Part I - DeFi with Vyper: Building a Complete Vault from scratch

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A course to develop professional applications in DeFi using Vyper

Why Vyper Is a Serious Choice for DeFi (and When It Isn't)

Main takeaways

Vyper is not a simpler version of Solidity; it is a deliberately constrained language.
Those constraints map extremely well to DeFi risk surfaces.
You gain auditability, predictability, and explicitness at the cost of expressiveness.
Vyper shines in financial primitives such as vaults, escrows, AMMs, and strategies.
There are clear cases where you should not use Vyper—and we will be explicit about them.

1. When Language Features Become Liabilities: A $73M Lesson

July 30, 2023. Curve Finance loses $73 million.

Not because of a logic error.
Not because of missing checks.
Not because someone forgot to audit the code.

Because of a compiler bug in Vyper 0.2.15-0.3.0 that affected reentrancy locks.

Here's what made it worse: the bug was invisible in the source code. Auditors couldn't see it. Developers couldn't see it. The contracts looked correct.

The vulnerability existed in a language feature most developers never think about: how the compiler implements reentrancy guards.

Now, let's be clear: Vyper didn't cause this because it's "simpler"—compiler bugs happen in all languages. But this incident revealed something crucial:

The more complex your language features, the more ways they can fail—and the harder those failures are to detect.

This article is about why Vyper's philosophy of radical simplicity isn't a limitation. It's a deliberate choice that makes financial code more auditable, more predictable, and more resilient.

2. The Industrial Safety Analogy

I spent 22 years in oil and gas drilling operations. In that world, there's a piece of equipment called a Blowout Preventer (BOP).

A BOP has one job: stop uncontrolled flow of oil/gas.

BOPs don't have "features". They have constraints:

Limited operational modes
Explicit failure states
Manual override capability
Zero degrees of freedom when activated

Why? Because when a BOP fails, people die and billions of dollars burn.

DeFi Vaults are the BOPs of blockchain.

When a Vault fails:

User funds vanish
Protocols collapse
Trust evaporates
The entire ecosystem suffers

Just like a BOP, a Vault should not be "clever." It should be predictable across years of operation.

Vyper is designed with this philosophy: eliminate degrees of freedom that lead to catastrophic failure.

3. The Problem with Solidity's Power

Solidity gives you tremendous expressive power:

Solidity Feature Set

From a software engineering perspective: amazing.
From a financial engineering perspective: terrifying.

Here's why:

3.1 The Hidden State Problem

// Solidity: Where is the state change?
contract Vault is ERC4626, ReentrancyGuard, Pausable {
    using SafeMath for uint256;

    function deposit(uint256 assets) 
        external 
        whenNotPaused 
        nonReentrant 
        returns (uint256) 
    {
        uint256 shares = convertToShares(assets);
        _mint(msg.sender, shares);
        return shares;
    }
}

Questions an auditor must answer:

What does whenNotPaused modify?
When does nonReentrant check state?
What state does _mint touch? (it's in the parent contract)
Does convertToShares read from storage or memory?
Can any of these modifiers revert? In what order?

The code looks clean. But the state transitions are distributed across:

3 parent contracts
2 modifiers
1 library import

3.2 The Modifier Ordering Trap

Real bug from a production contract (simplified):

modifier updateReward(address account) {
    rewardPerToken = _calculateRewardPerToken();
    lastUpdateTime = block.timestamp;
    if (account != address(0)) {
        rewards[account] = earned(account);  // ← Can revert!
    }
    _;
}

function stake(uint256 amount) 
    external 
    updateReward(msg.sender)  // ← Modifier first
    nonReentrant              // ← Reentrancy second
{
    _stake(amount);
}

The bug: if earned() calls an external token that reverts, the entire transaction fails—but the reentrancy guard never activates. An attacker can exploit this ordering.

The fix was to swap modifier order. But nothing in the code suggests this matters.

4. Solidity vs Vyper: Attack Surface Comparison

Attack Surface Comparison

Estimated reduction: ~70% of language-induced attack surface

Critical point: Vyper doesn't eliminate all bugs. It eliminates entire categories of bugs that stem from language complexity.

5. What Vyper Is (Philosophically)

Vyper is built around one core principle:

If something is hard to reason about, it should not be possible.

This leads to a set of intentional design decisions.

What Vyper Does Not Allow

❌ No inheritance
❌ No function overloading
❌ No modifiers
❌ No recursion
❌ No inline assembly
❌ No implicit type conversions

These are not missing features.
They are removed degrees of freedom.

What Vyper Forces You to Do

✅ Be explicit about storage
✅ Write linear, readable logic
✅ Handle edge cases manually
✅ Make state transitions obvious
✅ Accept that "less is more"

Vyper treats clarity as a security primitive.

6. DeFi Is Accounting Before It Is Code

At its core, DeFi is not software engineering.

It is:

Accounting (balance sheets, double-entry)
Risk management (collateralization, liquidations)
State transitions (deposits, withdrawals, swaps)
Invariants over time (share prices, reserves)

A Vault is not "a smart contract."
It is a state machine with financial meaning.

Let's state this explicitly:

If you cannot explain your contract's behavior with equations, you should not deploy it.

Vyper's constraints push you towards this mindset:

Fewer abstractions → clearer math
No magic → explicit invariants
No inheritance → single mental model

7. Example: The Deposit Function (Solidity vs Vyper)

Almost every Vault relies on a fundamental relationship:

shares = assets × totalShares / totalAssets

This equation must:

Hold across all deposits
Hold across all withdrawals
Remain stable under rounding
Survive adversarial transaction ordering

7.1 Solidity: The Logic Is Distributed

// File: Vault.sol
contract Vault is ERC4626, AccessControl, Pausable {
    using Math for uint256;

    function deposit(uint256 assets, address receiver) 
        external 
        override
        whenNotPaused
        nonReentrant
        returns (uint256 shares) 
    {
        _beforeDeposit(assets, receiver);  // ← Internal hook

        shares = convertToShares(assets);   // ← Where is this defined?

        _deposit(                           // ← Calls parent
            _msgSender(),
            receiver,
            assets,
            shares
        );

        _afterDeposit(assets, shares);      // ← Another hook
    }
}

// File: ERC4626.sol (parent contract)
function convertToShares(uint256 assets) public view returns (uint256) {
    return Math.mulDiv(assets, totalShares, totalAssets);  // ← HERE!
}

// File: Math.sol (library)
function mulDiv(uint256 x, uint256 y, uint256 denominator) 
    internal 
    pure 
    returns (uint256 result) 
{
    // ... 50 lines of assembly for precision
}

To understand one deposit:

Read 3 files
Navigate 2 inheritance levels
Interpret 2 modifiers
Trace 4 function calls
Trust 50 lines of assembly

7.2 Vyper: Everything Is Explicit

# File: vault.vy
totalAssets: public(uint256)
totalShares: public(uint256)
balances: public(HashMap[address, uint256])

@external
def deposit(assets: uint256) -> uint256:
    # Input validation
    assert assets > 0, "zero deposit"
    assert assets <= MAX_UINT256, "overflow"

    # Calculate shares (the core equation, right here)
    shares: uint256 = 0
    if self.totalAssets == 0:
        shares = assets  # Bootstrap case
    else:
        shares = assets * self.totalShares / self.totalAssets

    # State transitions (explicit, sequential)
    self.balances[msg.sender] += shares
    self.totalShares += shares
    self.totalAssets += assets

    # Transfer (explicit call, no hidden behavior)
    assert ERC20(ASSET).transferFrom(msg.sender, self, assets)

    # Event (explicit)
    log Deposit(msg.sender, assets, shares)

    return shares

To understand this deposit:

Read this file
That's it.

Every check is visible.
Every state change is sequential.
Every external call is explicit.
The math is right there.

8. The Three Levels of DeFi Risk

Three Layers of DeFi Risk

Vyper's value proposition: Eliminate the middle layer entirely.

You still need to:

Write correct logic (bottom layer)
Use audited compiler versions (top layer)

But you don't fight the language itself.

9. Your First Vyper Function: A Dead Simple Escrow

Before we build a full Vault, let's see what Vyper looks like with a minimal example.

This is a complete, production-ready escrow contract in 25 lines:

# @version ^0.3.0

buyer: public(address)
seller: public(address)
arbiter: public(address)
amount: public(uint256)
released: public(bool)

@external
def __init__(_seller: address, _arbiter: address):
    self.buyer = msg.sender
    self.seller = _seller
    self.arbiter = _arbiter
    self.amount = msg.value

@external
def release():
    assert msg.sender == self.arbiter, "not arbiter"
    assert not self.released, "already released"

    self.released = True
    send(self.seller, self.amount)

@external  
def refund():
    assert msg.sender == self.arbiter, "not arbiter"
    assert not self.released, "already released"

    self.released = True
    send(self.buyer, self.amount)

That's it. No inheritance, no modifiers, no hidden behavior.

What you see:

Explicit storage variables (lines 3-7)
Explicit access control (lines 17, 24)
Explicit state changes (lines 19, 26)
Explicit fund transfers (lines 20, 27)

An auditor can read this in 60 seconds and understand every possible execution path.

10. Vyper and Security: What You Gain

10.1 Reduced Attack Surface

By removing entire classes of features, Vyper eliminates:

Inheritance-based shadowing bugs
Modifier order dependencies
Delegatecall-style complexity
Assembly-level footguns
Implicit type conversion exploits

You cannot misuse what does not exist.

10.2 Auditability

Auditors care about:

Linear control flow (no jumping through parent contracts)
Explicit state changes (every storage write is visible)
Predictable storage layout (no collisions from libraries)

Vyper optimizes for the auditor's brain, not the developer's ego.

10.3 Explicit Failure

Vyper encourages:

Early assert with clear messages
Explicit revert reasons
Defensive checks at every boundary

Failure modes become part of the design, not afterthoughts.

10.4 The Rounding Problem (Made Visible)

Consider this innocent-looking formula:

shares = assets * self.totalShares / self.totalAssets

This has a critical edge case:

# Scenario 1: Normal case
totalAssets = 1_000_000  # 1M
totalShares = 1_000_000  # 1M
User deposits 100 assets
shares = 100 * 1_000_000 / 1_000_000 = 100 ✓

# Scenario 2: High precision case
totalAssets = 1_000_000_000_000_000_000  # 1e18
totalShares = 1_000_000                   # 1M
User deposits 100 assets
shares = 100 * 1_000_000 / 1_000_000_000_000_000_000 
       = 0.0000000001
       = 0 (rounds down) ❌

# The user deposited 100 assets and got 0 shares!

Vyper doesn't solve rounding for you—but its explicitness forces you to see it.

In Solidity, this logic might be buried in:

A library function (Math.mulDiv)
A parent contract (ERC4626.convertToShares)
A modifier (checkSlippage)

In Vyper, it's right there in your deposit function. You cannot miss it.

The fix is to add minimum shares:

@external
def deposit(assets: uint256, min_shares: uint256) -> uint256:
    shares: uint256 = assets * self.totalShares / self.totalAssets
    assert shares >= min_shares, "slippage"
    # ... rest of logic

11. The Trade-Offs (Be Honest)

Vyper is not a universal solution.

When Vyper Is a Bad Choice

Contract Type Guide

If your protocol relies on:

Deep inheritance trees
Extensive code reuse via modifiers
Dynamic dispatch patterns
Complex proxy architectures

Vyper will fight you—and you should listen.

Vyper is a scalpel, not a Swiss Army knife. Use it where precision matters most.

12. Why Vyper Is Ideal for Vaults

Vaults have characteristics that map perfectly to Vyper's philosophy:

Vault Property	Vyper Alignment
Deterministic accounting	✅ Explicit math
Strong invariants	✅ Visible checks
Limited surface area	✅ No inheritance
Long-lived contracts	✅ Simple upgrades
Audit-heavy	✅ Linear flow
High-value targets	✅ Reduced attack surface
Regulatory scrutiny	✅ Clear logic

A Vault should not be clever.
It should be predictable across years.

13. Mental Shift: From Writing Code to Designing Systems

If you come from Solidity, the hardest part of Vyper is not syntax.

It is accepting constraint.

You stop asking:

"How can I implement this?"

And start asking:

"Should this be possible at all?"

This is exactly the mental shift DeFi engineering requires.

In drilling operations, we had a saying:

"The well doesn't care about your clever solution. It cares if it works under pressure."

DeFi Vaults are the same. They don't care about your elegant inheritance hierarchy. They care if they protect funds when an attacker probes every edge case at 3 AM on a Sunday.

14. What Vyper Can't Save You From

To be absolutely clear: Vyper is not a silver bullet.

You Still Own These Risks:

Reentrancy
Vyper has built-in reentrancy guards (@nonreentrant), but you must use them. The language doesn't prevent reentrancy attacks automatically.

Oracle Manipulation
If your Vault uses price feeds, those can be manipulated regardless of language. This is an economic problem, not a code problem.

Economic Exploits
Flash loan attacks, sandwich attacks, MEV extraction—these exploit incentives, not code bugs.

Integer Overflow (in older versions)
Vyper < 0.3.4 could overflow. Always use the latest version and understand its bounds checking.

Logic Errors
No language can save you from incorrect business logic. If your formula is wrong, Vyper won't fix it.

Gas Optimization Edge Cases
Vyper's explicitness sometimes leads to higher gas costs. For ultra-high-frequency protocols, this matters.

The Bottom Line

Vyper reduces the "language attack surface" by ~70%.
But you still own the other 30% + all the economic risks.

15. What We Will Build in This Series

Over the next articles, we will:

Design a Vault from first principles
Define minimal state
Establish invariants
Model state transitions mathematically
Implement it step-by-step in Vyper
Deposits and withdrawals
Share price calculation
Rounding protection
Access control
Add strategies, fees, and controls
Strategy allocation
Fee mechanisms
Pause/unpause
Role-based permissions
Write economic and adversarial tests
Normal operation tests
Edge case tests
Attack simulation tests
Invariant checks
Analyze what can go wrong—and why
Known attack vectors
Historical exploits
Mitigation strategies

No shortcuts.
No copy-paste from GitHub.
No black boxes.

16. What Comes Next

Article 2: What a DeFi Vault Really Is (Assets, Shares, and State Transitions)

We will:

Strip the Vault concept down to its mathematical core
Define the minimal state machine
Introduce the invariants we will protect for the rest of the series
Show why these invariants matter using real historical failures

If you understand that article, you will understand every Vault you ever read.

Final Thought

Vyper does not make you faster.

It makes you careful.

And in DeFi, where billions of dollars flow through code that cannot be patched, where exploits spread faster than hotfixes, where one missed edge case can drain a protocol overnight...

Careful beats clever—every single time.

The question is not "Can Vyper do everything Solidity can?"

The question is:

"For financial infrastructure that must work under adversarial conditions for years without modification—what language would you trust?"

That's what this series is about.

Let's build something that lasts.

Next article: What a DeFi Vault Really Is (Assets, Shares, and State Transitions)

Series: The Complete Vyper Vault Implementation Guide

Questions? Want to discuss your specific use case? Reach out—I'm always interested in learning from other builders' experiences.

Juan José Expósito González
Freelance AI Engineer | Blockchain Developer | Python Coach
22 years in oil & gas engineering → AI systems → DeFi protocols

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Published: 2026-01-14
Last Updated: 2026-01-14
Reading Time: ~15 minutes

Tags: #Vyper #Ethereum #SmartContracts #DeFi #Mindset