> ## Documentation Index
> Fetch the complete documentation index at: https://docs.theblockchainlibrary.com/llms.txt
> Use this file to discover all available pages before exploring further.

# ERC-4626

> An Ethereum tokenized-vault standard defining a common interface for vaults holding a single underlying ERC-20 asset.

# ERC-4626

An Ethereum tokenized-vault standard defining a common interface for vaults holding a single underlying ERC-20 asset.

## Definition

An Ethereum tokenized-vault standard defining a common interface for vaults holding a single underlying ERC-20 asset.

## Why it matters

Ethereum-specific terms explain its execution environment, standards, accounts, and scaling roadmap.

## How it works

The standard defines methods for depositing assets, withdrawing shares, and checking vault balances. It includes functions for calculating interest rates and yield distribution in a consistent way. Protocols implementing this standard must adhere to specific naming and logic, enabling easier integration for front-ends and other smart contracts.

## Real-world example

Yearn Finance and many lending protocols are moving toward ERC-4626 for their vault structures.

## Advantages

* Standardized yield interface
* Higher DeFi interoperability
* Simplified integration for developers

## Limitations

* Implementation requires rigour
* Newer standard gaining adoption

## Common misconceptions

* People think it is a specific investment fund, but it is just a set of rules for building one.
* Many assume all DeFi vaults are ERC-4626, but many legacy protocols use custom code.

## Related knowledge

* [EIP](/generated/v2/glossary/eip) — term
* [Ethereum](/categories/ethereum) — term
* [Smart Contract](/generated/v2/glossary/smart-contract) — term

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**Canonical knowledge ID:** `glossary:erc-4626`