> For the complete documentation index, see [llms.txt](https://docs.secured.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.secured.finance/yield-vault/core-mechanics/vault-system-overview.md).

# Vault System Overview

#### Purpose of This Page

This page explains the **core system model** shared by all Secured Finance Vaults.\
It describes how user funds flow through the system, independent of any specific strategy.

***

#### Vault as the Core Capital Container

At the center of the system is the **Vault**.

A Vault is a smart contract that:

* Accepts user deposits of a single asset
* Issues Vault Shares to represent ownership
* Keeps track of total assets and liabilities
* Delegates capital deployment to strategies

The Vault itself does **not** generate yield.\
Instead, it acts as a **capital coordinator and accounting layer**.

This design is inherited from Yearn V3 and allows the Vault interface to remain stable even as strategies evolve.

***

#### Separation of Responsibilities

The Vault system is intentionally modular.

Each component has a clearly defined role:

* **Vault**
  * Manages deposits and withdrawals
  * Issues and redeems shares
  * Tracks total assets
* **Strategy**
  * Deploys assets to generate yield
  * Interacts with external protocols or markets
* **Periphery Modules**
  * Enforce limits, fees, and configuration
  * Provide auxiliary logic without modifying core contracts

This separation allows strategies to be added, removed, or replaced without disrupting users.

***

#### Vault Shares and Ownership

When a user deposits assets into a Vault, they receive **Vault Shares**.

Vault Shares represent:

* A proportional claim on the Vault’s total assets
* Ownership that changes in *value*, not in *quantity*

As yield is generated by strategies:

* The number of shares held by a user remains the same
* The value of each share increases

This share-based model avoids rebasing and provides a consistent user experience across strategies.

***

#### Capital Flow (High-Level)

The typical flow of funds is:

1. User deposits assets into the Vault
2. Vault mints shares to the user
3. Vault allocates assets to one or more strategies
4. Strategies generate yield over time
5. Yield increases the Vault’s total assets
6. Users redeem shares to withdraw assets

All Vaults follow this same flow, regardless of the strategy used.

***

#### Strategy-Agnostic Design

A key design principle is that **Vaults are strategy-agnostic**.

The Vault does not assume:

* How yield is generated
* What external protocol is used
* Whether returns are stable or volatile

All strategy-specific logic is intentionally isolated outside the Vault.\
This makes the system extensible and future-proof.


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