centrifuge is one of the most significant examples of ERC-7540 in production, using synchronous deposits and asynchronous redemptions to resolve the tension between DeFi and traditional finance T+ settlements. These hybrid vaults are becoming a template for any vault involving off-chain assets.

Securitize Vault Registrar: This ERC maps each investor to their identity when using RWA in DeFi, ensuring the protocol complies with all regulations and requirements needed for the assets.

Redstone Liquidation Flow: They execute RWA liquidations by introducing auction-based liquidations and connecting positions to KYC-verified solvers, who receive the underlying assets off-chain and close positions on-chain.

Upshift Clear: Upshift is working with Superstate to launch its new product for instant RWA redemptions, allowing users to exchange their RWA for USDC at the currently reported price, with a redemption fee of 5 basis points.

Another protocol in this category is 3F, a platform for leveraging RWA on-chain (@3f_xyz). It currently has $7 million in TVL and addresses RWA asset issues in DeFi differently from other solutions.

It attempts to externalize different factors, including Bridge Facilitators and Liquidity Integrators. The former provides upfront liquidity to complete the exposure users intend to take on their base capital.

For example, if a user's target exposure is $3 million and their deposit is $1 million, they can obtain the remaining $2 million liquidity from the Bridge Facilitator, achieving the entire position with 3x leverage.

Similarly, when users intend to close their positions, facilitators provide the necessary liquidity, addressing redemption delay issues. The latter, Liquidity Integrators, provide immediate liquidity when users want to exit instantly.

Because even with Bridge Facilitators, users have $1 million in deposits that must go through the entire redemption process, these integrators provide the much-needed liquidity.

Both approaches borrow efficiency from the market, just like liquidation work in lending, filled by active on-chain participants to capture profits in RWA looping.

Over time, such systems become easier to scale, as each participant benefits from the process: loopers achieve smooth exits, while facilitators earn profits by providing liquidity and faster redemptions for users.

As mentioned in the previous section, Gearbox also plans to launch "Retokenisation": a feature that allows infrastructure to natively support leveraged minting and redemption of non-atomic tokenized assets without requiring secondary liquidity or causing redemption delays.

In practice, Gearbox's contracts will merge with the contracts of RWA issuers, creating a seamless, composable system that implements RWA leverage directly at the issuer level, making Gearbox the only EVM protocol offering native RWA leverage.

Perpetual Contract LP Vaults

Representatives of perpetual contract LP vaults include Jupiter Perps ($715 million), @HyperliquidX HLP ($396 million), @DriftProtocol ($256 million, down after a recent hack), @GMX_IO ($242 million), and @Ostium ($51 million).

Jupiter's JLP remains the largest perpetual vault in terms of TVL, but has lost more than half its value since last October due to liquidation events.

HLP has performed better in value preservation, down 30% from its peak of $600 million in September last year. Hyperliquid's vault has experienced continuous ups and downs, typically driven by its HLP floating yields, which are influenced by its structure and market conditions. Thus, high-yield cycles attract capital, while low-yield or loss periods push it out.

A significant loss event occurred in March 2025 when a trader opened large short positions on the Jelly token and then withdrew margin, triggering forced liquidations and prompting HLP to take over the position.

Such losses inflicted on the vault have created a structural bias among depositors, often classifying HLP as a higher-risk vault, but Hyperliquid has reduced the leverage allowed for such tokens to avoid such situations, thereby amplifying losses.

Products like Ostium OLP provide exposure to RWA perpetual contracts and offer users yields with different configurations, but its TVL has dropped about 50% from its peak. This pullback is a result of broader market fluctuations and Ostium's yield cycles.

Additionally, Ostium recently introduced architectural changes, making OLP a priority tier and never taking on first-risk intraday settlement layer. This contrasts with the HLP model: depositors who previously wanted directional exposure provided by OLP may leave, but in this new model, it has become a passive income source for depositors looking to reduce risk.

Options Vaults

DeFi options vaults (DOV) as a category have gradually faded over time, peaking in 2022. DOVs provide exposure to strategies like covered call options and cash-secured put options, but lack capital efficiency, carry higher risks, and have attracted fewer audiences over time as crypto users tend to be drawn to perpetual contracts. However, options vaults have recently been improving and solidifying their use cases, at least for more savvy users.

Options vaults no longer exist in their previous format. Instead, they have architecturally changed to be more user-friendly, delivered through products like @DeriveXYZ and @ryskfinance. Nowadays, options vaults execute through a request-for-quote (RFQ) system, with market makers processing in the background.

Derive is an options and perpetual contract exchange that has achieved accelerated growth since launching V2 in March 2025, due to feature expansions (such as using CLOB and enabling institutional-grade features like OTC custody and support for multiple collateral types), processing perpetual contract and options trading volumes of $12 billion and $16 billion, respectively.

Derive V1 has active vaults that provide users with exposure to different strategy options and create delta-neutral positions for their depositors, maximizing annualized yields. These vaults currently hold about $2.4 million in TVL.

On the other hand, products like Rysk provide options exposure to retail through covered call options and cash-secured put options. It launched on Hyperliquid, focusing on HYPE's covered call options, currently holding about $56 million in TVL and processing $975 million in notional options trading volume.

Through this, they also offer Rysk Premium, a flagship product acting as a vault for savvy allocators, deploying funds across different options strategies and generating ongoing yields for depositors.

The new vault implementations focus on addressing some of the previous issues of existing products. These issues include poor strategy design, with timeframes as short as 7 days; executing trades at fixed time intervals, creating opportunities for front-running; and allowing users to align their scales, strike prices, or expiration dates with customizable designs.

Options vault providers are now more attuned to the market pulse, understanding which assets to list to capitalize on new opportunity windows in income-generating assets.