Introduction:
Insurance companies play a prominent role in risk management solutions. The services provided by the Insurance companies support the Insurers to sustain their lives and recover their assets from the crisis. We cannot afford the risk supposed by the failure of such a life-supporting system. To eliminate such risk, Tech nerds computed a solution through a decentralized medium.
Blockchain technology, which introduces a wide range of DeFi services for financial stability and security now offers its consequential services in the DeFi Insurance platform development to provide financial freedom among the crypto society.
Cover protocol, a blockchain nerd takes charge to offer a complete cover to the financial securities in a decentralized medium with an innovative Defi Insurance platform. Let’s dig deeper to know what the cover protocol covers and offers for financial security and why we need one similar to a Cover protocol.
What is Cover Protocol?
Cover Protocol is a blockchain-based peer-to-peer coverage market for decentralized finance. As investors started to invest in digital assets, the liquidity flow in the cryptocurrency market fluctuates drastically. Investors’ concentration towards the yield farming concept which has exponential growth, results in coverage of smart contracts.
Cover Protocol offers peer to peer coverage with fungible tokens which allows the market to set coverage prices. Our DeFi Insurance Platform guards our digital assets against the hackers penetrating into our digital assets by governing the credentials and undergoes complete background checks to determine the user’s risk of bridging the gap between traditional centralized financial services and DeFi Financial services.
How does the “Cover protocol” replace traditional financial services?
Market Makers(MMs) begin the process by depositing collateral to cover a product. Two types of Fungible tokens will be offered to the Market makers in exchange for their deposit. The tokens allow permissionless and non-KYC coverage which is an effective feature of this system. The protocol allows users to stake collateral to mint CLAIM tokens(redeemable if an exploit occurs) and NO CLAIM tokens(redeemable if no exploit occurs).
The cover protocol performs as a predictions market which depends on the market determining coverage premiums. CLAIM tokens are available for the users who want to hedge against the risk and the NO CLAIM tokens are for the users who trust the security of the protocol. The cover protocol allows the users to bet under the safety and security of the protocol. The system provides stability for DeFi users in the turbulence of the market that offers confidence over smart contracts risks.
Significance of tokens in the protocol:
Each Fungible token is minted when the user approves a smart contract. The cover determines the protocols to be covered, type of collateral needed, amount of collateral, and insurance length.
Two types of Fungible tokens can be minted from the system that are CLAIM and NO CLAIM tokens. One DAI equals one CLAIM + one NO CLAIM token. If a claim is approved, the CLAIM value goes to 1 and NO CLAIM to 0. Holders can deposit the two token types on the Balancer pools.
Cover Protocol creates two Balancer pools; one with 80% CLAIM coins and 20% collateral token (DAI) and the second with 98% NO CLAIM and 2% DAI. In this way, IL (Impermanent Loss) is minimized. The pools are created by the launch of a new cover to the protocol.
Cover token and Governance:
$cover is denoted as the native currency of the cover protocol which can be used as a governance token that provides access to the Balancer pools. Cover token facilitates the liquidity generation on SushiSwap by interacting with ETH cover liquidity pool. Returns can be generated from the cover tokens by depositing the cover in the pool and by staking the LP’s in the cover protocol.
Steps followed by the protocols to handle claims:
The painstaking process of claiming an Insurance cover is simplified in a decentralized medium under four levels.
Level 1: Initially, the protocol offers a time period of 72 hours after an incident to request a claim. The case will be brought against an Insured product after the payment of the claim file fee. The cost of new allegations against an Insured product is increased in order to resist malicious attacks.
Level 2: The second step is consolidated under the process of voting. If the $cover holders vote for the claims positively without any opposition, the protocol carries out the process to the third level. The case has the possibilities of rejection if any opposition in voting occurs in the community voting phase. Such cases can be re-filed as a Forced Claim at expensive charges.
Level 3: The claim will be validated to meet the requirements by the Claims Validity Committee (CVC) that supports the Auditors to decide the percentage of your payout.
Level 4: The final step is carried out by the $cover holders by qualifying the accepted allegation.
Participants in the cover system:
Market Makers:
Market makers provide liquidity by holding both types of minted tokens. The returns from fees charged in liquidity pools range between 2-3%.
Coverage providers:
Coverage providers receive both token types by depositing collateral in the system. They hold NO CLAIM coins alone by selling CLAIM tokens for a premium and retaining NO CLAIM coins. Fees charged on the NO CLAIM pool act as their incentives. Cover encourages the teams to seek insurance for their platform. In the event of a claim payout, they would lose all their funds that make the collected NO CLAIM tokens useless.
Insurance seekers:
Insurance seekers obtain rewards for providing liquidity in the CLAIM pool by holding CLAIM COINS and insuring their deposited funds.
Unique features of cover protocol:
- Market Efficient: COVER protocol initiates market makers to fill the need of the demand.
- Scalable: Offers Independent coverage
- Fungible coverage: Enables to trade your coverage on Balancer and Uniswap at any time.
- Decentralized: Deployed on the Ethereum blockchain that makes coverage entirely censorship-resistant and open.
- Limitless coverage: The Protocol will allow you to buy cover on anything beyond smart contracts and crypto.
- No KYC required: No identity is required to buy coverage.
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