When you deposit into a Squirrel.Finance insured farm you are depositing into an insured (“wrapped”) version of an existing bsc farm.
Each insured farm is covered by NUTS collateral which pays out automatically to users if the underlying farm has any withdrawal issues (such as “rugs” etc.)
User deposits 10 CAKE into Cake Farm, they then unstake a day later & receive their 10 CAKE back. In this case no NUTS compensation is needed.
User deposits 10 CAKE into Cake Farm, but when they come to unstake PancakeSwap’s farm has lost their CAKE (e.g. rug or unintentional math issue). In this case the user is automatically compensated NUTS to make up for the CAKE loss. The amount the user receives is upto 100% of their CAKE value (each Insured Farm has a NUTS allocation which would be split between depositors). As our project grows TVL the amount of coverage on our farms will increase.
Hope this guide has helped answer any questions you may have. The risk of covered BSC projects to “rug” or have unforeseen withdrawal issues is of course low, but Squirrel.Finance is providing the protection for those who value the extra safety 🚀