Testnet only. Parts of these docs describe the original design. Not traditional insurance, and no guarantee. See the testnet apps and the limits of protection.
On-Chain Backing

Protection

YieldShield protection is a fixed backing claim that is reserved on-chain before you commit. It is not traditional insurance, and it does not guarantee your principal. This page explains what the backing does and where it stops.

How the Backing Works

When a holder opens a position, the pool records a fixed backing claim based on the asset's price at that moment. First-loss providers have already funded the pool, and the contract reserves part of their funds against that claim. The pool's creator sets how much is reserved. In the featured markets on Avalanche Fuji, for example, it is 150% of each claim.

Before the position closes, the holder chooses an exit:

  • Asset exit: keep the asset and pay a share of any realized gain to the providers.
  • Backing exit: hand the asset to the pool and take the fixed backing claim instead.

If the asset has fallen, the backing exit pays the fixed claim, and the providers take the loss on the asset they receive. No one has to approve this: the contract applies the terms that were set when the position opened.

What It Does Not Cover

The backing is only as strong as its parts. You can still lose value when:

  • The reserve runs short: protection only reaches as far as the backing reserved in the pool.
  • The price is wrong: positions are valued with oracle prices, vault redemption values or, on testnet, synthetic test prices. A stale, manipulated or failed price can lead to the wrong outcome.
  • The contracts fail: the contracts are unaudited. A bug or exploit in YieldShield, or in a token it holds, can cause losses that the backing does not cover.
  • The backing asset loses value: if the backing is paid in a token that depegs or fails, the claim loses value with it.
  • The rules change: where contracts are upgradeable or governed, their rules can change after you commit.

What You Can Check

Every pool's backing, collateral ratio, fees and terms are stored on-chain, and each testnet app shows them before you sign. You can verify them in the chain's block explorer and, for the open-source deployments, in the published contracts.

Current Status

YieldShield runs on testnets only, with valueless test tokens. Nothing here is financial advice or an offer of insurance. You can try the design in the testnet apps.