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The CoverFi smart contract ecosystem provides a decentralized stablecoin loss protection mechanism built on Stellar and Soroban. These contracts have been open-sourced at CoverFI-space/coverfi-contracts.

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Architecture Diagram

The following diagram illustrates the interactions between the main components of the CoverFi contract ecosystem:

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Money and Data Flow

For a user protecting 1000 units with a 1% fee and a 10% max payout cap:
  1. Initiation: The user creates a protection position.
  2. Principal: The principal amount (1000 units) moves into the protected_balance_vault.
  3. Fee Collection: The protection fee (10 units) moves into the premium_vault.
  4. Yield Routing: The premium_vault forwards fees to the reserve_vault.
  5. Capacity Locking: The reserve_vault locks the maximum payout capacity (100 units).
  6. Data Storage: The position is stored as active in the engine’s state.
If the oracle price falls below the trigger before expiry, the payout is calculated based on the price loss and is capped by the configured maximum payout basis points.