When a user deposits to Spool V1, their address is saved in the "Master Spool" and the amount of tokens that they deposit is saved to the same location. Since the Spool protocol topped at $70M TVL and has been "online" since the early part of 2022, we now know that this is a robust tracking system.
The downside of the V1 deposit-tracking system is the fact that, due to a lack of "deposit receipts" (Tokens / NFTs representing your deposit): Deposits are non-transferrable and, therefore, cannot be used in further DeFi Blocks.
Spool V2 supports both NFTs as well as Tokens as "deposit receipts". These receipts would allow users to borrow assets against deposits into a given Smart Vault, transfer the Spool Smart Vault Deposit between different addresses without needing to withdraw, and, finally, trade deposits with other users.
The latter use case can, over time, easily be translated into a Spool Deposits Backed Stablecoin or an ETH LSD Index Product.