The Cover protocol is a point-to-point insurance market protocol. Use predictive markets to provide peer-to-peer insurance of homogeneous tokens to insulate DeFi users from smart contract risk, allowing the market to set prices.

Non-homogeneous insurance tokens are created and maintained in a 1:1 ratio to their collateral. Each Cover contract specifies the agreement to insure (Curve, for example), the preferred collateral (DAI, for example), the amount deposited, and the expiry date of the insurance.

For each DAI stored, the user will receive two tokens: A CLAIM token and a NOCLAIM token. A NOCLAIM token represents the right to secure collateral deposited if a claim is not paid within the specified period of coverage. A CLAIM token represents the right to deposit collateral (or part of it) in the event that the CLAIM management process grants a CLAIM payment.

1 CLAIM token + 1 NOCLAIM token = 1 collateral (e.g. DAI)

1 CLAIM token = 1 collateral (e.g. DAI), 1 NOCLAIM token = 0

1 CLAIM token =0, 1 NOCLAIM token = 1 collateral (e.g. DAI), once claims and NOCLAIM tokens have been minted, they can be put into the Balancer pool, sold on a rally, or even used as collateral for various lending platforms (risky but technically feasible!). . To facilitate the growth of these markets, whenever a new Cover mints tokens for the first time using Cover Protocol, Cover Protocol creates a Balancer pool of 80% CLAIM tokens and 20% DAI, And another pool containing 98% noclaims and 2% DAI. In addition, the COVER UI will provide a convenient interface for locating all the relevant Balancer pools for each COVER. If required, the same process can be replicated in Uniswap, Sushi, etc.

There are three types of participants in the insurance protocol market: Market makers (MM), insurance providers and insurance seekers.

market maker

Market makers hold both CLAIM and NOCLAIM tokens, And provide liquidity for both alternative tokens. To become a market maker, users will: A) deposit collateral b) Receipt of claims and NOCLAIM tokens c) Provision of liquidity for claims and NOCLAIM tokens Market makers earn liquidity provider fees by providing liquidity for claims and NOCLAIM tokens, In addition to participating in COVER token mining by mortgaging LP tokens. They can also sell any generation at will and use both tokens to redeem the collateral at any time (e.g., 1 DAI).

insurance provider

The insurance provider only holds NOCLAIM tokens and provides liquidity for them. To become an insurance provider, the user will: A) deposit collateral b) receiving both CLAIM and NOCLAIM tokens c) selling CLAIM tokens at a premium and providing liquidity only for NOCLAIM tokens (since the insurance provider expects the CLAIM token to mature at $0, And NOCLAIM tokens have a maturity price of $1.) Like market makers, insurance providers earn liquidity provider fees by providing liquidity for NOCLAIM tokens and also participate in COVER token mining by mortgaging LP tokens.

Insurance seekers hold and only hold CLAIM tokens. The objective is to cover exposure to protected products. To become an insurance seeker, the user will: A) purchase and hold CLAIM tokens directly from the pool or a) deposit collateral and receive both CLAIM and NOCLAIM tokens b) sell NOCLAIM tokens and provide liquidity only for CLAIM tokens in addition to participating in COVER token mining by mortgaging LP tokens, The second path can also earn liquidity provider fees by providing liquidity for the CLAIM token.

COVER Token holders play a vital role in the claims management process by validating/invalidating claims. The process follows these steps:

Make a claim: If the claim is accepted, the fee will be refunded to the author. Anyone can claim a protected product by paying a claim documentation fee. The application fee for each agreement increases by a multiple each time a claim is filed to protect against spam attacks. Anyone can file a compulsory claim against the project by paying a fee for compulsory claim documentation. If the claim is submitted by FORCE, skip step 2.

Decide claims by vote: Once a claim is made, a snapshot voting page is created for the claim. COVER token holders can vote on both valid and invalid claims. If the vote rejects the statement, the statement is determined and rejected (if a person disagrees with the result of the community vote, they may choose to file a FORCED declaration). If the vote accepts the claim, the claim is passed on to the auditor in the next step.

The Claims Validity Committee will review the submitted claims and determine whether the claim meets the requirements to be accepted and what percentage should be paid. Five or more auditors will be assigned to each claim. To determine a claim, if the claim is accepted, more than 50% of the auditors must agree on the validity of the claim and the percentage paid (up to 100%). Claims accepted by the auditor will be refunded to the applicant. All other claims for the same agreement will be rejected and the fee will be sent to the Treasury.

Once the claim is accepted in the above steps, CLAIM token holders will be able to start redeemingtheir outgoings after the deferral period.