ERC4626

ERC4626, also known as the Tokenized Vault Standard, is an Ethereum standard proposal that aims to unify the way yield-bearing vaults are implemented on the blockchain. Before ERC4626, different decentralized finance (DeFi) protocols had their own unique ways of representing and interacting with vaults, which often held underlying assets and generated yield. This lack of standardization made it difficult for developers to build interoperable applications and for users to understand the mechanics of different vaults.

ERC4626 introduces a common interface for these vaults. A vault compliant with this standard exposes functions for depositing underlying assets, withdrawing them, and checking balances. Crucially, it also manages "shares" tokens. When a user deposits assets into a vault, they receive shares in return, representing their proportional ownership of the vault's assets. As the vault accrues yield, the value of these shares increases, allowing users to redeem more underlying assets than they initially deposited.

The main benefits of ERC4626 include increased composability and standardization within the DeFi ecosystem. Developers can build applications that interact with any ERC4626-compliant vault without needing to write custom integration code for each one. This simplifies the development process and fosters greater innovation. For users, it means a more predictable and understandable experience when engaging with yield-generating strategies across different DeFi protocols. By providing a universal blueprint, ERC4626 simplifies the creation and integration of yield-bearing vaults, paving the way for a more cohesive and user-friendly DeFi landscape.