Overview
A staker deposits USDC into Sherlock's staking pool for a fixed term (6 months, 12 months etc.) and receives a market-leading APY in exchange for the risk of funds being used (up to 50%) to pay out an exploit at a covered protocol.
The APY for a staker is made up of 3 streams:
- 1.Premiums from protocol customers
- 2.Interest earned from depositing staker funds into yield strategies (Aave, Compound etc.)
- 3.Incentive rewards paid in SHER (Sherlock’s governance token)
In return for these streams, a staker’s funds are at risk of being partially liquidated (up to 50%) if a covered exploit occurs at a protocol covered by Sherlock (or possibly a protocol that the covered protocol depends on). Despite the risk, stakers are incentivized to stake because:
- 1.They are paid a substantial APY for the risk
- 2.They see the quality and incentive alignment of the security team
- 3.Each covered protocol is required to have a large bug bounty program which can further protect stakers against losses
Last modified 9mo ago