Core Concepts - CoverFi

This page explains the words used across CoverFi.

Mental model

Premiums and seeded reserve create liquidity.
Active positions lock some of that liquidity.
Settled payouts can only use position-specific reserved liquidity.
Wallet signatures approve every user action.

Terms

Term	Meaning
Stellar	The network CoverFi uses for accounts, payments, and assets.
Soroban	Stellar’s smart contract platform.
XLM	Stellar’s native asset.
Wallet	The user-controlled account that signs transactions.
Liquidity	Funds available in a vault to support future claims.
Reserve	The vault balance used to back eligible payouts.
Premium	Fee paid to open a protection position.
Payout	Contract-approved amount after expiry settlement.
Oracle	A source of price data for contracts.
Stale price	Oracle data that is too old to safely use.
Basis points	1/100 of a percent. `100 bps = 1%`.
Admin	Privileged account used for controlled operations.
Pause	Emergency control to stop sensitive flows.
Audit	Independent smart contract review.

Protection is not insurance

CoverFi does not promise to make users whole. A payout depends on:

Contract state.
Entry price captured from the oracle at position creation.
Oracle freshness.
Reserve capacity.
Position-specific reserve accounting.
User signature.
Stellar network execution.

Why reserves matter

The product should not accept exposure that the reserve cannot support. That is why active positions lock max payout capacity.

Why oracle policy matters

Contracts cannot read market prices by themselves. CoverFi uses an oracle adapter that stores price and timestamp data. The protection engine rejects stale prices. For mainnet scale, the oracle policy should use multiple sources or an established Stellar-compatible oracle provider, with deviation checks and emergency pause rules.