Interesting Protocol

[Metamorph]

Amulet Protocol is a decentralized risk protection protocol built for the Rust-based ecosystem, starting with the Solana blockchain. Amulet has designed an innovative and open risk protection model, which not only effectively addresses the common challenges of existing decentralized RPPs, but also creates a new paradigm shift for the whole risk management sector. Risk underwriting and claims lie at the core of any risk protection business. However, all existing decentralized finance (DeFi) RPPs have been facing a critical sustainability challenge for risk underwriting and claims.
Amulet is creating the risk protection industry’s first Protocol-Controlled Reserves (PCR) approach in which Amulet will build up reserves and introduce a claim structure involving a unique Yield Backed Claim ("YBC") method. This is a significant change from the incumbent model of simply drawing directly on the underwriters' capital to make claim payouts. Amulet's vision is to offer simple, reliable cover for everyone in Web3. With the addition of Amulet, users in the entire Rust-based ecosystem will gain access to a new way to hedge various risks with cover product offerings.

DeFi has experienced exponential growth since the summer of 2020 with the influx of hundreds of billions in capital and the emergence of multi-billion dollar protocols in just a little over two years. Riding this wave of explosive growth is a rapidly increasing demand for protection against blockchain risks. Crypto users often suffer losses from various threats, such as smart contract hacks, stablecoin de-pegs, market volatility, etc. In 2021 alone, $3B were lost to smart contract hacks. Among all available risk hedging tools, protection by way of cover has become the most prominent and effective approach to managing these risks. Although Amulet has seen increased demand for cover products, less than 2% of overall DeFi TVL is currently covered. There is still a large void to be filled by RPPs. Despite Ethereum and its affiliated EVM (Ethereum Virtual Machine) ecosystems’
dominance in DeFi, other Rust-based public chains are rapidly maturing, spearheaded in particular by Solana. According to Amulet's research, TVL on Solana is growing 5x faster than Ethereum, and this growth is expected to be stronger given the distinctive strengths of Solana centered around its lower cost and higher throughput.

Product Offerings:

Amulet plans to start with providing cover for smart contract vulnerability, stablecoin de-peg risk, custodian risk, and eventually expand to a much wider spectrum of different risk types such as default risk on lending protocols, NFT asset risk, price volatility risk, etc. In addition standalone cover products, Amulet will also customize cover bundles by wrapping two or more separate cover products or covered protocols in a single
package deal, and provide portfolio-based coverage. This lowers costs, simplifies user experience, and broadens coverage for users. To help users with their cover purchase decisions, Amulet will be providing cover
recommendations. Users will also have the flexibility of cancelling, renewing, or extending their cover. Amulet currently operates and builds on the Solana blockchain. In time and as its cover capacity and technologies
develop, Amulet will extend its valuable suite of products and services to the growing userbase on other Rust-based blockchains (e.g. Cosmos).

The risk protection business is an endeavor to hedge against uncertain future loss, in which the covered person trades risk with RPPs through payments for cover products. Product pricing is at the heart of any risk protection business and Amulet builds its pricing model based on proven practices and historical data. The aim of product pricing is to find and charge a fair, affordable, and competitive price for users. It should reflect the risks undertaken by the protocol and be quick to adapt to fast-changing risk settings. Amulet's pricing models enable it to get a fair estimate on expected losses, reduce costs for users, and enhance the protocol's long term
viability. Amulet's pricing models take a multi-faceted approach when determining risk. For example, its Smart Contract Cover uses audit reports, operational history, team info, etc. to generate a base rating for a protocol. The base rating, along with protocol APY and supply-demand factors, will be used to determine a cover product's price. Supply and demand is typically measured via a bonding curve between price and cover capacity. Basically the more capacity available, the lower the cover product's price and vice-versa. Stablecoin De-peg Cover rely on economic simulations of historical data to test and identify the initial limits of the cover product, followed by further refinement through the incorporation of data from current market indicators and forward-looking assumptions. Amulet will carefully select and define these limits at the start, then
constantly refine the product as it receives new information. As more and more data becomes available, Amulet will be able to develop and fine tune increasingly sophisticated data-driven pricing models with the help of Machine Learning technology