> For the complete documentation index, see [llms.txt](https://docs.nookapp.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.nookapp.xyz/posts/how-nook-classifies-defi-vaults-core-and-frontier.md).

# How Nook Classifies DeFi Vaults: Core & Frontier

by [Krzysztof Gogol, PhD](https://www.linkedin.com/in/krzysztofgogol/) and [Joey Isaacson](https://www.linkedin.com/in/joeisaacson/), Cofounder of Nook

<figure><img src="/files/hM1R18talw2DTjZ2WnTY" alt=""><figcaption></figcaption></figure>

The hardest problem in DeFi is no longer finding yield, but understanding the risks behind it.

Traditional finance has addressed the challenge of risk assessment with various frameworks and classifications.Asset managers like BlackRock and Franklin Templeton organize their funds into clear categories: cash, investment-grade credit, high-yield bonds, equities, and emerging markets. These categories do not guarantee performance, but they give investors a consistent framework for making informed decisions. Investors do not compare Treasury ETFs with emerging-market ETFs solely by annual return - they first ask what risks each product is designed to take.

DeFi has yet to develop such risk frameworks. Today, more than **$60 billion** is deployed across onchain lending vaults. Yet most vault aggregators still present them as a simple list sorted by last week's APY. A relatively low-risk vault can appear next to one financing tokenized complex leveraged strategies with no indication that they represent fundamentally different risk profiles.

Nook was built on a simple principle: yield should always be evaluated in the context of the risks taken to generate it

Every vault listed on Nook is classified as **Core** or **Frontier** based on the risks taken to generate its yield.

Core vaults prioritize capital preservation and consistency, while Frontier vaults pursue higher yields by expanding the range of acceptable collateral, or, depositing assets onto newer networks with smaller markets.

Many curators already signal their intended strategy through names such as Core or Prime for more conservative vaults, and Frontier or High Yield for strategies targeting higher returns.

While these labels provide a **useful starting point**, they are not our conclusion.&#x20;

Every vault undergoes independent due diligence and is constantly evaluated using Nook's own risk framework. In this article, we explain the principles behind that framework, how we distinguish between Core and Frontier vaults, and why some vaults earn a place on Nook while others do not.

***

#### USDC as the Default

The first pre-classification factor that Nook applies to vault selection is the deposit token.

Nook currently lists **only vaults denominated in stablecoins**. By excluding vaults denominated in ETH or BTC, we eliminate currency risk for our lenders. A 5% yield in USDC means a 5% return on US dollar-denominated capital - without any dependence on the price of crypto-currencies.

We constantly evaluate the DeFi stablecoin market and remain open to vaults denominated in stablecoins, as long as their market capitalization exceeds $100mn. Today, as vaults listed by Nook are denominated in USDC. Issued by Circle, USDC is the most widely used stablecoin in DeFi with the highest daily trading volumes.

That said, two USDC-denominated lending vaults can both show 7% APY - one lending against Bitcoin and blue chip tokens, another against tokenized high-yield strategies. Even though the denomination and APY are the same, the risks behind that yield are not. That is where Core and Frontier differentiator comes in.

***

#### Pre-selection of Lending Vaults

We intentionally exclude any vaults that **follow complex and risky strategies**, e.g., highly leveraged trading of digital or real-world assets. These vaults might offer higher APY in certain market conditions, but the risk is disproportionately higher and, in unfavorable market dynamics, might even lead to the loss of invested capital.

Nook specializes in DeFi lending vaults. In traditional finance, banks lend money based on a borrower's credit score, income, and repayment history. For products such as mortgages or personal loans, the bank assesses the borrower's ability to repay and bears the credit risk if the borrower doesn’t repay.

DeFi lending works differently. It is one of the safest categories in onchain finance because it is overcollateralized and pool-based. Instead of relying on credit scores, borrowers deposit digital assets (worth more than the value of the loan) as collateral. If the collateral value falls below a predefined threshold, it is liquidated automatically to repay lenders. In return, borrowers pay continuously accruing interest, which is distributed to lenders.

***

#### Core: Capital Preservation First

Core vaults are the foundation of Nook. They include lending vaults that are focused on **highly liquid**, **battle-tested** collateral (such at ETH or BTC), operated by experienced curator teams with a strong track record. The classification rules are:

* Curator: Managed by a top-tier curator, such as Steakhouse or Gauntlet.
* Vault TVL: The vault must have more than $10 million in user deposits.
* Asset Allocation: No single asset or ecosystem may represent more than 80% of the portfolio, unless the concentrated asset is an approved blue-chip EVM asset.
* Collateral: Only approved blue-chip assets are accepted as collateral.
* Blockchain: The vault must be deployed on Ethereum or Base.

Core vaults are designed for consistency rather than maximum yield. Collateral is limited to established, highly liquid assets - primarily ETH, BTC and their wrappers. Curators have demonstrated experience managing capital through multiple market cycles, including periods of significant stress.

| Vault                  | Curator    | Chain | TVL     | APY   | Delegation |
| ---------------------- | ---------- | ----- | ------- | ----- | ---------- |
| AAVE V3 - USDC Pool    | Aave       | Base  | $27.2M  | 3.20% | Core       |
| Gauntlet USDC Prime    | Gauntlet   | Base  | $433.1M | 4.30% | Core       |
| Gauntlet USDC Prime V2 | Gauntlet   | Base  | $88.8M  | 4.30% | Core       |
| Steakhouse Prime USDC  | Steakhouse | Base  | $228.0M | 4.10% | Core       |
| Spark USDC Vault       | Spark DAO  | Base  | $7.8M   | 3.80% | Core       |

In these vaults yield derives from real borrowing demand rather than temporary incentive programs, making 4-5% APY on USDC sustainable. Core vaults earn less compared to high-yield ones because of their very low risk approach.

***

#### Frontier: Higher Yield for Investors Who Understand the Trade-Off

Frontier vaults offer higher yields, often above 7% APY. The reason is that borrowers are willing to pay higher interest rates to borrow against assets that Core vaults typically avoid. This creates higher returns for lenders, but only if the additional risks are properly understood and managed. Nook classifies Frontier vaults based on the following criteria:

* Curator: Newer or non-blue-chip curators may qualify. However, Nook never includes weak, suspicious, or unsupported curators.
* Vault TVL: Each vault must have at least $100,000 in user deposits.
* Assets and Allocation: Any asset and any allocation percentage may be included, provided they pass Nook's strict internal due diligence and review process.
* Blockchain: Vaults on any blockchain may qualify.

#### Current Frontier Vaults

| Vault                      | Curator    | Chain      | TVL    | APY   | Classification |
| -------------------------- | ---------- | ---------- | ------ | ----- | -------------- |
| Gauntlet USDC Prime        | Gauntlet   | Optimism   | $3.3M  | 6.30% | Frontier       |
| Waterline Reservoir USDC   | Waterline  | Ethereum   | $22.8M | 5.60% | Frontier       |
| Steakhouse High Yield USDC | Steakhouse | Base       | $28.0M | 7.10% | Frontier       |
| Re7 USDC                   | Re7        | Worldchain | $11.6M | 5.70% | Frontier       |

While Core vaults lend against blue-chip collaterals (mostly BTC and ETH), Frontier vaults extend the collateral range. They include wrapped tokens of less liquid tokens (e.g.,SOL, XRP, and ADA), tokenized real-world assets (e.g.,private credit strategies) and lending markets on newer blockchain ecosystems where liquidity is still developing. The evaluation of Frontier vaults is more demanding, and the ongoing monitoring is more intensive, as the major risks often stem from the underlying composition of collateral tokens.

Nook currently lists four Frontier vaults, each generating higher yield through a different source of risk. Steakhouse High Yield USDC expands beyond ETH and BTC by accepting tokens such as SOL, XRP, and ADA as collateral. Gauntlet USDC Prime and Re7 USDC operate on Optimism and World Chain, respectively-ecosystems that are smaller than Ethereum or Base. Finally, Waterline Reservoir USDC earns additional yield through exposure to Reservoir, a yield-bearing stablecoin strategy.

Gauntlet has recently announced that its Frontier vaults will expand to include a broader range of tokenized assets, increasing RWA exposure to drive additional yield for lenders, without exposing them to excessive risks.

#### Overview: Core vs Frontier Criteria

| Criteria                  | Core                                                                                                   | Frontier                                                   |
| ------------------------- | ------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------- |
| Curator                   | Top-tier curator with a strong track record                                                            | Newer or non-blue-chip curator, subject to due diligence   |
| Minimum vault TVL         | More than $10 million                                                                                  | At least $100,000                                          |
| Collateral and allocation | Approved blue-chip collateral; no asset or ecosystem exceeds 80%, except approved blue-chip EVM assets | Any asset and allocation may qualify after internal review |
| Blockchain                | Ethereum or Base                                                                                       | Newer blockchains                                          |
| Typical APY               | 4–5%                                                                                                   | 7% or higher                                               |

***

#### How Every Vault Earns Its Place

Every vault that Nook reviews is assessed across five areas before it receives a classification - or before it is listed at all.

**Diversification.** Is the vault's exposure spread across genuinely uncorrelated markets, or it concentrates in linked assets? For example, a stablecoin and its yield-bearing wrapper are prone to the same ecosystem risk.

**Collateral quality.** Can the accepted collateral token actually be sold during market stress? Assets like ETH and BTC can absorb sharp price drops and still support clean liquidations of bad debt. Thinly traded tokens or illiquid products, if liquidation fails, can lead to capital loss for lenders.

**Liquidity.** What is the vault's utilization, and does the interest rate curve correct elevated utilization before it becomes a withdrawal problem? A vault that lends at 95% of liquidity has only 5% of its capital available for immediate lender withdrawals.

**Sustainable yield.** Where does the yield actually come from? If the presented APY depends on external token rewards or protocol incentives, it will decline when those programs end.

**Curator track record.** Has the team managed this vault through a market stress event with proven outcomes?

A vault can fail on any one of these and not be listed - regardless of how attractive the APY looks.

A vault's classification is not permanent. Market conditions evolve, curator strategies shift, and what qualifies as Core today may not qualify six months from now.

After the MainStreet USD event in June 2026, several curators with exposure to yield-bearing stablecoins tightened their collateral allowlists - raising LTV requirements, reducing supply caps, or removing certain assets entirely. Others moved in the opposite direction, increasing RWA allocations as tokenized credit markets developed more liquidity.&#x20;

Nook reviews classifications continuously, and we reserve the right to reclassify or delist vaults where the risk profile has shifted in ways that make the original classification no longer accurate.

***

#### Closing Thoughts

As onchain finance continues to grow, understanding risk is becoming just as important as finding yield. Core and Frontier are Nook's way of bringing a risk framework to onchain lending vaults. Our framework helps lenders understand the risks before each vault APY:

**Core vaults** lend against established, highly liquid assets like ETH and BTC, managed by curators with proven track records. They are built for depositors who want a consistent, sustainable yield without exposure to collateral complexity or liquidity risk. Expect around 4-5% APY.

**Frontier vaults** expand beyond blue-chip collateral into tokenized real-world assets, yield-bearing stablecoins, and wrapped tokens with smaller market caps. They serve borrowers that Core vaults do not list- which is why they pay higher interest. Expect 7-8% APY, with more intensive monitoring required.

The goal of the Nook framework is not to identify the "best" vault, but to match lenders with a strategy that reflects their objectives and risk tolerance. The best investment decisions begin with understanding risk.<br>

***

Part of the Nook educational series. Read the full series at [nookapp.xyz](https://nookapp.xyz)

Previous post: [What Is a Curator? Two Vaults. Same 7% APY. One Right Answer.](http://blog_what_is_a_curator.md)

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