A Yearn Vault (yVault) is a pool of funds that has an underlying set of strategies to maximize returns on the asset deposited. They leverage different techniques to get the most out of yield farming, liquidity mining, and more. This product was a direct solution to the issue that made searching for the highest yield much more complex than just switching between different lending protocols.
Even though in the background the smart contracts deal with a lot of different tokens and protocols, one of the core points of Yearn is the fact that users always withdraw accrued yield in the same currency as the main asset in the vault (aka the one they deposited).
Yearn v2 Vaults are the new improved version of Yearn Vaults and come with a lot of changes and upgrades. This is the explanation offered by Yearn's official documentation:
Up to 20 strategies per vault → This will increase the flexibility to manage capital efficiently during different market scenarios. Each strategy has a capital cap. This is useful to avoid over-allocating funds to a strategy that cannot increase APY anymore.
Strategist and Guardian are the new Controllers → The Controller concept is not available in V2 yVaults and has been replaced by a Guardian and the Strategy creator (strategist). These 2 actors oversee strategy performance and are empowered to take action to improve capital management or act on critical situations.
Automated vault housekeeping (Keep3r network) → harvest() and earn() calls are now automated through the Keep3r bots network. These 2 function calls are used to purchase new underlying collateral by selling the earned tokens while moving the profits back to the vault and later into strategies. The keep3r network takes the heavy lifting of doing these calls and running with the gas costs in exchange for keep3r tokens. This approach unloads humans from these housekeeping tasks.
Bouncers and Guest lists → Yearn has created a unique development process for new vaults. All vaults are launched as Test Vaults (tyvToken) to start with. Test vaults have a cap and therefore their strategies as well. Also, the Bouncer has a guest list of wallets that can interact by depositing and withdrawing funds in the Test Vaults. This approach prevents uninformed users from potentially losing funds in a not production-ready product.
At the same time, the fees system has also been reworked and increased the average fees that rewards are subject to:
The main asset in the vault is SNX, Synthetix's own collateral and governance token. Synthetix is a protocol that aims to be the backbone for derivative trading in DeFi.