Spool’s Million-Dollar Commitment Puts DeFi Safety First

Decentralized finance (DeFi) security can sometimes feel boring until it isn’t. Web3 is no stranger to smart contract exploits and hacks, making maintaining robust security procedures and protocols a top priority for any project looking to establish trust and attract capital.

Understanding that security is the bedrock of trust in DeFi, Spool recognizes this, prioritizing security at every stage, from strategy integration to ongoing monitoring and incident response. We provide investors with a platform they can rely on to keep their funds safe, offering a $1.5 million bounty for any critical vulnerabilities identified.

Spool’s internal smart contracts have been thoroughly audited. Trail of Bits, one of the original and most highly sought-after auditors in the industry due to their thoroughness, gave a glowing review. ChainSecurity echoes this sentiment.

There’s an industry-wide recognition of security as a key differentiator in DeFi. Spool prides itself on upholding the highest security standards, safeguarding investor funds, and providing a reliable platform for investing in DeFi. Our Lead Product Contributor and CPO, Konstantin Zagaynov, was recently a featured speaker on an X Space with ChainSecurity, Yearn Finance, LayerZero, and Immunefi, discussing the importance of security and what steps Spool takes to keep funds safe.

Security: The Foundation of Trust in DeFi

Depositing funds into a protocol lacking robust security practices is closer to gambling than a financial investment strategy. DeFi is immutable, meaning once a transaction is processed, it can’t be easily reversed, if at all. Mistakes are all too common with new technology like blockchain. Whether arising from human error, smart contract bugs, or external libraries, these potential errors can spell disaster for users and builders alike.

With this context, it becomes clear that security is the bedrock of any successful protocol, Dapp, and community.

In traditional finance (TradFi), capital follows trust, and trust is built on security. However, TradFi is far from perfect. While DeFi is normally lauded as more risky, TradFi’s scale and scope make it subject to significantly greater levels of fraud and failures. The goal is to make both segments of the global financial industry as transparent and safe as possible.

On the recent X spaces, Konstantin discussed how security starts at the beginning of a project’s lifecycle, from the initial protocol or product concept through architectural discussions, and long before any code is written. Put simply, security should be a core ingredient in organizational culture.

Spool’s culture is fundamentally based on security. Its proprietary risk score system ensures investors enjoy access to only the safest and highest-fidelity yield opportunities across the DeFi landscape. This feature is particularly in high demand from B2B organizations, emphasizing that organizations seeking long-term success prioritize security over all other features. The investors with the most capital to support protocols share the view and act accordingly.

No Security, No Whales

Our user research reveals that large asset holders, or ‘whales,’ prioritize audits and smart contract code analysis over flashy features and high APYs. After all, what good are significant returns if all the accrued value disappears overnight, along with your principal investment?

Konstantin references the countless conversations in which whales have shared that even a single security uncertainty regarding the ironclad integrity of the product can cause these influential investors to avoid a platform entirely. One inconsistency or exploitable piece of code and a protocol’s total potential value locked plummets as whales simply choose not to interact with it. This reality underscores the importance of maintaining an impeccable security record and procedures.

Making Security Integral To Your DeFi Platform

Spool meticulously integrates new strategies for Vaults. In the context of Spool, a strategy is a yield-generating approach that combines a smart contract with an underlying yield-generating protocol, such as Gearbox, Lido, Morpho, and Curve. Strategies securely and automatically manage deposits, withdrawals, and the compounding of earned interest while the yield generator’s smart contract powers the actual yield generation.

We start by researching APYs and identifying new trends, then narrow our list to five potential strategies for integration. From there, we conduct a deep dive into each protocol’s documentation, understanding the money flow, yield generation, and reward structure.

The latter steps are crucial. If a segment of the audited code appears unreliable for any reason, the integration is denied, and alternative candidates are considered.

Community sentiment is also an input factor in the selection process. We scour multiple Discord channels, TG and tech forums, and audit reports, assessing factors such as bug bounty sizes, time on the market, and total value locked (TVL). In addition, only protocols with instant withdrawal capabilities and substantial liquidity in their token pools make the final cut.

Once a strategy is selected, our team develops the strategy logic, creates unit tests, and prepares deployment scripts. The code undergoes several rounds of review and testing on a staging environment before being sent for auditing. Only after a successful audit do we deploy the strategy to production, where it is thoroughly tested with real, internally provided capital to ensure its integrity, allowing us to literally ‘put our money where our mouth is.’

Finally, to complete our strategy integration approach, we exercise extreme caution when it comes to external libraries and ensure our security audit partner Hexens audits new strategies. Our team carefully reviews the code to understand its functionality and only uses external libraries when absolutely necessary, prioritizing security over minor optimizations.

While any platform could be more efficient in theory, Spool will never jeopardize its users’ security to achieve this. When striking a balance between speed and security, Spool will prioritize security over everything else. It’s the bedrock of our culture.

Keeping Constant Vigilance

Spool’s security measures extend beyond the integration phase. We maintain constant vigilance through smart contract monitoring, alerting systems, and incident logging. Our team closely monitors the underlying strategy protocols and is on call to spring into action at the slightest hint of a potential issue.

By practicing an “always on” approach, Spool ensures a rapid yet proportional response to any potential incident. From automatic alerts from the code to manual monitoring of Discord and Telegram for user-reported incidents, our framework lets us spring into action at a moment’s notice.

This approach empowers investors with peace of mind. Any detected incidents are quickly addressed while also informing our community about their potential impact and severity. Transparency and open communication with investors and the community keep everyone informed about the realities of identified incidents every step of the way.

Spool’s culture of security is as transparent as the blockchains we use to form world-class yield-generation strategies.

Conclusion

Spool empowers investors with yield-generating strategies across multiple protocols, all from a single interface. The platform is designed with security at its core, incorporating a range of protective aspects and features, including smart contract audits, a comprehensive risk assessment framework, and continuous monitoring for potential vulnerabilities. Spool even offers a $1.5 million bounty to anyone who can successfully identify a critical vulnerability in its smart contracts.

Our rigorous processes, combined with our team’s expertise and dedication to transparency, set Spool apart as a leader in DeFi security. As the industry continues to evolve, we remain committed to upholding the highest standards of security because, when it comes to DeFi, security may be boring — until it’s the only thing that matters.