Rewards & Risks

Staking in the Insurance Pool offers Warrant rewards, but comes with real risks. Here's a clear breakdown.

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What You Earn

Warrant NFTs — Your rewards are paid in Warrants, not cash or tokens.

Factor	Impact on Rewards
Amount staked	More USDT = more Warrants
Lock duration	Longer lock = higher multiplier (up to 2.0x)
Time staked	Rewards accumulate weekly

Your Warrants are yours to keep, exercise, or sell — regardless of what happens to your staked USDT.

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What You Risk

Your USDT may be used to cover shortfalls.

When a USD bond series matures and series proceeds can't fully repay Note holders, the Insurance Pool fills the gap.

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Shortfall Scenario: Step by Step

USD Bond Series X matures
        │
        ▼
Series proceeds = $8M USDT
Principal owed = $10M USDT
Shortfall = $2M USDT
        │
        ▼
Insurance Pool provides $2M USDT
        │
        ▼
Stakers compensated with pre-minted $MSTR
(valued at 24-hour TWAP)
        │
        ▼
┌─────────────────────────────────────┐
│  $MSTR covers the $2M?              │
└─────────────────────────────────────┘
        │                    │
       YES                   NO
        │                    │
        ▼                    ▼
  Stakers made          Pool takes
  whole ✓               a loss

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Example: Staker Gets Compensated

The pool covers a $2M shortfall.

Pre-minted $MSTR for the series: 200,000 $MSTR

$MSTR 24-hour TWAP: $12

$MSTR needed to compensate: $2M ÷ $12 = 166,666 $MSTR

Result:

• Stakers receive 166,666 $MSTR (worth $2M at TWAP)

• Remaining 33,334 $MSTR is burnt

• Stakers are made whole

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Example: Pool Takes a Loss

The pool covers a $5M shortfall.

Pre-minted $MSTR for the series: 200,000 $MSTR

$MSTR 24-hour TWAP: $12

$MSTR value available: 200,000 × $12 = $2.4M

Result:

• Stakers receive all 200,000 $MSTR ($2.4M value)

• Uncompensated loss: $5M - $2.4M = $2.6M

• Pool absorbs the $2.6M loss (stakers lose proportionally)

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Risk/Reward Summary

	Short Lock (3 months)	Long Lock (24 months)
Reward multiplier	1.0x	2.0x
Warrant earnings	Lower	Higher
Time exposed to risk	3 months	24 months
Potential shortfall exposure	Lower	Higher

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Key Questions to Ask Yourself

Before staking, consider:

• ✓ Am I comfortable with my USDT being locked for this period?

• ✓ Do I understand that my USDT could be used for shortfalls?

• ✓ Am I okay receiving $MSTR as compensation (not USDT)?

• ✓ Do I believe the Warrant rewards are worth the risk?