> For the complete documentation index, see [llms.txt](https://resources.vaults.sentora.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://resources.vaults.sentora.com/smart-vaults/smart-vault-setup-and-infra-overview.md).

# Smart Vault Setup & Infra Overview

## What is a Smart Vault?

A Smart Vault is a more structured vault type that uses multi-step capital deployment to pursue higher capital efficiency or enhanced yield. Unlike Direct Vaults, Smart Vaults do not simply place user deposits into one venue and earn the base lending yield. Instead, they build and manage a strategy stack  which includes Supervised Loans, Leverage Looping, etc.

This means Smart Vaults can deliver more diverse return profiles, but they also introduce more layers of strategy risk, operational dependency, and liquidity management complexity.

## Smart Vault Architecture

Smart Vaults introduce an additional strategy layer on top of the base vault contract. Instead of routing deposits into a single protocol, these vaults construct and manage structured positions that may involve collateralization, borrowing, and redeployment of capital across multiple venues.

A typical capital flow looks like this:

1. Users deposit assets into the vault contract.
2. The vault allocates those assets as collateral or liquidity in the underlying protocol.
3. Depending on the strategy, the vault may borrow against the collateral or deploy funds into additional markets.
4. The position is then monitored and periodically rebalanced to maintain target risk parameters such as heath factor, leverage ratios, etc.

Compared with Direct Vaults, Smart Vaults usually require:

* More than one protocol interaction,
* More decisions/diligence needed by users on risk criteria and levels,
* Active monitoring of position health,
* And clearly defined unwind logic.


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