Protocol
Guarantee Pool
The Guarantee Pool is a planned phase 2 backstop for refunds that a seller's escrowed balance and bond cannot cover. It is subject to legal review.
What it is for
"Phase 2" on this page means the second stage of the protocol, after the first mainnet release. It is not Phase 2 of the 90-day roadmap, which covers testnet work.
Leverage lets a bond back more open payments than it could refund all at once. At 5x, a seller with a 1,000 USDC bond can have up to 5,000 USDC of open exposure. If that seller loses disputes for more than the bond in a short time, the bond runs out.
The Guarantee Pool is designed to cover that shortfall. It is the third and last layer of the refund waterfall.
| Order | Source |
|---|---|
| 1 | The seller's escrowed balance |
| 2 | The seller's bond |
| 3 | The Guarantee Pool, with a seller debt |
The pool is a shared backstop. It is not a promise that every refund will always be paid. Its size will be limited, and it can be used up.
How it is planned to be funded
Two sources are planned.
- Protocol fees. 30% of every fee is allocated to the Guarantee Pool and the treasury. See Fees.
- Depositors. The pool is planned to accept deposits. The terms for depositors are one of the main subjects of the legal review and are not defined yet.
Nothing on this page is an offer to deposit, and no return is promised to anyone.
The first-loss layer
Staked $UNDO is planned as a first-loss layer ahead of Guarantee Pool depositors. When the pool has to pay for a shortfall, staked $UNDO absorbs the loss first. Depositor funds are used only after that layer.
This puts the cost of bad outcomes on the people who take part in arbitration and parameter governance before it reaches anyone else. See $UNDO token.
Seller debt
The pool paying does not clear the seller. When the Guarantee Pool covers a refund, the seller carries a debt for the same amount.
- The debt is repaid from the seller's future payouts.
- The debt is recorded by the contracts, next to the seller's bond and exposure.
A seller who never sells again never repays. That loss stays with the first-loss layer and the pool. This is one reason the guardrails freeze leverage to 1x above 5% lost disputes over 30 rolling days, well before a bond is likely to run out.
Until phase 2
Until the Guarantee Pool exists, the waterfall stops at the seller's bond. If the escrowed balance and the bond are both used up, a buyer who wins a further dispute may not be refunded in full.
This is stated plainly on the Risks page. The capped mainnet launch, the 2,500 USDC per-payment cap and the leverage tiers are designed to keep that case rare while the pool does not exist.
Open questions
These points are not decided. They will be settled during the legal review in phase 4 of the roadmap.
- Whether the pool accepts outside deposits, and under what terms.
- How the 30% fee share is divided between the pool and the treasury.
- The maximum the pool can pay for a single seller.
- In which jurisdictions, if any, the pool can be offered.