Is Sherlock Safe?
Risk Grade: B- (35/100)
Sherlock is rated as moderate risk — some novel mechanisms, generally well-understood.
Moderate risk — novel audit-plus-insurance model, but the pool is under-collateralized by design and audit failures directly threaten solvency
A DeFi insurance protocol that audits smart contracts and then insures them against hacks, with $60M in its claims pool. You can deposit USDC to back those insurance policies and earn yield from premiums. Its B- grade reflects a fundamental tension: if Sherlock's audits miss bugs, it also has to pay for the losses.
TVL
$506,000
Mechanisms
6
Interactions
5
Value Grade
D+
Key Risks for Sherlock Users
The $60M insurance pool covers far more than $60M in total risk. If multiple insured projects get hacked at the same time, the pool cannot pay everyone. Your USDC deposit gets slashed to cover claims
Sherlock only insures projects it audits. If its audit process has a blind spot, every insured project shares that same weakness
Insurance payouts max out at $10M per project. A $500M protocol paying premiums gets only $10M back if hacked
Top Risk Factors
- •Under-collateralized insurance model: staking pool reserves ($60M) can be overwhelmed by correlated exploit events across multiple covered protocols, forcing staker principal slashing
- •Skin-in-the-game model creates perverse incentives: Sherlock only covers protocols it audits, so systematic audit methodology failures cascade to insurance solvency
- •Coverage caps ($10M per protocol) are inadequate for large DeFi protocols, creating moral hazard where Sherlock insures 5% of risk but collects 2% premium on 100% of TVL
Risk Score Breakdown
Sherlock's highest risk area is Mechanism Novelty (8/15). Here's how each dimension contributes to the overall 35/100 score:
Read the Full Sherlock Risk Report
This protocol has 2 collapse scenarios. 2 high-severity interaction risks identified. See the full mechanism classification, interaction matrix, and deep-dive recommendations.
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