Core Protocol: Refund Process

3 min readMar 24, 2022

In a series of 4 articles, we explain to you step by step how significant parts of Core Protocol work. These 4 articles are about:

A quick reminder of how Core Protocol essentially works:

The objective of the Lossless Core Protocol is to provide an extra security layer in order to prevent fraudulent token movement and recover fraudulently taken tokens. This functionality is available to all the tokens that follow the LERC20 standard. Core Protocol exists alongside the Vault and Treasury Protection Protocol.

To achieve this goal, four types of actors work together in order to detect, report, and recover funds from fraudulent transactions. These are:

Finders
Stakers
LERC20 Token Owners
Decision Making Body

Each part has an essential role to play within the Lossless Core Protocol. There are three main tasks that are activated in it and one extra task that while it’s not essential, it serves as a booster to provide more visibility and urgency to a certain report.

The three principal tasks can be broken down into:

Report Generation
Report Investigation and Solving
Stolen funds refunding and Reward distribution

The extra step available to the community, while extremely useful, is not necessary for a report to be processed:

Report Staking

Refunding Process and Reward Distribution

When the report gets solved there are two things that can happen:

Report is solved negatively
Report is solved positively

Report being solved negatively

This means the report wasn’t legitimate. When this situation happens, the staked tokens both from the Finders and Stakers get taken.

The reported address will be removed from the blacklist. Also, previously blacklisted addresses will be eligible to claim compensation.

Report being solved positively

This allows a few processes to take place in order to get the funds back to the rightful owner and for each party (Finders, Stakers, Decision-Making Body) to claim their rewards.

Refund process

In order to get the stolen funds back to the owners, a refund wallet must be proposed by the LERC20 Token Owner or the Lossless Team. This wallet will endure a certain period where any of the parties of the Decision-Making Body can reject it.

After the period is over and no disputes are raised, the address will be entitled to claim the retrieved funds which will encompass the stolen funds minus the rewards percentages.

If the proposed refund wallet gets rejected by the majority of the Decision-Making Body, then another refund wallet can be proposed and the mentioned process will take place again. This can be done indefinitely until a consensus has been reached.

About Lossless

Lossless is the world’s first DeFi hack mitigation tool for token creators. Apart from Lossless’ known cyber security solutions and renowned professionals, the community also plays a role. With a tangible reward system, community members are also encouraged to explore new ways to detect hacks and fraudulent transactions.

Lossless protocol halts counterfeit transactions through various methods of fraud identification and automatically reverses any stolen tokens back to the original owner. Its solutions to the impending problems of cyber theft within the blockchain space are thorough and applicable within many protocols.