The Insurance Fund
Current Balance: Zero
The Insurance Fund at 0xE8799FCf327C6d2F78103a3C9308c93592a30403 currently holds nothing. No USDC, no WETH, no ETH. The hourly signed attestation at kerne.fi/api/por/signed publishes this as insurance_fund_usd, and the balance is a direct on chain read that needs no cooperation from Kerne.
Everything below this section describes a designed mechanism, not capital that exists today. An unfunded reserve protects nobody, and no reader should price Kerne as though this one does. Until it is funded, the backing that actually stands behind kUSD is the USDC held in the PSM, published hourly as psm_solvency_ratio and recomputable from public on chain reads. Where a loss would land in the meantime is set out under Loss Allocation in Risk Disclosures.
The fund is also not being filled automatically at present. Protocol revenue to date is the 0.03 USDC of swap fees accrued inside the live mint PSM, that revenue has never been skimmed to the treasury, and the PSM's fee destination is the treasury rather than this fund. A funding route from revenue to the Insurance Fund is design intent and is not wired today.
When the Insurance Fund Deploys
The Insurance Fund can be deployed in two scenarios:
- Collateral shortfall: If an exchange failure, oracle error, or extreme market event reduces collateral backing below 100%, the Insurance Fund is the first capital source drawn to restore full backing before any user experiences a loss. Individual claims are capped at 50% of the total fund balance per event to prevent full depletion.
- Peg defense: If kUSD trades below $0.99 on secondary markets and the Peg Stability Module capacity is exhausted, the Insurance Fund can be deployed to buy kUSD in the open market, defending the peg.
Governance and Access
Insurance Fund deployment is governed by a multi signature wallet requiring multiple approvals. No single individual can access these funds unilaterally, though there is no timelock, so an approved deployment executes immediately. The deployment criteria are defined in advance and enforced by smart contract logic.
Important Limitations
A funded Insurance Fund would provide material protection without guaranteeing full coverage in all scenarios. This one holds nothing, so today it provides none. The mechanism described above is what it is designed to do once capital is in it, and the intent is that it grows with protocol revenue, which requires a fee route that is not wired yet. Users should not treat the Insurance Fund as equivalent to FDIC insurance or any government backed guarantee, and at a zero balance should not count it in an assessment of Kerne at all.
The Peg Stability Module
In addition to the Insurance Fund, the protocol includes a Peg Stability Module (PSM) that allows direct 1:1 conversions between kUSD and USDC at a minimal conversion spread. This creates a structural arbitrage floor: if kUSD trades below $1.00 on a DEX, traders can buy kUSD and use the PSM to convert it to USDC at $1.00, capturing the difference. This arbitrage pressure continuously supports the peg from below.
The PSM has a capacity cap to prevent it from being used as a zero slippage swap at scale, which would drain protocol reserves. The cap is set by governance and scales with protocol maturity.