FAQ - Sherlock

General
What is Sherlock?
Sherlock is a risk management platform designed to provide protocols with affordable, reliable coverage against smart contract exploits. After the guarded launch, anyone will be able to stake in Sherlock's staking pools and receive what will likely be one of the highest risk-adjusted returns in DeFi. This is made possible by our expert smart contract security team, who reviews and prices coverage for every protocol we take on and has “skin-in-the-game” alongside our stakers.
How is it different from other risk management protocols?
Sherlock was created because existing solutions have failed to scale for two major reasons: 1) Poor user experience and 2) bad pricing. 1) DeFi users don't like buying exploit coverage which is why Sherlock doesn’t make them do it. Sherlock works with protocols to bake in coverage so users don’t need to worry. 2) Existing protocols outsource pricing by either making users decide which protocols are safe or by relying on a utilization curve. Sherlock has a team of expert smart contract security analysts who price coverage and have “skin in the game” alongside stakers.
How does staking work?
A user stakes into the Sherlock staking pools and receives a market-leading yield comprised of protocol premiums, SHER token incentives, and lending platform rates. These pools cover the risk of smart contract exploits among covered protocols and can be partially slashed in the event of an exploit. There is currently a 7-day cooldown period to unstake funds from the pool.
How can I get coverage as a protocol?
We are currently in a guarded launch with a select number of protocols. Please email us at [email protected] to join the waitlist.
Is cover for a protocol always fully collateralized?
Not necessarily. One of the main powers of insurance is using diversification to limit the need for full collateralization. This is what allows insurance to be affordable in traditional markets. We expect the value staked into Sherlock's staking pools to be less than the total funds that Sherlock is covering. That said, we expect the staking pool to be significantly larger than the size of the coverage at any one protocol.
So a single exploit event, even if it drains all of the funds of the covered protocol, will always be able to be 100% reimbursed.
A complication arises if an exploit were to occur that affected multiple protocols and drained nearly all of the funds of multiple protocols. In this situation, depending on the capital efficiency of Sherlock, Sherlock may not be able to reimburse the exploits 100 cents on the dollar. However, Sherlock is designed to manage the risk of multiple protocols being affected by the same type of exploit, consequently, it seems like it would constitute an extremely rare event to see multiple covered protocols hacked for nearly all of their TVL at the same time -- but it is theoretically possible.
How do I start using it on Kovan?
Get ETH on Kovan here​
Get USDC from AAVE​

Introduction to Sherlock

Glossary

Last modified 1mo ago

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Contents

General

What is Sherlock?

How is it different from other risk management protocols?

How does staking work?

How can I get coverage as a protocol?

Is cover for a protocol always fully collateralized?

How do I start using it on Kovan?