Hats Finance is excited to announce our newest vault with UMA Protocol, which deposit 30,000 UMA tokens worth $240,000, using protected token technology. UMA protocol is a decentralized finance contract platform that enables Universal Market Access to developers, founders, and projects looking to easily build financial products in the Blockchain.
Through the UMA vault, hackers will be able to report vulnerabilities and get paid in UMA-protected tokens, which they can later exchange for UMA tokens once their vulnerability disclosure is accepted. The idea behind protected tokens is to add an extra layer of security in case of theft, loss, or compromised smart contracts. Protective tokens are backed by UMA’s Optimistic Oracle, and they are a powerful way to mitigate risk and user error.
What is a Protected Token?
The idea behind protected tokens was first introduced by UMA, who uses a long-short pair contract to wrap any ERC20 asset and create protected recovery tokens. Protected tokens are stored in a different wallet address and smart contract system, allowing token recovery in case of a hack, bug, or loss of funds.
Protective tokens are specifically helpful in Hats Finance, where security is one of our highest priorities, and we want to ensure that investors, hackers, and participants in the protocol have the utmost confidence that tokens are held with the highest security levels in place. It is important to highlight that because protected tokens are stored in a different wallet address, they will not expose any of your assets to additional risk.
How do protected tokens work in Hats Finance?
Risk Labs has launched the UMA Hats Vault Protected Token Pair that uses UMA as collateral once protected tokens are deposited in the Hats Finance vault. Protected tokens will be rewarded to whitehat hackers who identify bugs in the UMA protocols.
In case funds are lost due to hack or bug, the UMA committee multisig will review the attack’s report, and the recovery tokens held in a secure wallet can be used to recover the underlying UMA. Recipients of rewards through this program will also receive 1:1 matching recovery tokens from Risk Labs so that they can redeem the protected/recovery token pair for the underlying UMA without waiting for contract expiry.
Other UMA holders are encouraged to mint protected token pairs and add additional funding to the Hats vault to increase rewards for whitehat hackers and enhance the security of the UMA protocols. You should remember to deposit the protected tokens in the vault while keeping your recovery tokens in a secure wallet. Right now it is a manual process, and somewhat cumbersome, but we hope to announce updates on the automation of this part of the flow as well.
We are excited to collaborate with UMA and their actively growing ecosystem, as we believe this is just a stepping stone to improve the future of crypto security. Our partnership with UMA is still unique since protected tokens can be a good way to allow users to deposit in the vault while decreasing the smart contract risk even further. This is an opportunity to not only lower protocol risk, but also grow hacker rewards. At this moment Hats continues to explore different ways to onboard new projects, bring more users, and ultimately make our protocol more secure. We are certain that this is the start of something bigger,and we can’t wait to share with you our journey.
