Proposal #30: Proposal to protect ETH Perpetual Pools through Risk Harbor

Summary

In August 2021, the Poly Network was hacked via a smart contract exploit with over $600 million USD equivalent in assets being stolen. Smart contract risk is one of the greatest risks in Decentralized Finance leading to millions of dollars being lost and inevitably causing an increase in fear of adoption of DeFi technology. Thus, it is imperative that this risk is effectively managed to ensure security in order for DeFi to scale.

Risk Harbor is a risk management protection protocol for all cryptocurrency that provides an algorithmic, transparent, and impartial service that removes the need for trusted intermediaries. Risk Harbor has provided risk management and protection services for other major DeFi protocols including Anchor, Element Finance, and Iron Finance.

Risk Harbor’s services aim to provide the following:

  • Protect against smart contract risk and network vulnerabilities;
  • Invest safely and earn risk-adjusted rewards by providing protection; and
  • Maximise capital efficiency with market-informed dynamic pricing.

Risk Harbor offers its services to Tracer DAO in order to work with the DAO on initially insuring Tracer DAO’s Perpetual Pools financial contract against smart contract risk. In addition to allowing the ability for individual users to protect themselves using our services, this proposal aims to have Tracer DAO protecting each of the currently offered markets in Perpetual Pools including:

  • 3L ETH token;
  • 3S ETH token;
  • 1L ETH token; and
  • 1S ETH token.

This proposal is to offer protection on the above markets in the case of smart contract failure as specified within our documentation. Initially, this proposal, if successful, will implement ‘protection pools’ that are funded by the DAO to emphasize Tracer DAO’s approach to security against smart contract failure. These pools will be initially allocated with 100k USDC per market as listed in the above dot points (400k USDC total). As Perpetual Pools moves toward v2 and market conditions change, further proposals may be proposed to increase these protection pools and/or add protection to the BTC/USD and other Perpetual Pool tokens.

Next Steps

In order for this proposal to take effect, it must be pushed to Snapshot by a DAO member and that Proposal must succeed.

We encourage the discussion of this proposal in the comments below.


Consideration

For the provision of these services, Risk Harbor requests:

  1. 400k USDC to protect against smart contract failure across the 4 different ETH/USD Pool tokens on Tracer DAO’s Perpetual Pools financial contract:

  2. 1L-ETH/USDC

  3. 1S-ETH/USDC

  4. 3L-ETH/USDC

  5. 3S-ETH/USDC


Deliverables

If engaged by Proposal to provide the services described in this Proposal to the DAO, Risk Harbor will provide the following (Deliverables):

  1. Risk Harbor builds wrappers and contracts defining how depeg events are detected, and will launch protection pools for the select Tracer DAO perpetual pools products listed below:
  • 3L-ETH/USD
  • 3S-ETH/USD
  • 1L-ETH/USD
  • 1S-ETH/USD
  1. Tracer DAO to purchase protection for their users:
  • All users will then be protected (on a pro-rata basis), depending on the available protection capacity. This is a strong signal for Tracer depositors and will increase new and existing engagement for TracerDAO users as a whole as they are programmatically protected against any loss event. It is also a marketing rallying point to the ecosystem as a whole.
  1. Tracer DAO will underwrite Tracer DAO protection pools on Risk Harbor:
  • This shows that the Tracer DAO team is confident in their product - to the extent that they are willing to underwrite Tracer DAO protection on Risk Harbor and provide capacity for users and the community to protect themselves against any events of risk.
  • 400K USDC initial underwriting capacity from Tracer DAO allocated as detailed in the Considerations section. Underwriting capital will be reallocated across pools, as they expire, optimistically until Tracer DAO votes otherwise.
  1. Risk Harbor community admirals and team members provide support to Tracer DAO protection buyers:
  • Tutorials, documentation, etc. if needed
  • Continuous customer support in Discord, Telegram, Twitter, etc.

Variation and Termination

  1. Risk Harbor acknowledges that, if engaged, its engagement can be varied or terminated by future Proposals.
  2. Risk Harbor expects that any engagement will be terminated if they fail to deliver in accordance with the deliverables specified above.

Conflicts of Interest

In the context of the Tracer project, conflicts of interest include:

  1. Existing Service Providers who are Related Parties; and
  2. Existing (vested and unvested) holdings of TCR tokens.

Risk Harbor wishes to declare the following conflicts of interest:

  1. No conflicts of interest to declare.

Interpretation

Unless otherwise defined in this offer, all terms beginning with a capital letter which are defined in the Participation Agreement have the same meaning unless the context otherwise requires.

If this offer is accepted as a Proposal under the Participation Agreement, Risk Harbor may more formally document aspects of that Proposal.


Copyright Waiver

Copyright and related rights to this Proposal are waived pursuant to CC0.

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Quick update on this proposal

We are launching Risk Harbor V2 on Ethereum mainnet imminently. Once the system is stable, we will add support for the Arbitrium and deploy a Tracer vault. We then will add support for all available Tracer pools and will add new pools as they are released. Since each pool is highly correlated, minimal underwriting leverage will be applied. The 400k USDC from the above proposal will be deposited into the vault once the pools are added.

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