Firelight Adds Onchain Cover to Kraken Protected Strategies USDC Vault

Firelight enabled onchain coverage for Kraken Protected Strategies USDC, a USD Coin (USDC) vault, on Thursday, Oct. 15, giving eligible depositors a capped payout path for specified decentralized finance failures.

Sentora, the vault’s independent curator, enrolled it in the program. Deposits qualify only while they remain in the vault, and users do not need to opt in separately. Participation does not guarantee a payout.

Covered events include smart contract exploits, oracle failures and governance attacks. Economic failures may also qualify, including mechanism-driven bad debt, mechanism-driven depegs and redemption failures. Losses from market moves, such as changes in asset prices or the vault’s yield, are excluded.

Coverage scope, price and capacity reset each 30-day epoch based on the vault’s composition and risk profile. Firelight’s Risk Consortium reviews incidents against the applicable coverage terms. Qualifying payouts are made onchain in USDC.

Payouts are capped at $100,000 per depositor address in each 30-day period. The vault’s aggregate limit and available coverage capital also constrain total payouts. Kraken does not decide whether an incident qualifies, fund payments or guarantee that depositors will be paid.

The arrangement is not insurance. Its cost is deducted from the vault’s yield, and the displayed yield already reflects that expense. Firelight’s coverage capital comes from a shared pool of staked funds that backs multiple programs and is separate from vault deposits.

Stakers’ positions may be slashed after a covered event is confirmed. Firelight has also used staked capital for DeFi cover in its XRP-backed yield model, where stakers face slashing risk.