Sherlock is excited to announce its latest audit of Hook Protocol, and will support their launch on mainnet by providing Hook users with up to $10M of smart contract coverage.

This coverage will provide recourse for Hook Protocol users who write covered calls on their NFTs.

Sherlock is a risk management platform built to help protect crypto end-users by uniquely aligning incentives with protocol teams by auditing their smart contracts and providing recourse through smart contract and bug bounty coverage in the event of an exploit.

Hook is an oracle-free, on-chain option protocol for non-fungible tokens (NFTs). Unlike many popular approaches to NFT DeFi, Hook does not sacrifice the non-fungible nature of NFTs by requiring that they are converted into fungible tokens.

Sherlock x Hook Security Partnership

The Hook team has worked closely with Sherlock ahead of their launch on all aspects of security, to bring the strongest peace of mind to all participants in their ecosystem. Sherlock completed a full audit and fix review of Hook’s contracts, enabling them to go live with $10M of smart contract coverage and a $1M bug bounty hosted through Immunifi, which is fully paid for by Sherlock.

Sherlock’s coverage-backed audit approach aligns incentives by matching Sherlock’s exposure to exploit risks faced by Hook’s users. Sherlock’s close partnership with Hook’s development allows the team to benefit from a more continuous audit cycle as future upgrades & updates arise. This type of partnership allows Hook to continue in their development, without being bottlenecked by auditor availability. 

The steps taken to secure Hook’s launch include:

• Audits from Sherlock + fix reviews to ensure proper implementation of updates
• $1M Immunefi bug bounty provided by Sherlock
• $10M in smart contract coverage at launch
• Continued collaboration with Sherlock during the development cycle to review updates and maintain coverage
• Development best practices in test coverage, peer reviews, and code complexity

Hook Protocol’s Innovative Approach to NFT Options

Hook at a Glance

Hook is an oracle-free, Ethereum-based option protocol for non-fungible tokens (NFTs), built with EVM compatibility in mind. Unlike many popular approaches to NFT DeFi, Hook does not sacrifice the non-fungible nature of NFTs by requiring that they are converted into fungible tokens.

The Core of How Hook Works:

First, any NFT holder (the writer) can transfer their NFT into Hook, while specifying a specific strike price and maturity. Hook will hold the original NFT and mint a new option NFT representing the option as a bearer token, which allows the holder of the option NFT to be the owner of the option until expiration.

The writer can then earn a premium by selling the option NFT. The sale can occur on any marketplace which supports the sale of ERC-721, including the marketplace hosted by Hook. 

At this point, anyone can purchase the option NFT from the writer, providing them with upside exposure to the underlying original NFT.

Before the option expires, Hook automatically starts a settlement auction for the original NFT.

If the highest bid in this auction is less than or equal to the strike price, then the writer retains ownership of the original NFT and keeps the option premium.

If the highest bid is above the strike price (e.g., the original NFT appreciated during the option period to above the strike), the writer earns the strike price and option premium. The original NFT is concurrently sold to the highest bidder, and the option buyer earns the price spread (difference between the highest bid and the strike price).

Hook’s NFT Marketplace

In order to create a consistent venue for trades and liquidity, Hook plans on hosting an order book where people can place orders for specific option NFTs or option NFTs with certain characteristics. These orders will be fulfilled by the excellent suite of exchange smart contracts hosted by 0x, available on several popular chains.

Keep up with Hook Protocol:

Follow along on Twitter, Discord, and their Blog

Read more about Hook’s NFT option protocol

Keep up with Sherlock:

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