Vaults Explained

What is a Vault?

A vault is an on-chain, smart-contract-driven structure that holds tokenized real-world assets (RWAs) and allows users to gain exposure to them through a single, liquid vault token (referred to as nvAsset tokens on NUVA). Vaults are designed to address the challenges of distribution, liquidity, and governance, making tokenized assets more accessible and usable in decentralized finance (DeFi).

NUVA enables users to access vaults from leading issuers in a permissionless way, while maintaining 24/7 access to liquidity via withdrawals on NUVA or swaps on decentralized exchanges (DEXs).

Vaults vs. Tokenized Assets

While vaults and tokenized assets are closely related, they serve distinct purposes:

  • A tokenized asset is the underlying real-world asset brought on-chain, such as a loan, bond, or equity.

  • A vault, on the other hand, is a smart contract-driven structure that holds one or more tokenized assets to make them easier to access, distribute, and deploy into DeFi.

Vaults hold tokenized assets and issue vault tokens to its depositors that represent a proportional position in the vault. Yield generated by the underlying assets is reflected in the increasing value of the vault token over time. Without vaults, many tokenized assets remain harder to distribute, less liquid, and less usable across DeFi and other on-chain markets.

How Do Vaults Work?

Vaults operate as pooled structures that dynamically manage deposits, withdrawals, and yield distribution. In the case of NUVA, here’s how they work step-by-step:

  1. Deposit USDC: You deposit funds (e.g., USDC) into the vault. In return, you receive vault tokens, which are referred to as nvAsset tokens on NUVA. These tokens represent your proportional share of the vault.

  2. Gain Exposure to RWAs: The vault holds tokenized real-world assets, such as loans, bonds, or other financial instruments, which generate yield. The vault’s total assets and token supply adjust dynamically with each deposit or withdrawal, meaning you do not buy from a fixed inventory.

  3. Earn Yield: The underlying assets in the vault may generate yield, which is distributed back to the vault and reflected in the increasing value of your nvAsset tokens.

  4. Composable Tokens: nvAsset tokens are composable ERC-20 tokens, meaning they can be freely deployed into DeFi strategies for enhanced earnings.

  5. Withdrawals and Liquidity: Vaults allow you to withdraw your funds at any time. On NUVA, you can also access liquidity by swapping nvAsset tokens on decentralized exchanges (DEXs).