> ## Documentation Index
> Fetch the complete documentation index at: https://docs.railnet.org/llms.txt
> Use this file to discover all available pages before exploring further.

# How it works

> How Railnet routes capital from yield sources to end users through composable layers

## The problem

Managing yield across multiple protocols requires custom infrastructure for every integration — its own accounting, permissions, failure handling, and timing logic. Existing vault standards don't solve this: ERC-4626 handles synchronous operations but can't track async flows, and ERC-7540 added async requests but remains all-or-nothing with no way to compose multiple sources.

## Three composable layers

Railnet standardizes yield management through three layers connected by [STEAM](/developers/contracts/steam-standard) — a standard interface that tracks every operation from creation through settlement, handling both instant and multi-day flows.

### Layer 1: Yield Sources

Protocols wrap their yield source in a STEAM adapter. Whether the protocol completes in one transaction (Aave, Morpho) or takes days to settle (Ethena, tokenized bonds), every operation follows the same lifecycle: **create → process → settle**.

One integration makes the source composable with every Strategy and Conduit on the network. The protocol owns its adapter and updates it independently.

*On-chain implementation: [Vehicle](/developers/contracts/steam-standard)*

### Layer 2: Strategies

Asset managers compose yield sources into managed allocations. A single Strategy can hold both synchronous and asynchronous sources — routing capital through priority queues, tracking every asset via [sector-based accounting](/developers/contracts/accounting), and enforcing [guardrails](/strategies/allocation/guardrails) set by the Strategy owner.

For complex operations not available as standard adapters — swaps, borrows, bridges, perps — asset managers can use [Advanced Strategies](/strategies/advanced) via Specialized Vehicles.

*On-chain implementation: [MultiVehicle](/developers/contracts/multi-vehicle)*

### Layer 3: Conduits

Platforms deploy a Conduit on any Strategy — or directly on a single Yield Source — to create a branded entry point for their users. Each Conduit has its own share token, fee structure, compliance controls, and automated settlement via [Keepers](/developers/contracts/keeper).

One Strategy can serve many Conduits simultaneously. Each platform gets its own configuration while the underlying strategy is shared — scaling distribution without fragmenting liquidity.

*On-chain implementation: [Conduit](/developers/contracts/conduit)*

## What this replaces

Railnet serves the same function on-chain that fund administration platforms serve in traditional finance — standardized accounting, consolidated books and records, compliance enforcement, NAV calculation, and uniform operational workflows.

| Without Railnet                              | With Railnet                                             |
| -------------------------------------------- | -------------------------------------------------------- |
| Custom accounting per protocol               | Real-time books via sector-based double-entry accounting |
| Off-chain NAV calculation, delayed reporting | Contract-native NAV, computed every block                |
| Manual reconciliation across systems         | On-chain single source of truth                          |
| Per-integration permissions and compliance   | Unified role-based access control across all layers      |
| Bespoke fee collection and invoicing         | On-chain fee management — automatic, verifiable          |
| Custom vault infrastructure per venue        | One STEAM integration per yield source                   |
| End-of-day batch position updates            | Real-time capital deployment observable on-chain         |

## Network effects

Each participant amplifies the others:

* Every new **Yield Source** adapter expands the composition space for every asset manager
* Every new **Strategy** gives platforms more products to offer their users
* Every new **Conduit** expands distribution reach for every strategy — without additional work from asset managers
* Greater capital flow incentivizes more protocols to integrate

The value of joining Railnet increases with every new participant at every layer.

## What to read next

<CardGroup cols={2}>
  <Card title="Ecosystem" icon="circle-nodes" href="/overview/ecosystem">
    How asset managers, platforms, issuers, and protocols connect through Railnet.
  </Card>

  <Card title="Comparing Railnet" icon="scale-balanced" href="/overview/railnet-and-other-standards">
    How STEAM compares to ERC-4626, ERC-7540, and other vault approaches.
  </Card>
</CardGroup>