Collateral

The vault.

Every active protection is backed by money already set aside. The protocol never sells more protection than it can pay out — capacity is checked before a single premium is taken.

Vault in use

0.0%

reserved collateral against deposits · buffer — held back at all times

In the vault

—

Locked (reserved)

—

Free capacity

—

Back the pool

Most of every premium flows to backers pro rata — Sherwood keeps —%. Payouts are borne the same way. Only the part of your stake that is not promised to an active note can ever be withdrawn.

Solvency, verifiable

Capacity is checked before any premium is collected
Reserved collateral covers every active note's maximum payout
A 20% reserve buffer stays unencumbered at all times
Payouts re-verify the vault's real token balance at settlement
No withdrawal — backer or protocol — can take funds an active note needs

All of these are enforced on-chain and covered by the test suite, including a fuzzed hold-over-sequence invariant.