What is the Insurance Pool?
The Insurance Pool is a mechanism where a vault curator locks their own capital into the vault as a loss backstop. If the vault incurs bad debt and losses are socialized, the curator’s locked capital is used to make depositors whole — compensating them for the losses they incurred. In simple terms: the curator puts their own money on the line. When things go wrong, depositors are compensated from the Insurance Pool after the fact.How it works
A curator deposits capital into the vault and receives vault shares (kTokens), just like any depositor. These shares are then staked into a dedicated Insurance Pool with a mandatory 30-day cooldown — during which the curator cannot withdraw.Curator deposits
The curator deposits capital (e.g. USDC) into their own vault and receives vault shares.
Capital serves as a backstop
If the vault incurs bad debt, losses are socialized across the vault. The curator’s Insurance Pool capital is then used to compensate affected depositors.
Why it matters
Skin in the game with a real backstop. The Insurance Pool financially aligns the curator with depositors:- If the vault incurs bad debt, the curator’s locked capital is used to compensate depositors after losses are socialized
- If the curator makes poor allocation decisions, their capital is on the line
- The cooldown prevents the curator from quietly exiting before depositors can react
- Accountability is enforced by code, not just promised
What depositors see
Depositors can verify the following on-chain:| Detail | Why it matters |
|---|---|
| Whether the vault has an Insurance Pool | Indicates the curator has committed capital as a loss backstop |
| How much capital is locked | A larger pool means more capacity to compensate depositors after a loss event |
| The cooldown period | The mandatory 30-day cooldown prevents the curator from exiting before depositors can react |