Custody: Isolated Safes vs. Pooled Vaults
The most critical design choice in any yield protocol is how it handles user funds. Blend’s model is fundamentally different from the pooled models that have led to catastrophic losses in the past.| Approach | The Pooled Vault Model | Blend’s Isolated Safe Model |
|---|---|---|
| How it Works | All user funds are co-mingled in large, shared smart contracts or off-chain accounts. | Every user is issued their own individual Gnosis Safe, a personal smart contract wallet. |
| Risk Profile | Systemic & Shared. A single exploit, hack, or fraudulent act can drain the entire pool, affecting all users at once. | Isolated. An attack would have to compromise thousands of individual safes one-by-one, making systemic failure impractical. In the event of an exploit on an underlying protocol, only the proportion of your capital exposed to that particular strategy would be impacted. Blend’s strategy and curation team reduces this risk by thoroughly vetting yield opportunities, capping downside risk while leveraging DeFi-native expertise to earn excess returns. |
| Custody | Often custodial (CeFi) or pseudo-custodial (DeFi protocol admins hold significant power). | Self-Custodial. You are the sole signer of your Safe. You can withdraw your funds at any time, with or without Blend’s interface. |
| Analogy | A commercial bank vault where everyone’s cash is mixed together. | A collection of personal, soul-bound safe deposit boxes. |
Strategy: Yield Coordination vs Passive Aggregation
Blend is not a passive vault that simply deposits funds into another protocol. It’s an active Yield Coordination Engine that builds on top of trusted DeFi primitives.- Passive Aggregators: Often focus on finding the single best rate for an asset and moving funds there. The strategies are simple and unleveraged.
- Blend’s Engine: Actively orchestrates capital across a portfolio of established venues (lending markets, DEXs, staking). It uses delta-neutral leverage via flash loans to amplify spreads, creating yields that are difficult to replicate manually.
Execution: Proactive Automation vs Reactive Manual
- Other Models: Often rely on manual intervention, slow governance votes, or simple reactive liquidations to manage risk.
- Blend’s Intent Engine: You define your risk intent once. A permissionless, constraint-aware automation engine then handles the complex execution 24/7. It proactively derisks by unwinding positions automatically if profitability or safety metrics decline, long before a liquidation is necessary.