What's Next for Vaults? | Steakhouse Co-Founder, Adrian Cachinero

Adrian Cachinero, co-founder of Steakhouse, defines a vault as a token that aggregates liquidity for a goal, tracing the concept to DeFi Summer when Yearn produced the first smart contract architecture allowing users to delegate strategy selection to a smart contract, analogous to ETFs in traditional finance.

Morpho pioneered isolated risk markets for borrowing and lending, but isolated markets lose the network effects that pooled models like Aave provide through rehypothecation of collateral. Morpho addressed this by using vaults to aggregate liquidity across isolated markets, rebundling network effects at the aggregation layer rather than at the individual market level. An individual Morpho isolated market targets roughly 90 percent utilization, leaving about 10 percent available for withdrawal, and a vault spanning multiple markets distributes that constraint materially.

The vault stack has two layers. The bottom layer is infrastructure, with Morpho offering simple governance-light isolated lending markets and VEDA offering a more complex execution layer with greater operator discretion. Above infrastructure sits the curator layer, where opinions about strategy and risk allocation are expressed. Steakhouse operates as a curator on the Morpho stack, running backend infrastructure that keeps vaults balanced and drives price discovery of efficient borrow rates without standing between borrower and lender. The main risk lever a curator exercises is collateral onboarding, and Steakhouse frames the key risk inflection point as the onboarding proposal itself, after which the market settles around that decision without ongoing active management.

Steakhouse builds an Aragon DAO around its vaults so depositors can veto collateral onboarding decisions through a mechanism called VTOM, giving depositors direct veto power rather than routing governance through a separate token as Aave does. Steakhouse evaluates collateral along two axes: credit risk in the underlying asset and market and platform risk for the specific loan position, with the loan-to-value haircut as the chief protective lever. Wrapped Bitcoin carries low credit risk but could still be too risky at a 98 percent loan-to-value ratio due to insufficient haircut. EtherFi was previously classified as high-yield collateral and was reclassified as prime after it agreed to set very long time locks and governance controls around key roles such as minter roles, making it an example of an upgrade rather than a denial.

There is a principal agent gap between vault curators and depositors because curators earn performance fees on yield but do not lose principal if the vault is exploited or mismanaged. Cachinero acknowledges this asymmetry is muted for lower-risk vaults lending against Bitcoin and ETH with overcollateralized lending but is significantly larger for higher-yield, lower-liquidity repo markets. In the event of a default, depending on vault configuration and bad debt calculation, losses can accrue most to depositors who leave last, creating a bank-run dynamic where early exiters leave whole while remaining depositors face growing impairment. Steakhouse allocates its entire treasury to its own vaults and has committed publicly to withdraw last if something goes wrong, though Cachinero acknowledges this commitment is not cryptographically enforced, which he finds unsatisfying. He argues that vaults with complete managerial discretion and no restrictions should have at minimum some cryptographic enforcement of a buffer, surplus, or insurance, while a prime vault lending only against Bitcoin and ETH arguably does not require it.

Cachinero predicts curators taking excessive risk will eventually fail, and those remaining in five years will be those that made cumulatively better decisions for users, pointing to events like Stream Finance and Elixir as catalysts for a major clean-out of risk-taking vaults. He argues boring, lower-risk vaults will grow more and faster than high-risk vaults over the next five years, and that the vault industry has two fundamental paths: a scalable safe repo market side and a higher-risk managerial side that still requires legal liability and insurance infrastructure before it can scale. There is currently no efficient overnight repo market for US treasuries on chain, and Cachinero sees this as a major opportunity given that repo markets today represent trillions of dollars of activity.

Hester Peirce's memo raised concerns about whether vault curators engage in securities activities or behave as investment companies. Cachinero says Steakhouse has tried to be thoughtful about whether its activities fall under existing securities laws and would prefer to confirm this directly with the SEC, arguing that aligning with her framework would produce better vaults by creating more protections and more distance between curator and vault user. Steakhouse is not venture backed, describes itself as a family business thinking in centuries rather than toward an investor exit, and says its work is significantly accelerated by AI. Cachinero would not use a vault managed entirely by AI, applying a radiologist analogy in which AI assists but a human professional still validates the final output, and predicts AI will increase the number of vaults by enabling more growth with fewer people rather than replacing human curators.