> For the complete documentation index, see [llms.txt](https://docs.axiomprotocol.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.axiomprotocol.io/protocol-design/axiom-prime/vault-mechanics.md).

# Vault Mechanics

Each vault maintains a share price that increases as yield accrues:

```
sharePrice = totalAssets / totalShares
```

Why Share Tokens?

* Gas Efficiency: Only global `sharePrice` updates when yield arrives.
* Automatic Compounding: Yield accrues passively to all positions without manual claims.
* Fair Entry/Exit Pricing: Share price ensures proportional yield allocation.
* Standard DeFi Pattern: Share-based vaults (ERC-4626 standard) are battle-tested.

When users deposit, they receive shares based on the current price. When they withdraw, their shares are burned and they receive the underlying assets at the current share price. Stakers can deposit or withdraw when they are not subject to active resolution locks.

Yields accumulate via:

* Protocol fee flows directed to the staker fee recipient, including legacy market commissions and the live CLOB staker fee path.
* Penalties slashed from dishonest or incorrect voters/proposers.
* Optional external incentives or integrations.


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