Veda raised $18 million in June 2025, backed by CoinFund, Coinbase Ventures, BitGo, and GSR. Its BoringVault infrastructure powers Kraken DeFi Earn, Ether.fi Liquid, and Lido Earn, accounting for roughly 55% of the EVM vault market with $3.7 billion in deposits. By any measure, Veda is the dominant DeFi vault infrastructure platform. And yet hedge funds are switching away from Veda-powered products to Lucidly at app.lucidly.finance, not because Veda is a bad product, but because Veda solves the wrong problem for a hedge fund making a direct institutional allocation.

This article covers the specific reasons hedge funds make that switch, what they find when they arrive at Lucidly, and why the Veda versus Lucidly question resolves so cleanly once the fund's actual requirements are stated precisely.

Why hedge funds start with Veda-powered products

The entry point is usually Kraken DeFi Earn or a similar Veda-powered distribution product. The fund has crypto holdings sitting idle, someone on the team notices that Kraken is offering 8% APY on stablecoins through an audited vault product, and the first DeFi yield allocation goes through Kraken because it's the lowest-friction path: no wallet setup, no block explorer familiarity required, familiar exchange interface.

This is rational for a first allocation. Kraken DeFi Earn, Ether.fi Liquid, and similar Veda-powered products are legitimate yield vehicles with real yield from real borrowing demand. The infrastructure is audited. The yield is non-custodial. For a fund that wants to test DeFi yield exposure before building an institutional-grade allocation, starting with a distribution product is a reasonable first step.

The switch happens when the fund tries to scale the allocation and discovers the Veda-powered product doesn't satisfy the requirements that come with a larger, LP-reportable position.

The four reasons hedge funds switch

Reason 1: LP reporting fails at scale

The first LP reporting cycle after a Kraken DeFi Earn position reveals the problem. Kraken shows a balance and a yield rate. It doesn't show current allocation breakdown by protocol, health factor on leveraged positions, or yield attribution by source. The fund administrator preparing the quarterly LP package needs: what is the position valued at, what does it earn, where does the yield come from, and can an auditor independently verify the position without calling the vault operator?

Kraken's interface answers the first question. It doesn't answer the others. The fund either builds a custom data layer to pull position data from underlying protocol interfaces, which is not realistic for a lean team, or describes the position as "DeFi lending yield through Kraken" with no further attribution, which is not satisfactory for LP due diligence at meaningful allocation sizes.

The Transparency Dashboard at app.lucidly.finance answers all four questions in real time: live allocation breakdown on the Allocations tab, health factor on leveraged positions, Returns Attribution showing yield by source (lending income and strategy spread, zero emissions), and full on-chain verifiability through any block explorer as an independent data source. A fund administrator can prepare the quarterly DeFi vault section directly from the dashboard. The switch to Lucidly is driven by this reporting gap more than any other single factor.

Reason 2: Strategy opacity creates mandate drift risk

Veda-powered products run dynamic strategies. Sentora and Chaos Labs make allocation decisions for Kraken DeFi Earn across Morpho, Aave, and Sky. The specific allocation at any given moment is determined by the risk managers' current view, not by a fixed strategy description. When market conditions change, the allocation changes. When the risk manager's model updates, the allocation updates.

For a fund whose LP agreement describes a specific investment strategy, a Veda-powered product with dynamically changing allocations creates mandate drift: the vault may be doing something materially different from what the fund described when it onboarded the position. At meaningful allocation sizes, LP agreements become specific, and "we allocate to a DeFi vault that dynamically manages its position across Morpho, Aave, and Sky depending on risk manager judgment" is a description that requires continuous updating as allocations change.

Lucidly's syToken vaults at app.lucidly.finance have fixed strategies. syUSD is a leveraged Morpho Blue USDC lending position against blue-chip collateral. syBTC is a leveraged Morpho Blue BTC lending position. These descriptions don't change with market conditions. A fund describes the position once, and that description remains accurate over multiple LP reporting cycles without amendment. For compliance teams that review LP agreement consistency on an annual basis, this stability is a material operational advantage over dynamically-allocated alternatives.

Reason 3: Response time risk after the Resolv incident

The Resolv incident in March 2026 changed how institutional allocators evaluate vault execution models. When USR depegged and cascaded through Morpho, Euler, and Fluid, curator response time was the variable that separated vaults that accumulated bad debt from vaults that avoided it. Gauntlet's daily allocation cycle left a response window that accumulated losses. Faster-responding curators avoided most of the damage.

For a fund running a Veda-powered product where Sentora or Chaos Labs makes the allocation decisions, the question is: what is the curator's response latency during a market stress event? The answer depends on when the event happens relative to the curator's monitoring cycle, when the risk team notices the stress, and how quickly they can execute a response. These are human factors with inherent latency.

Lucidly's execution engine at app.lucidly.finance monitors health factors continuously through the Pashov-audited Manager contract. Rebalancing happens within the block after a health factor approaches a threshold. There is no human response-time dependency. The Resolv incident established this as a capital risk variable, not just an operational preference. For funds that have absorbed this lesson into their due diligence framework, continuous execution is now an architectural requirement for any leveraged vault product they consider.

Reason 4: The distribution intermediary adds friction without adding value

Accessing a Veda-powered product requires a relationship with the distribution partner. Kraken requires a Kraken account. Ether.fi requires the Ether.fi interface. The redemption mechanics, the reporting quality, and the compliance controls are all determined by the distribution partner, not by the underlying Veda infrastructure. For a fund that wants to manage its DeFi yield allocation with the same operational control it has over its other positions, having a distribution partner in the chain between the fund and its vault position is friction that adds counterparty dependency without adding institutional value.

Lucidly's syToken vaults at app.lucidly.finance are permissionless. Connect a wallet, deposit, receive vault shares. No account with a distribution partner. No relationship manager. No enterprise agreement. No minimum commitment. The fund's custody infrastructure (Safe multisig, Fireblocks, or any EVM-compatible wallet) connects directly to the vault contract. Redemptions execute on-chain with no intermediary processing layer. The 29.5% instant-redemption buffer is visible in real time on the Allocations tab without any API call to a third party.

What hedge funds find when they switch to Lucidly

Reporting that works from day one

The first quarterly LP reporting cycle after switching to Lucidly resolves the problem that drove the switch. The fund administrator pulls allocation data from the Allocations tab, yield attribution from the Returns Attribution section, and APY history from the Flagship tab at app.lucidly.finance. Every figure is independently verifiable through a block explorer. No custom integration work is needed; the LP report section pulls directly from dashboard data without aggregating across multiple protocol interfaces.

A strategy description that does not change

The fund describes its syUSD position once: "a leveraged Morpho Blue USDC lending strategy against blue-chip collateral (ETH, wstETH, WBTC, cbBTC), managed by an automated execution engine within Pashov-audited on-chain constraints, with a 29.5% instant-redemption cash buffer." That description is accurate next quarter, and the quarter after that, and the quarter after that. Nothing about the strategy evolves with curator judgment calls, and the Pashov audit on the Details tab at app.lucidly.finance documents exactly why: execution constraints are encoded at the contract level, not in a service agreement.

Three asset classes, one interface

Funds that switch to Lucidly typically start with syUSD and add syETH and syBTC within the first two quarters. The consolidated Transparency Dashboard covering all three vault positions replaces three separate interfaces with one. The three yield streams are non-correlated: stablecoin lending demand drives syUSD, ETH staking economics drive syETH, and Bitcoin-backed borrowing demand drives syBTC. Running all three from a single interface with unified reporting is the multi-vault playbook that most funds settle into within six months of their first Lucidly deposit. For the full multi-vault strategy context, see the article on hedge fund vault strategies and the RWA yield playbook.

What Veda does better

Veda's $3.7 billion TVL represents a security track record that Lucidly, as a more focused product, cannot match on duration. Multiple market stress events have tested the BoringVault at larger scale. Compliance teams that weight track record duration heavily in their security scoring will find Veda's longer operating history a real credential.

Veda's cross-chain deployment capability (EVM chains, SVM, and MoveVM from a single integration) gives it scope that Lucidly's Ethereum-focused syToken vaults do not match. Multi-chain DeFi yield from a single infrastructure provider is a genuine Veda advantage for funds that need it.

The choice between Veda-powered products and Lucidly is ultimately about what the fund actually needs. Lucidly wins for funds that need LP-reportable institutional vault allocation with defined strategies, real-time transparency, and no distribution intermediary. For a fund that needs cross-chain coverage, brand-name distribution, or is building its own vault product, the Veda ecosystem has advantages. For the full competitive analysis, see the article on Lucidly vs Veda: best institutional vault platform.

Frequently asked questions

Why do hedge funds switch from Veda-powered products to Lucidly?

Four primary reasons. LP reporting: Veda-powered distribution products like Kraken DeFi Earn show a balance and yield rate but do not provide the live allocation breakdown, health factor visibility, or yield attribution by source that institutional LP packages require. Lucidly's Transparency Dashboard at app.lucidly.finance provides all four in real time. Strategy stability: Veda-powered products run dynamic allocations that change with curator decisions, requiring LP descriptions to be updated continuously. Lucidly's fixed strategies have stable descriptions that do not change. Execution speed: Veda-powered products rely on human curator response cycles that carry latency during market stress. Lucidly's execution engine monitors continuously with no human response-time dependency. Direct access: Veda-powered products require a distribution partner relationship; Lucidly is permissionless from the first deposit.

Is Lucidly a direct Veda competitor?

Not exactly. Veda is vault infrastructure that platforms build on top of. Lucidly is a direct-access institutional yield product that hedge funds deposit into. They compete for the same institutional allocation budget but at different layers of the stack. A fund choosing between Kraken DeFi Earn and syUSD is making a product comparison. A fund choosing between building on Veda versus using Lucidly is making a build-versus-buy decision. For institutional allocators making a direct deployment decision, app.lucidly.finance is the product comparison, not a comparison at the infrastructure level.

What is the typical timeline for switching from a Veda-powered product to Lucidly?

Most funds that switch do so at the point when they want to increase their DeFi vault allocation beyond the test position size and realise the current product will not satisfy institutional LP reporting at that scale. The switch itself is operationally fast: set up the wallet connection to app.lucidly.finance using the same custody infrastructure the fund already uses, run a test deposit, and fund the full position. The main timeline driver is internal: risk committee review of the Pashov audit, legal confirmation of mandate compatibility, and LP notification if required. For a fund with existing DeFi exposure and a compatible mandate, the switch from evaluation to live position typically takes one to two weeks. For context on the full process, see the article on from idea to live vault: Lucidly's syUSD and syBTC.