# What is A Liquidity Vault

Vaults are a common feature in Web3 and DeFi, designed to simplify the user experience. But many existing vault providers underperform and offer limited exposure — often restricted to standard pairs like ETH-USD or pegged ETH variants.

Krystal’s Liquidity Vault is different. It’s a smart contract that functions as a dynamic portfolio manager. It holds and actively manages **multiple LP assets**, runs automated strategies, collects fees, adjusts positions, exits, and optionally vault can support external deposits in exchange for vault shares.

**Core Capabilities:**

* Manages multiple LP assets
* Auto collect and convert fees
* Enables auto-compounding, rebalancing, exiting, and more
* Auto-farm with enabled AI Agent

### **Why use a Vault?**

* **Fewer Transactions, Less Gas:** Bundle multiple LP actions (e.g. migrate, rebalance) into fewer txs
* **Safer and More Secure:** Vault permissions are scoped to the Vault only—unlike LP Strategies/Positions, which require permission across the entire NFT asset
* **Simplified UX:** Great for both normies and experienced users
* **Unlock More Opportunities:** Go beyond basic ETH pairs. Tap into niche markets, long-tail tokens, and custom strategies to maximize your edge in DeFi.
* **Passive Earning:** Let others deposit into your Vault and take a cut from performance fees

### Types of Liquidity Vault

There are 2 types of Liquidity Vault at Krystal:

* **Auto-Farm Vault**: Liquidity Farming through a Vault interface with enhanced management tools and **AI Agent**.
* **Shared Vault**: Allow public users to deposit into a vault; the vault owner takes a cut of the performance fee.