Risk Harbor PartnershipSmart Contract Protection for Perpetual Pools
In traditional financial markets, retail investors and institutions can hedge their exposure to market risks by using options and other derivatives. They can also mitigate counterparty risks by buying credit default swaps and insurance.
Today, Tracer has bridged another gap for DeFi by integrating with Risk Harbor - a completely automated, transparent and impartial claims process to protect liquidity providers and traders against smart contract risk and attacks. Users of Tracer's Perpetual Pools now have the option to protect their positions against hacks through Risk Harbor.
Why Risk Harbor?
Unlike other smart contract protection protocols, Risk Harbor has a claims process free of any human input or bias, making payouts in ~45 seconds. The Tracer >|< Risk Harbor partnership is another first, bringing smart contract insurance to the Layer 2 solution Arbitrum.
To initiate the partnership (Phase 1), Tracer users will be able to purchase protection for the 1S-BTC/USD Perpetual Pool via https://app.riskharbor.com/
Example "a potential policyholder will pay when purchasing protection from the protocol. For example, if a user purchased 100 yDAI worth of protection at a price point of 5%, they would pay 5 yDAI upfront in premiums" See Docs
In anticipation of Phase 2, we're working towards Tracer users being able to purchase cover for the remaining Perpetual Pools: 1L-BTC/USD, 1S-ETH/USD, 1L-ETH/USD, as well as the leveraged 3x Pools.
How does it work?
Underwriters agree to cover a Potential Policyholder's loss in the event of a hack or attack on the protocol in exchange for premiums paid upfront, as well as the compromised token itself if a claim is made. This type of financial derivative is known in traditional financial markets as a Credit Default Swap (CDS).
In a claiming event - A policyholder can swap ERC20 claim tokens for USDC, almost instantly.
- Hack event occurs
- Policy holder initiates transaction
- The Risk Harbor contract receives a request and automatically checks its redeemibility
- The underwriter receives the claim token and simultaneously the policy holder receives the payout.
What are the risks for underwriters?
Underwriters will bear the losses of any hack, attack or any other loss event that causes the redeemable USDC to fall below 90% of the target amount. This includes smart contract risk, hacks, rug pulls, misspecified contracts and flash loan attacks.
What are the risks for policyholders?
If a hack occurs, the policyholder will be paid out in USDC. So unless USDC loses its peg, policyholders will be protected.
Tracer welcomes this partnership and continues to build risk mitigation systems for our users. For more information go to https://docs.riskharbor.com/