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Deposit Protection
PWRD is protected against stablecoin failures and certain smart contract risks
PWRD deposit protection comes from incentivising Vault users with higher yields. By rewarding Vault holders with a greater share of total protocol yields, Vault users agree to take on losses due to failure of any of Gro Protocol's component stablecoins or protocols.
This means if any of DAI, USDC, or USDT fails or gets off its peg, Vault holders absorb the loss and PWRD remains stable. The same is true if any of the underlying protocols fail and Gro Protocol loses money. Vault holders would absorb the loss and protect PWRD.
The protocol contains $1m of PWRD and $4m of Vault. The Utilisation Ratio would be 25% and the TVL of the protocol is $5m. The exposure to underlying protocols is as follows:
In this scenario if there was a total failure from e.g. Harvest the protocol would lose 10% of it's value: i.e. $0.5m.
The loss would be absorbed entirely by Vault users, resulting in $1m of PWRD remaining, and now $3.5m of Vault.
While Gro Risk Balancer systematically manages stablecoin and protocol risk, users should note that it cannot protect PWRD from acts of God or failure of Gro Protocol itself.
Last modified 2mo ago
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