> For the complete documentation index, see [llms.txt](https://shiftrwa.gitbook.io/shift_education/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://shiftrwa.gitbook.io/shift_education/legal/vaults/faq.md).
# FAQ
#### Part 1: Understanding the RWA Vault
1. **What is an RWA Vault?**
An RWA (Real World Asset) vault is a decentralized finance (DeFi) smart contract that allows users to deposit stablecoins or other crypto assets to earn yield generated by traditional, off-chain financial assets. By tokenizing these assets or the yield they produce, RWA vaults bridge traditional finance (TradFi) with DeFi, offering users access to stable, institutional-grade returns on-chain.
2. **What specific assets back the yield in this vault?**
Shift Vaults generate yield by deploying capital into curated portfolios of real-world assets. For context, a vault can blend senior secured loans, trade finance, and short-term debt
* **Our Vault**: The primary assets backing Shift Vaults include
Fidelity Institutional Liquidity USD Fund, BlackRock iShares 1-3 Year Treasury Bond ETF (SHY), BlackRock iShares iBonds Dec Investment Grade Corporate ETF (IBDW), BlackRock iShares 0-5 Year High Yield Corporate Bond ETF (SHYG), Commercial Paper, Private Credit Instruments, Corporate Loans / Loan Participations, Asset-backed or Structured Credit Instruments.
3. **How is the yield generated and brought on-chain?**
When you deposit stablecoins into the vault, the capital is routed (either directly on-chain or via regulated off-ramps) to purchase or fund the underlying real-world assets. As these assets generate interest or fixed returns in the real world, the proceeds are converted back into stablecoins and directed into the smart contract. This yield is then accumulated or distributed proportionally to vault depositors.
4. **How does an RWA Vault differ from traditional DeFi lending?**
Traditional DeFi lending generates yield dynamically based on the on-chain supply and demand of volatile crypto assets (circular crypto economy). In contrast, an RWA vault sources its yield from real-world economic activities and legally enforceable contracts (like government debt or corporate credit). This provides a sustainable, predictable yield that is largely uncorrelated with crypto market volatility.
#### Part 2: Vault Architecture & Strategy
5. **How is capital allocated across different assets?**
Capital allocation is managed through a curation model. A curator is an independent entity responsible for the strategic management and risk oversight of the vault.
6. **Does the vault use isolated markets or a shared liquidity pool?**
To protect depositors, Shift and its partners isolate risk. All loans made via Shift are made to a single Borrower, OpenTrade SPC, a segregated portfolio company registered in the Cayman Islands.OpenTrade SPC has been designed to be "bankruptcy remote" meaning its assets would not form part of the bankruptcy estate of any other entity involved in supporting Shift Vaults. This is to ensure that loan collateral is protected and, in an extreme case, can be recovered by Lenders as secured creditors of the Borrower in a default event.
7. **Who manages the off-chain collateral and execution?**
Because RWAs interact with the real world, regulated entities handle the physical or legal custody.
* Our Structure: Off-chain asset management and fiat execution are handled by various entities:
| Portfolio Manager | Five Sigma Finance - an FCA regulated entity |
| --------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Asset Issuers | Fidelity, BlackRock (iShares), Janus Henderson, TradeFlow Capital, Commercial Paper issuers including, but not limited to John Deere, Hyundai, and more |
| Broker(s) | Barclays, DMBL |
| Asset Custodian(s) | Wilmington Trust |
| Cash Management and Transaction Bank(s) | Wilmington Trust, DMBL, JP Morgan Transfer Agency |
| Transfer Agent(s) | JP Morgan Transfer Agency |
| Stablecoin Custodian(s) | Circle, Anchorage, Sygnum |
8. **What happens to the underlying assets if the decentralized protocol is compromised?**
The underlying real-world assets are held in legally remote structures (such as a Special Purpose Vehicle or Trust). If the smart contract is hacked or the DeFi front-end goes down, the physical assets or legal claims remain secure with the regulated custodian. Depositors maintain legal rights to the underlying assets, which can be redeemed or recovered through off-chain legal processes.
#### Part 3: Deposits, Withdrawals & Yield Mechanics
9. **How to deposit in a Vault**
Lenders can connect their wallet and lend stablecoins into one or more Treasury Management smart-contract vault(s). In return, the Lender will receive vault tokens at the current exchange rate.
Vault tokens are issued to the Lender's wallet. It is the sole responsibility of the Lender to ensure proper security and custody of the vault tokens it's issued.
10. **Which assets can I deposit into the vault?**
Currently, the vault accepts deposits in USDC, EURC. Upon depositing, you receive a receipt token that represents your principal and accrued interest.
11. **Is there a lock-up period for my deposits?**
There is no lock up period in Shift Vaults
12. **How often is the interest paid and compounded?**
Yield is accrued daily and is automatically compounded back into the vault. This means your vault receipt token will increase in value relative to the underlying stablecoin (value-accruing).
13. **What are the fees associated with the vault?**
To maintain the infrastructure and cover real-world operational costs, the following fees apply:
* Curation Fee: a fee the Curator receives in exchange to its risk management
* Deposit/Withdrawal Fees: each Vault has its own fees. Please see the specific Vault page.
#### Part 4: Risk, Security, and Transparency
14. **What are the primary risks associated with this RWA vault?**
While RWAs are less volatile than crypto, they are not risk-free. Key risks include:
* Counterparty/Default Risk: The issuer of the real-world debt could default.
* Smart Contract Risk: Vulnerabilities in the on-chain code.
* Stablecoin De-peg Risk: If the deposited stablecoin loses its 1:1 peg to fiat.
* Liquidity Risk: Delays in converting the off-chain asset back to stablecoins during mass withdrawals.
15. **How is default risk mitigated?**
We mitigate default risk through strict underwriting, asset curation, and legal structuring. Similar to institutional platforms, risk can be offset through overcollateralization, investing in senior-secured debt, or granting an Independent Security Trustee step-in rights to liquidate assets if a default occurs.
16. **How transparent is the underlying collateral?**
We prioritize off-chain to on-chain transparency. Users can view the exact assets backing the vault.
17. **Are KYC/AML checks required to access the vault?**
Because the vault interacts with regulated traditional financial assets, compliance requirements apply. Some protocols use permissionless front-ends with permissioned asset layers, while others restrict access entirely .