Shared Security Model

CAP leveraged shared security to shield stablecoin holders from the risks related to agent activity.

CAP will function based on a system of rewards and penalties, allowing for provisioning and offboarding of contributors as incentives change. There’s no reliance on a founding team or individual dev. Crucially, there is no unilateral control over the system or funds. Every aspect of these protocols will function on a decentralized marketplace of predefined incentives.

Shared security

A shared security network / AVS will regulate a permissionless collective of operators with specialized skills in value capture. They will have separate and conditional access to deposits from users, such as ETH, ETH derivatives, various forms of BTC, and dollar stablecoins. Their role will be to execute yield-generating activity, which may include MEV, arbitrage trades, and regular DeFi farming. The proceeds will then be shared among system participants. Malicious activity, CEX defaults, exploits, and other force majeure events will be covered by slashing parameters.

Operators as agents

Operators are incentivized to generate a minimum amount of yield using cost-free capital from collateral baskets. Excess yield generated is kept by operators as a reward for participating in the system. Each operator acts independently and is responsible for sourcing restaker buy-in via strategy creation and due diligence. Given the highly profitable structure for operators, talent can be sourced to extract yield from hard-to-reach venues like MEV, arbitrage, and complex farming.

Covered agents

All operators in the system need to possess enough security delegations to cover losses of any kind: malicious activity, loss from strategy implementation, force majeure events like CEX failures, and other unforeseen events. Through this delegation process, LRT protocols, risk managers, and the operators themselves will need to carefully examine strategies and assess risks. Such a process will completely outdo any current safety procedures in DeFi and create a significantly safer method to generate yield.

Below is a high level graphic of CAP. Agents and restakers below are listed as examples.