We examine the risk of each protocol in terms of DeFi specific risks such as the associated smart contract being compromised, and the funds being stolen or otherwise lost. A smart contract audit involves a trusted group of third-party developers scrutinizing the code that is used to create the terms of the audited smart contract.
The risk quantification process will depend on multiple parameters that indicate the vulnerability of each protocol. e.g. the time since last audited launch, total locked value, audit results, stress test results, historical performance, etc. A few preset pools with different risk levels will be ready at launch with detailed metrics associated.
TIDAL Protocol strongly recommends that all smart contracts to be audited before being covered under any mutual cover pool; however, given its ethos as a more experiential mutual cover platform, it will allow unaudited contracts, but with a much lower risk exposure allowance to LP’s capital than audited contracts.