HOW YIELD IS ACTUALLY MADE

Summary from the TLDR Crypto newsletter

DeFi vaults automate yield generation through smart contracts that deposit assets, allocate to protocols like Aave and Curve, compound returns, and continuously rebalance positions across nine core strategies, including yield aggregation, delta-neutral hedging, leveraged farming, and options-based derivatives. The Stream Finance case exposed systemic risk when curator failures triggered $93 million in cascading losses across interconnected protocols, demonstrating how recursive vault loops and poor management amplifies contagion beyond protocol boundaries. Vaults simplified DeFi from complex multi-step strategies into single-action deposits, but the next phase requires stricter audits, DAO-based curator approvals, and transparent proof-of-reserves dashboards to balance automation with accountability as smart contract bugs and oracle manipulation remain persistent attack vectors.