Solace Is Making Moves

As the announcement regarding Solace V2 is being formalized and drafted, we’ve decided to cut down our risk exposure and pause all of our current infrastructure, across Ethereum, Polygon, Fantom, and Aurora. This includes the following:

• All liquidity from the DEX pools has been removed;
• SPI policies are voided, effective immediately;
• Staking rewards have stoped;
• Bonding is paused as well;

While this might sound concerning to our dear investors and users, I’m here to explain why this decision was made and what to look forward to! But first, action items.

Implications to SOLACE holders

Staring today, any utility of SOLACE tokens has been paused. With absence of liquidity on DEX’s, we understand that this results in your in-ability to sell SOLACE. We’re sorry to temporarily force your investment into an illiquid state, but I promise this was necessary for the long-term success of Solace, which we hold dear. I’ll share the reasoning for this move below.

However, the transfers are available, so we ask you to consolidate your SOLACE tokens in your wallets for now. Please remove your SOLACE from various vaults, harvest the staking rewards, etc. Regarding your locked SOLACE, as of right now these can be left in your safes and no action required there.

Implications to SPI policy holders

Solace team and I sincerely apologize that some have lost their coverage today, we hope that you’ll find alternative risk management options and continue protecting your capital across the DeFi. For now, we ask you to withdraw your policy deposits and hold SOLACE in your wallet. No other action is required. Please note, only premium deposits can be withdrawn, not referral rewards.

So why is this happening?

As I mention at the begging of this post, we must transition to a new architecture and remove any operational overhead and technical debt that we’ve accumulated over time. However, as one might assume in these shaky markets, wrapping up any products or infrastructure can cause confusion and FUD. Given that, a decision was made to protect our liquidity, investors’ capital, and temporarily pause the trading on DEX’s. This way people can’t dump on each other, and the market maintains at a neutral state for the time being. The truth is that the negative market conditions has significantly hit our underwriting reserves over the last 6 months, even with diversification of tokens. Including SOLACE itself, which has been slowly bleeding as people exit their DeFi positions. That why we’ve transitioned to ETH pools recently, however that only bought us some more time, and now we must take further actions to preserve our solvency as a project and a team.

Moreover, as the TVLs in DeFi shrink, the demand for insurance and our products has significantly reduced. Given lower underwriting balance sheet, we also can’t effectively leverage the capital at this scale, offering same cheaper rates and more insurance with the current product offer. Solace Native has also become a longer term project, as we work with the protocols to strike the right balance between the risks involved with the system and protection benefits they get.

Additionally, operating a protocol in the current fashion across 4 chains have spread our resources thin. We have learnt our lessons and want to evolve, further optimizing Solace and our product.

In the nature of full transparency, I invite to track or check the flow of funds that we’ve executed across our multisigs and liquidity pools, mentioned in the docs. All funds have been accumulated or being transferred/bridged over to our core multisig on Ethereum network, including the SOLACE tokens.

Last point here I’d like to make clear, we’re not shutting Solace down. I hope the paragraphs above offer sufficient update on where we’re at with current market and products. However, the team remains 11-members-strong and well-capitalized, so we continue on building the space up!

Now, what’s next?

I have already “spilled the beans” above, Solace V2 is coming! More details and news will be shared later in December, but we’ve found new ways to better tackle the DeFi Insurance space, along with new partners and relationships. Therefore, I ask you to stay patient, as we continue pushing forward. Solace team and I are grateful for all of your support and kind words, we appreciate you!

To satisfy all the questions and share more private “behind the scenes” information, I will be hosting two AMAs on Twitter Spaces at different times this week: Thursday 8pm UTC and Friday 8am UTC, so you have a chance to join regardless of your location. Please join us and share your questions, concerns, impressions! These Spaces will not be recorded, so I can share more intel on our developments and, more openly, comment on these news!

With gratitude,

Solace team