How It Works

YieldFi vaults issue ERC-20 vault tokens that represent a pro-rata claim on a vault’s underlying assets and strategy performance. The vault’s value is tracked through a Net Asset Value (NAV) that is updated periodically as the strategy generates profits or losses, net of any applicable fees. Users interact with vaults through two core flows: Deposit (instantaneous) and Withdrawals (with a queue).

Deposit (Instantaneous)

When you deposit the supported asset into a YieldFi vault, the vault mints ERC-20 vault tokens to your wallet, representing your pro-rata claim on the vault. Mint pricing is defined by a vault feature flag such that deposit price is set at:

• Current NAV, or

• Higher of Current NAV vs end of epoch NAV

The second option is designed to prevent anyone from depositing and withdrawing between NAV updates.

Redemption (WithdrawQueue → Payout)

To redeem, you submit a request that enters the WithdrawQueue. You may cancel the request any time before it is processed. Once processed, the vault burns the redeemed vault tokens and transfers the underlying assets to the specified receiver wallet address. Redemption pricing is defined by a vault feature flag such that redemption price is set at:

• Current NAV, or

• Lower of Current NAV vs end of epoch NAV

The second option is designed to prevent bank run in case of loss in the vault strategy.

Yield Distribution

Yield is distributed by updating the vault NAV to reflect strategy performance, net of any management fees (if applicable). When performance is positive and the new NAV is higher than the High Water Mark, the increase is not applied as a single step. Instead, the NAV update is vested over a defined epoch period, which reduces the ability for anyone to front-run a known NAV jump by depositing right before it or redeeming right after it.

When performance is negative and the new NAV is lower than the current NAV, the NAV update is applied instantly, ensuring losses are reflected immediately. Even in this loss scenario, front-running is mitigated because redemptions can be configured to process at the lower of current NAV or end NAV, which prevents users from escaping losses by withdrawing at a temporarily higher NAV before the end-of-epoch accounting is finalized.

Compliance Gating (Greenlist)

A vault may require a Greenlist from day one. When enabled, any user who wants to mint or redeem must complete KYC/KYB and AML checks to satisfy regulatory compliance requirements for that specific product.

Redemption SLAs & Fees

Each vault’s expected redemption SLA (processing time) and all applicable fees are disclosed on the vault’s factsheet at www.yield.fi/vaults, so users can evaluate liquidity and costs before depositing.