COI Fund Wallet
A mechanism to counter Conflict of Interest in Smart Contract Audits
The COI Fund Wallet is a unique and revolutionary mechanism that avoids us, as the team behind the project, from issuing fake or inaccurate audit reports. The term "COI" refers to Conflict of Interest in this case.
This mechanism is only applicable to Hard Audits, not Soft Audits, further explained here.
Whenever the community requests and votes for a security audit on any given project, the Defyre team will take a stake on that project (Token, LPs, etc.), exposing us to the risks associated with the project. This stake will be locked for a period of 90 days and cannot be withdrawn under 3 months. This mechanism will be controlled via a time-locked smart contract.
Why are we doing this?
Because we want to prove to the community that we have zero conflict of interest in every single audit, and it disincentivizes us from providing the community with fake or inaccurate information that would otherwise solely benefit the project(s) we're auditing. This something no other smart contract security auditor in the crypto industry does, and we're the first to get there.
How does this prevent a conflict of interest?
For example, let's assume that the community voted for us to audit a brand new project called "Get Rich Fast Swap", offering it's own token called "Get Rich Fast Token (GFT)", and yield farms producing over 10,000% APY on their GFT-BUSD Liquidity Pair (LP).
In this example, we would assume a position in the GFT token, or GFT-BUSD LP, exposing us to the risk of losing funds from the COI Fund Wallet in case GFT experiences a price dump or the infamous "rug pull" by bad actors. At a minimum, we assume a position of 10% of the total value of the COI Fund Wallet in GFT tokens or the GFT-BUSD LP, which depending on the price of our Defyre Token, could be a considerable loss and forces us to have "skin in the game" during the audit.
A typical audit will occur between 30-45 days, depending on the complexity. Remember, we cannot withdraw these funds in under 3 months, which means that after our audit, we will still have exposure to the risks of the GFT token/LP until after 90 days. If the GFT token suffers a price dump, we're at a loss as well as the community.
This entire mechanism will be controlled by time-locked smart contract, meaning we will have no control whatsoever in removing the funds prior to the 90 days. The code of the contract will be posted here for everyone to see as well as in our Github repository.
What happens to the funds in the COI Fund Wallet after 90 days?
Once the 90 days cooling off period has passed, the smart contract will automatically send the GFT token and/or LP back to the COI Fund Wallet where it can be redeemed and exchanged back to Defyre tokens and placed back in the COI Fund Wallet for future audits.
Any profits will be distributed as follows:
20% to team members.
10% to reinvest in infrastructure overhead.
70% to Defyre Token holders via a lottery system.
What happens if the tokens being audited got liquidated or the price crashed because of bad actors?
The token/LP will still be exchanged back to the Defyre Token even if the price is considerably lower than the initial investment, and 25% of the Defyre tokens used to make the initial swap will be burned, helping our token maintain it's fair market value by reducing supply.
For example, let's assume we exchanged 500 Defyre tokens for 500 "Get Rich Fast" GFT token, and let's also assume that the Defyre token's value is $1 BUSD and the GFT token also sits at $1 BUSD at the time of the swap, for a 1:1 ratio. Now, let's assume that the bad actors from the "Get Rich Fast" project dumped the price down to $0.10 BUSD because of a rug pull, losing 90% of it's value.
After 90 days, the time-locked smart contract will send the 500 GFT tokens (now worth $50 BUSD) back to the COI Fund Wallet, we'll exchange these for BUSD and back to Defyre tokens, and we'll burn 125 Defyre tokens from the COI Fund Wallet, decreasing total circulating supply by 125 tokens.
Minting and burning of tokens is extremely limited further described here.
Last updated