The Sherlock core team is excited to announce that the last piece of the Sherlock claims process is now live on mainnet!
The Sherlock team has been working closely with UMA to answer one big question: How can you make a decentralized claims process as fair as possible?
The Sherlock team quickly realized that any claims process that relies on parties associated with Sherlock includes the possibility of bias. A decision made by the Sherlock core team could be biased. A council of security experts chosen by Sherlock could be biased. A vote amongst Sherlock tokenholders could be biased. Anything involving a party associated with Sherlock could be biased. This includes stakers, Watsons and protocols. This meant Sherlock needed to look outside its own ecosystem for a better claims process. Enter UMA.
Escalation via the UMA Data Verification Mechanism
UMA’s Optimistic Oracle system has been live since May of this year. The final escalation of UMA’s Optimistic Oracle is the UMA DVM (Data Verification Mechanism). If a Sherlock coverage holder believes that an initial claims decision is incorrect, they can escalate the decision to the UMA DVM. The DVM mechanism boils down to a game-theoretic decision process amongst UMA token holders. As long as the value being decided on is less than 51% of UMA’s market cap, UMA token holders should be incentivized to resolve requests correctly.
UMA’s Optimistic Oracle suits Sherlock’s need to have an unbiased, decentralized arbiter. Coverage holders at Sherlock now have access to the on-chain equivalent of the Sixth Amendment of the US Constitution: the right to a speedy and public trial by an impartial jury.
Of course, with a process like this, human judgment still plays a large role. The Sherlock and UMA teams have worked hard to make sure UMA token holders will have access to clear documentation as well as multiple trustworthy analyses of a smart contract exploit in question, especially by individuals not tied to Sherlock. This will give UMA token holders the best tools to make an informed decision. At the end of the day, the decision will still be made by humans and even well-informed human judgment can be subjective by nature. However, the value created by the removal of bias cannot be understated. If you were buying avocados at the grocery store, this would be the difference between a small, bidirectional margin of error in the scale vs. an employee putting their thumb on the scale with your avocados. Which experience would you prefer?
An exciting partnership furthering on-chain smart contract coverage
This partnership improves the trustworthiness of on-chain smart contract coverage and Sherlock is excited to be pioneering this approach with UMA.
We will release a follow-up article that explains the full claims process in more detail. For now, the Sherlock docs contain more information about the process.
As of today, the UMA claims process at Sherlock is live! We think this partnership makes DeFi more accountable and self-reliant, and we see this as a huge step towards accomplishing Sherlock’s mission of making DeFi safe for the masses.