> For the complete documentation index, see [llms.txt](https://developers.term.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://developers.term.finance/periphery-contracts/curated-vaults/core-architecture.md).

# Core Architecture

Term Strategy Vaults integrate Yearn V3's ERC-4626 tokenized vault architecture with TERM's fixed-rate lending markets. This integration automates the management of fixed-income positions while maintaining standardized vault interfaces and robust risk controls.

This documentation, accompanied by a detailed diagram, outlines the fundamentals of Yearn V3's architecture and the specific adaptations for Term Finance. It focuses on three key layers:

**Architecture Layers**

1. [**TokenizedStrategy**](https://docs.yearn.fi/developers/smart-contracts/V3/TokenizedStrategy) **(Yearn V3)**: A centralized ERC-4626 implementation contract that manages deposits, withdrawals, accounting, and profit locking across all Yearn V3 strategies.
2. [**BaseStrategy**](https://docs.yearn.fi/developers/smart-contracts/V3/BaseStrategy) **(Yearn V3)**: The foundational component for custom strategies, delegating ERC-4626 functionality to the TokenizedStrategy contract while standardizing vault storage setup.
3. **Custom Strategy (Term Finance)**: Extends BaseStrategy with protocol-specific logic and storage to implement TERM functionality, such as repo token management, auction participation, and portfolio constraints, while leveraging inherited vault mechanics.

<figure><img src="/files/s9QnSiyzL66bPdCxWYvl" alt=""><figcaption></figcaption></figure>

The accompanying diagram illustrates Yearn V3's separation of vault logic and storage:

* **TokenizedStrategy Contract**: Centralized implementation of ERC-4626 logic for all strategies.
* **BaseStrategy Contracts**: Proxy contracts delegating ERC-4626 calls to TokenizedStrategy via fallback functions while maintaining standardized vault storage for shares, balances, and profit mechanics.
* **Custom Strategies**: Inheriting and extending BaseStrategy to incorporate TERM-specific features.

**Key Features of Term Strategy Vaults**

1. Core Integration: Deploying funds to Yearn vaults, managing withdrawals, and reporting profits
2. Portfolio Valuation: Tracking repo token present values and open auction offers
3. Protocol Interactions: Participating in TERM auctions and managing repo token positions
4. Portfolio Constraints: Enforcing concentration limits, reserve ratios, and maturity thresholds

Through this modular architecture, Term Strategy Vaults combine standardized ERC-4626 vault mechanics with custom fixed-income portfolio management. Each Term strategy operates within an isolated storage context while leveraging the shared ERC-4626 implementation, ensuring security, flexibility, and capital efficiency.