Coverage Limit

Policy’s effective coverage limit is set by the amount of capital underwriting the policy. Policyholders set the requested coverage limit and load the policy with a premium, which underwriters can then back and generate yield from. However, the effective coverage limit will be dynamic and equal to the the amount of underwriting capital allocated to the policy. Policyholders only pay the amount of premium based on the effective coverage limit, but can further incentivize underwriters to take on the risk and underwrite the policy.

Timing of coverage

Smart Contract Coverage is based upon prepayment of a cover policy premiums. This premium balance is then gradually used to secure the coverage limit and protect the smart contract(s). As long as there is a premium balance and an underwriting capital backing the policy, the coverage is active. Cover shall terminate and will no longer be active when the prepaid policy premium hits a zero balance, or the underwriters withdraw the backing.

Cover policies have a minimum duration of three months and maximum of one year. The start of coverage will be as follows. If the covered smart contract(s) are on the same blockchain where the policy is activated, the policy will take effect in the next block once the policy has been funded. If the covered smart contract(s) are on a different blockchain from where the policy is activated, the coverage will take effect 60 minutes after the timestamp of the block where the cover funding transaction is first confirmed.

Solace does not guarantee that the website or application, or any content on it, will always be available or uninterrupted. Access may be interrupted, suspended or restricted, including because of a fault, error or unforeseen circumstances and/or because of maintenance.

Covered events

Smart Contract Coverage provides protection agains technical risks (i.e., smart contract exploits and hacks) for audited smart contracts only. These include, but not limited to, all of the following:

• Minting vulnerabilities
• Flash loan attack
• Trojan fake tokens
• Proxy manipulation
• Math error
• Re-entry attack

Non-Covered events

Claims for the following will be denied:

• Losses due to phishing, private key security breaches, malware, or MEV-related
• Any hacks or pre-defined insured events occurring outside of the blocks when a policy has premium and is active
• NFT losses
• Any other event that is not listed under coverage events above

Covered Contracts

Cover is provided for smart contracts that have been audited, and listed in the policy. Redeploying or upgrading one of more smart contracts voids the cover policy and must be updated.

Payout amount

A claim payout will only cover losses actually incurred where such losses do not exceed the Cover Limit in effect at the time of exploit. Calculation of actual loss shall be done by examining the assets in question at the time when the loss occurred based on data extracted from block explorers, CoinGecko, CoinMarketCap, or any other sources regarded as reliable and fair. Any recovered losses received as compensation for the losses shall be excluded from the claim payment and not considered part of the loss amount.

Claims Process

1. Claims are initiated by the beneficiary of the policy through staking SOLACE and submitting a post mortem. Typically this would be the team or someone related to an exploited project. The post mortem outlines the exploit event, mechanism used, time of the event, affected smart contracts and the impact on accounts. The staked SOLACE tokens are non refundable.
2. The Solace DAO will respond with an opinion letter. The letter will compare the warranted audit scope and timing with respect to the affected smart contracts and their deployment dates to evaluate the conditions under which the exploit occurred. Based on the evidence found on chain the DAO will make a suggestion to arbiters whether or not the claim should be paid.
3. The post mortem in question along with Solace’s opinion letter will be presented to the arbiters: a council of auditors (including the auditor who performed the related audit), for investigation that will take 2 weeks before a judgement can be made. The arbiters can request further evidence during this process. Additional evidence may contradict or confirm the opinion letter. Solace will adjust the opinion letter accordingly.
4. All auditors in the network will be asked to vote on a final judgment, excluding the auditor(s) who produced the audit for the smart contracts in question. Each auditor will have a voting power based on the value their audits have secured in the network. The calculation of voting power uses the square root of the aggregate coverage limit from all the projects they've audited. The auditor network acts as a type of judicial body that holds trials. The original auditor and the coverage holder are the defendants and the plaintiffs.
5. Auditors are rewarded for their voting and receive SOLACE tokens. Auditors who choose not to vote will see their relative stakes reduced due to inflation. A quorum of 50% of the auditors must be reached for a claim to be settled. If a quorum is not reached, the direction of the opinion letter will be followed.
6. Solace DAO will execute approved claims payouts at the conclusion of the voting period.

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