Economic Security Model

Multi-Tier Insurance Reserve:

Dextr's 3-Tier Economic Security Model

Dextr employs a robust three-tiered economic security model to ensure the integrity and reliability of its platform. This model consists of the following reserves:

1. Operator Reserve: AVS Operators within the Dextr framework must dual-stake ETH and DXTR tokens to participate. This financial commitment acts as collateral, which can be slashed if operators fail to meet their responsibilities or remain offline.

2. Insurance Reserve: The insurance reserve is designed to address losses not covered by the Operator Reserve. Initially funded from the DXTR token supply, it is replenished through protocol revenue and penalties imposed on entities making invalid claims. In the event of a claim, 95% of the remaining amount after slashing the Operator Reserve is deducted from the Insurance Reserve.

3. Underwriter Reserve: This reserve is funded by underwriters who contribute capital in exchange for a share of the protocol's revenue. It is used to compensate users only after operator collateral has been slashed and the Insurance Reserve has covered its share of the claim. Only 5% of the remaining claim amount is settled via the Underwriter Reserve. This cap allows underwriters to manage their risk exposure effectively while benefiting from the protocol's profitability.

Solvency and Token Demand: This system design not only aims to protect users from MEV risks but also ensures the insurance pool’s solvency through penalties. Furthermore, this mechanism enhances the utility and demand for DXTR tokens, as holding and staking these tokens directly correlate with access to insurance benefits.

Here's how Insurance Claims process works:

Insurance Claims Process