Audience: Protocols and retail by extension. In purchasing covers, protocols and their users are encouraged to offer a portion of their token reserve allocated as a funds pool available for claims in the event of a smart contract hack. The allocated token reserve remains in custody of the depositors, earning premium yield until a smart contract hack event; in such an event, the claim will be assessed and if approved, the token reserves will be automatically issued to the cover provider(s) as collateral to the default event (a credit default risk event). This mechanism offers cover providers good faith in the protocol and collateral against the amount of cover sold. 10% of the claimable amount against the token price day before the hack is distributed to the cover providers. The purpose of guarantor pool is to offer certain recovery for the reserve providers once a payout happens, which is important to support a healthy level of reserves taking a higher risk of providing coverage.