In today’s newsletter, Nassim Alexandre from RockawayX takes us through crypto boxes, what they are, how they work and risk assessment.
Then Lucas Kozinski, from Renzo Protocol, answers questions about decentralized finance in Ask an Expert.
-Sarah Morton
Understanding vaults: what happens beyond the yield
Capital flowing into crypto boxes rose to over $6 billion last year, with projections indicating that it could double by the end of 2026.
With that growth has come a sharp division between vaults with robust construction and controls and vaults that are essentially yield packaging.
A cryptobox is a managed fund structure implemented on the chain. An investor deposits capital, receives a token representing their stake, and a trustee allocates that capital in accordance with a defined mandate. The structure can be custodial or non-custodial, redemption terms depend on the liquidity of the underlying assets, and portfolio rules are often encoded directly into smart contracts.
The central question about vaults is exposure: what am I exposed to, and could it be more than I’m told? If you can explain where the returns come from, who has the assets, who can change the parameters and what happens in a stress event, you understand the product. If you can’t, the headline returns are irrelevant.
There are three layers of risk that are worth understanding.
The first is smart contract risk: the risk that the underlying code will fail. When was the last revision? Has the code changed since? Allocation control is also located here. Adding new security to a well-designed box should require a time lock that allows depositors to see the change and exit before it takes effect. Policy changes should require multi-signature approval.
The second is the underlying asset risk: the credit quality, structure and liquidity of whatever the box actually holds.
The third underestimated risk is redemption: under what conditions can you get your capital back and how quickly? Understand who handles liquidations in a downturn, what discretion they have, and whether the manager commits capital to stop them. This distinction matters most at the precise moments you want to leave.
The quality of a vault depends largely on the quality of its curation. A trustee selects which assets are eligible, sets parameters around them and continuously monitors the portfolio.
For example, most real-world on-chain asset strategies today are single-issuer, single-rate products. A curated box, on the other hand, combines multiple, controlled issuers under active management, providing diversified exposure without managing the credit risk of a single name itself.
Then there is continuous monitoring. Default rates change, rules change and counterparty events happen. A curator who treats risk assessment as a one-off exercise is not managing risk.
What separates crypto vaults from a traditional fund is transparency; investors do not have to take the curator’s word for it. Every allocation, position and parameter change happens on the chain and can be verified in real time. For advisors familiar with private credit, the underlying security may be recognizable. What needs attention is the structuring in the chain around it: whether you have genuine recourse, in which jurisdiction and against whom. This is where the curator’s expertise matters. A curator is the risk manager behind a box. They decide which assets are eligible, set the rules within which the capital operates and actively manage the portfolio.
Curated vault strategies typically target 9-15% annually, depending on mandate and assets. This range reflects risk-adjusted return generation within defined constraints.
Vaults also provide a more efficient way to access assets you already allocate to, with features that traditional structures do not offer. For family offices that manage liquidity across multiple positions, this is a practical operational improvement.
The most important thing is composition. On-chain, a box can allow you to borrow directly against collateral without the documentation overhead of a traditional loan facility. For family offices that manage liquidity across multiple positions, this is a practical operational improvement.
Permitted vault structures are also notable as they allow multiple family offices or trustees to deposit funds into a single managed mandate without interference, each retaining separate legal ownership while sharing the same risk management infrastructure.
The vaults that survive this examination will be those where the engineer, mandate and curatorial judgment are built to hold up under pressure.
– Nassim Alexandre, vault partner, RockawayX
Ask an expert
Q: With yield stacking and many layers of decentralized finance (DeFi) protocols, what is needed to de-risk the box?
The first thing is to minimize the complexity. Each additional protocol in the stack is another attack surface. So if you don’t need it, cut it. We don’t deposit into protocols that have discretionary control over funds – meaning they can move capital wherever they want without user consent. We want transparency about what other protocols are doing with our capital, but privacy around our strategies so others can’t see anything proprietary.
Beyond that, it’s about transparency and time. Users should always be able to see exactly where their money is and what they are doing. And any parameter changes — fees, strategies, risk limits — should go through a time lock so people have a window to review and react before anything goes live. Smart contract auditing also matters, but audits are a baseline, not a safety net. The architecture must be sound before the auditor even shows up.
Question: At what point will institutional capital inflows compress DeFi yields to the level of traditional risk-free rates, and where will the next “alpha” be found?
It will eventually happen in the most fluid, simple strategies. But here’s what traditional finance (TradFi) can’t replicate: compounding. The underlying instruments may be identical – take the USCC carry trade as an example – but in DeFi you can plug the same position into a loan market, use it as collateral, provide liquidity to a DEX pool and do all of that simultaneously. It is not possible in TradFi without significant infrastructure costs.
The alpha is not going away. It will just move to whoever builds the most efficient capital pathways between the strategies. The people who figure out how to stack returns across composable layers while properly managing risk will consistently outperform. And this gap between DeFi and TradFi infrastructure costs alone will keep the spread wide for a long time.
Q: How will the integration of Real World Assets (RWAs) into automated boxes change the correlation between crypto yields and global macro interest rate cycles?
Yes, the crypto yield will become more correlated with macro as RWAs come in. That’s just the nature of bringing price-sensitive assets into the chain. But I think people underestimate the other side of that trade-off.
Before RWAs, crypto holders had a binary choice: hold on-chain stables and earn crypto-native returns, or withdraw everything and deposit to a brokerage. Now you can hold stables in the chain and access the same strategies that you would find in TradFi without leaving the ecosystem. And crucially, you can layer on top of them – borrow against your RWA position, deploy that capital on a loan market, LP against pools that use those assets as collateral. The capital efficiency you get from that kind of setup just isn’t available in traditional financing. So yes, more macro correlation – but also more freedom of choice in where to spend capital, which should push yields up over time as liquidity deepens.
– Lucas Kozinski, Co-Founder, Renzo Protocol
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