Armor Treasury Reserve
The main risk that users of arNXM yield vault face is that in case where a protocol that Armor was staking on gets hacked and suffers losses, claims are paid out and the vault would lose some (or all) of its stake on the contract.
Additionally, the underwriter of our cover, Nexus Mutual, could also lose a significant amount of their capital pool.
Who covers the coverage providers?
Armor has a solution.
When the arNXM:NXM ratio drops, it means that the arNXM yield vault suffered a loss because claims have been paid out via Nexus Mutual. In this case, the Armor's coverage for coverage providers will cover the loss. This will also replenish Nexus Mutual's capital pool.
Armor Treasury Reserve
The Armor Treasury Reserve will provide coverage for coverage providers and will cover the arNXM yield vault. In case of hacks where the vault stakes are burnt, the treasury reserve will take on the loss as debt. This debt can be paid by returning an equivalent amount of NXM to the stakers in the vault, sufficient to replenish the burnt stake and restore the arNXM:NXM ratio to where it would have been had the loss not occurred. This will be done by (in order):
Utilizing any excess funds from claims payouts from the same hack
Burning arNXM held by the Treasury Reserve
Not minting arNXM owed to the Treasury Reserve
Given that revenues stay consistent and/or expanding, the stakers will be returned to zero loss over time, and the arNXM yield vault can be considered zero risk over time.
Armor stands with our stakers and underwriters to cover their risk. The larger the treasury reserve holdings get, the safer our investments become.
Composition
The Armor treasury reserve is composed of the sum total of all investments held by the treasury, except assets denominated in ARMOR (uncirculating supply) and USDC (opex).
Investments may be held in ETH, arNXM, stablecoins, LP tokens or others.
Over time, as the treasury reserve grows larger and more diverse, it will provide larger and more dependable coverage.
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