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What Is Firelight Coverage on the Protected Strategies USDC Vault?

Last updated: 15 October 2026

Sentora, the independent third-party curator of the Protected Strategies USDC vault, has enrolled the vault in an onchain coverage program provided by Firelight, a third party not affiliated with Kraken. This was Sentora’s decision, not Kraken’s. If Firelight determines, under its own terms, that a covered event has caused a loss in the vault, depositors may be eligible for a payout in USDC, up to a cap.

Important: Coverage is provided by Firelight and arranged by Sentora, not by Kraken. Kraken does not provide, arrange, recommend or guarantee the coverage, and does not decide what is covered. Coverage is not insurance and does not guarantee your deposit or your rewards.

Sentora has enrolled the vault itself in Firelight. You don’t need to opt in, apply, or take any additional action. Deposits in the Protected Strategies USDC vault may be eligible while they remain in the vault, subject to Firelight’s terms.

Firelight is an onchain, collateral-backed coverage protocol. The capital that backs coverage is supplied by independent third-party participants and held in a pool that is fully separate from vault assets and from depositor funds. Your deposit is never part of that pool. Firelight is not affiliated with Kraken. Firelight was incubated by Sentora, the vault’s curator.

Because the pool is onchain, anyone can verify how much coverage capital is available at any time.

According to Firelight’s coverage terms, eligible events are defined technical and economic failures, including:

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    Smart contract exploits

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    Oracle failures

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    Governance exploits

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    Defined economic failures, such as bad debt, stablecoin depegs, and redemption failures

According to Firelight’s coverage terms, coverage does not apply to, among other things:

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    Market risk, including changes in asset prices or in the vault’s APY

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    User error, such as sending funds to the wrong address or losing your exported private key

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    Insider theft

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    Regulatory action

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    Other exclusions set out in Firelight’s coverage terms

Under Firelight’s terms, coverage is capped at $100,000 per depositor address per coverage period. If your balance in the Protected Strategies USDC vault is above that amount, the portion above the cap is not covered. Total payouts are also limited by the vault’s aggregate coverage limit and the coverage capital available, so any payout may be lower than your loss.

There is no separate charge and no additional fee at deposit or withdrawal. The cost of coverage is paid to Firelight out of the vault’s yield, so the APY you see for Protected Strategies USDC is already net of it. Kraken receives no part of this cost. The cost is set by Firelight and Sentora and can change from month to month depending on the vault’s strategies.

You do not need to file a claim. Under Firelight’s terms, the process works as follows:

  1. 1

    Detection: Firelight’s independent monitoring partners detect a potential incident.

  2. 2

    Assessment: Firelight’s independent Risk Consortium reviews the event against Firelight’s coverage terms and votes on whether it qualifies.

  3. 3

    Funding: If the Risk Consortium determines that the event qualifies, Firelight’s coverage capital is used to fund a payout in USDC.

  4. 4

    Payout: Any payout is distributed onchain by Sentora to eligible depositor wallet addresses.

Kraken does not decide whether an event is covered, does not fund, calculate or distribute any payout, and does not guarantee that any payout will be made. Those decisions are made by Firelight and its independent assessors under Firelight’s terms, and payouts are handled by Sentora.

The Firelight coverage pool is visible onchain. The pool is operated by Firelight; Kraken does not monitor or verify it. You can view the pool, and the coverage capital backing it, at any time here: https://flare-explorer.flare.network/token/0x4C18Ff3C89632c3Dd62E796c0aFA5c07c4c1B2b3.

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    Coverage is provided by Firelight which is a third party. Kraken does not provide, arrange, recommend or guarantee it.

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    Firelight coverage is not insurance. It is not a government, bank or deposit protection scheme.

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    Coverage does not guarantee your deposit or your rewards, and you can still lose money in a covered vault.

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    Coverage terms, the covered event list, and the per-depositor cap are set by Firelight and may change. Coverage runs in monthly periods and may be changed, suspended or ended by Firelight or Sentora.

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    Read Firelight’s coverage terms in full before depositing.

Next Steps

See What is DeFi Earn on Kraken? for how vaults work, or the DeFi Earn FAQ for common questions.

Firelight coverage is provided by a third party, is subject to its terms, conditions and exclusions, and is not insurance or a guarantee against loss. DeFi strategies involve risk, including loss of principal. Rewards are variable and not guaranteed. Availability depends on jurisdiction.

Rewards are variable and not guaranteed; you can lose some or all of your assets. Interacting with on-chain smart contracts involves risks which are further detailed in the terms of service, including technological risk (bugs, exploits, and oracle/MEV/bridge failures), market risk (price volatility, de-pegs, and liquidation where relevant), and operational risk (irreversible transactions, gas fees, network congestion). Kraken does not control third-party protocols. Offered by Payward Wallet, LLC. Fees apply. Availability varies by jurisdiction.