Other · Underwriting
Sherlock provides smart-contract audit coverage for DeFi protocols. Security researchers and stakers back a first-loss capital pool that pays out when covered protocols suffer exploits matching policy terms.
Audit-backed protocol coverage with a first-loss capital pool.
Protocol TVL
$501.5K
Latest data · 15 min delay
Ties underwriting directly to audit coverage — protocols pay premiums and stakers backstop exploit losses on audited codebases.
Financial coverage that reimburses protocols for losses from smart-contract exploits that should have been caught during a Sherlock audit. Historically offered up to $10M per protocol under the V2 staking model; the current Sherlock Shield product sits on top of audited code post-launch with limits up to $500,000 and is explicitly described as 'not insurance', with payouts governed by written program terms and claims processes.
A single Ethereum-based underwriting pool where stakers locked USDC to backstop coverage payouts. Stakers earned cover-purchase fees, yield-strategy returns and SHER token incentives, but bore first-loss risk: staked capital could be liquidated to pay valid exploit claims.
Large-scale adversarial competitions where thousands of registered security researchers compete to find vulnerabilities in a protocol's codebase for a prize pool, with severity-based scoring.
Private, staffed security reviews led by top-ranked researchers, offered as a pre-launch complement or alternative to open contests.
Ongoing post-launch incentive programs for live protocols, including record-size bounties (e.g. a $16M program for Usual).
AI-driven automated code-analysis tool (beta launched September 2025) that scans smart-contract code during development to surface vulnerabilities earlier in the lifecycle.
Two-stage claims process: the Sherlock Protocol Claims Committee (core team + security advisors) votes within ~7 days; denied claims can be escalated to UMA's Optimistic Oracle for arbitration for a fixed fee.
Native protocol token used for staking rewards and researcher incentives. Note: SHER was never launched as a liquid, publicly traded token; the planned large public token round did not result in a live token.
$4.5M paid out after the March 2023 Euler Finance exploit
DL NewsReserves fell ~90% over one year to ~$2.9M by April 2023, against $16.5M coverage outstanding
DL NewsCharged protocols ~3%/yr for cover while paying stakers ~19%/yr, implying an expected claim only ~every 33 years per protocol
DL NewsHow Sherlock maps onto established TradFi structures, and where it diverges.
Warranty / audit-linked professional-liability cover
Sherlock
Like a warranty on professional work, Sherlock's Audit Cover pays out when the audited 'product' (smart-contract code) fails due to a defect the audit should have caught, aligning the auditor's incentives with the client's outcome.
TradFi analogue
Cover is funded on-chain by USDC stakers taking first-loss risk rather than by a regulated insurer's balance sheet; claims are decided by a protocol committee plus UMA's Optimistic Oracle rather than courts or regulators; limits are modest and the product is explicitly 'not insurance'.
Surety bond
Sherlock
A third party (the staking pool) posts capital that can be drawn on if the covered party's code fails, similar to how a surety guarantees performance and pays the obligee on default.
TradFi analogue
There is no legal recourse against a principal to recover paid claims; the 'surety' capital is crowdsourced from anonymous USDC stakers earning yield, and pricing is tied to audit quality scores rather than credit underwriting.
Sherlock (Spearbit-adjacent / Sherlock Inc.)
Company / core team US-based venture-funded company that builds and operates the Sherlock security platform and coverage protocol. Co-founded by Jack Sanford (co-founder, frequently quoted on the coverage model and the 2023 reserves crisis).
Sherlock Protocol Claims Committee (SPCC)
Claims governance body Committee of core team members and security advisors that reviews and votes on coverage claims within roughly 7 days before any escalation to UMA arbitration.
Pre-Seed
2021-06-03$1.5M
Key milestones: launches, upgrades, exploits and governance events.
Pre-seed round ($1.5M)
ExecutedSherlock raised $1.5M pre-seed led by IDEO CoLab Ventures to build its audit-backed coverage model.
SourcePublic token sale opens (SHER, $100M target)
ExecutedSherlock opened a first-come public USDC round targeting $100M, with 90% directed to the staking pool and SHER rewards (1 SHER per 10 USDC staked after six months). A liquid SHER token did not ultimately materialize.
SourceSeed round ($4M) led by Archetype
ExecutedSherlock raised $4M seed led by Archetype (Spartan, Lattice, CoinFund participating) to scale the coverage and staking model offering ~10% USDC + 5% SHER yield.
SourceSherlock AI beta launch
ExecutedSherlock launched an AI-driven smart-contract security tool in beta (September 2025) as part of its pivot to a full-lifecycle security platform.
SourceNo. Sherlock has a native SHER token used inside the protocol for staking rewards and researcher incentives, but it was never launched as a liquid, publicly traded token. A planned $100M-target public token sale (2022) did not result in a live market token.
Audit Cover reimbursed protocols for losses caused by technical faults in smart-contract code that should have been detected during a Sherlock audit, up to $10M per protocol under the V2 model. It was not general-purpose insurance and covered a defined scope of audited contracts.
USDC stakers deposited into a single Ethereum underwriting pool and took first-loss risk. In exchange they earned cover-purchase fees, yield-strategy returns and SHER incentives; their staked capital could be liquidated to fund valid claims.
Yes. After the March 2023 Euler Finance exploit, Sherlock paid out $4.5M to cover an affected protocol, which severely depleted its reserves.
No. After its reserves collapsed ~90% in 2022-2023 (driven by a Maple/Orthogonal default and the Euler payout), Sherlock pivoted to a security-services company: audit contests, collaborative audits, bug bounties, an AI auditor, and a scaled-down 'Sherlock Shield' coverage product with much lower limits.
The Sherlock Protocol Claims Committee votes first; if a claim is denied, the claimant can escalate to UMA's Optimistic Oracle for third-party arbitration.
