Security Module Rewards
The Security Module is designed to secure Lyra's traders and liquidity providers in the event that the protocol becomes insolvent and cannot fulfill its obligations. This will become especially important in V2 when positions are not fully collateralized.

Entry/Exit Mechanics

Unlike the core Lyra protocol itself (which lives on Optimism), the SM is located on Layer 1 Ethereum. This is to ensure that the SM is secure in the event of an issue with Optimism itself. Users can stake USDC or LYRA at any time and start to earn rewards immediately.
To withdraw from the SM, users can signal a withdrawal in the Lyra dApp which will begin a 10 day cooldown. The 10 day cooldown period is to ensure that enough time is available to conduct an emergency governance procedure in the event of a shortfall. Liquidity will continue to earn rewards during the cooldown period.
At the end of this countdown, users can withdraw their liquidity during the unstake window which lasts for 2 days (from the 10th-12th day after you have signalled withdrawal). If users do not withdraw during the unstake period, they will have to re-signal their exit from the SM, and wait another 10 days.


  • Staked LYRA and USDC may be slashed as a result of a shortfall event. Slashing occurs at the discretion of a Lyra Council vote, requiring a vote to be enacted. Slashed funds will be used to reimburse Lyra LPs and/or traders via the DAO.
  • Shortfall events include:
    • Exchange solvency (v1 is fully collateralized, v2 will most likely not be)
    • Smart contract attacks
    • Other events that Lyra governance deems to have resulted in a shortfall


Security module rewards will continuously accrue on a per block basis, with LYRA to be distributed to stakers on a liquidity pro-rata basis.