Rethinking from the Cover of the Insurance Agreement: What exactly does the DeFi world need today?

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Since June of this year, we have witnessed a DeFi-led cryptocurrency bull market, and we have seen more and more projects emerge. Token prices fluctuate and are sometimes manipulated by some dealers. Some made money, some suffered losses and pain. We get tired of research projects because there is no way to make money purely on fundamentals. I personally would like to remind that the project can be forked or copied, but its core essence cannot.articleLet's get straight to the point.

A recent article by Multicoin Capital

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Introduced the current situation of the DeFi field. Reading this article is very convenient for newcomers to have a comprehensive understanding of the DeFi market. On the basis of this article, I will generally divide DeFi projects into two categories: "old" and "new".

“Old” DeFi projects are mostly first movers that appeared in 2019 or earlier, when DeFi was still in its infancy, and they grabbed the largest market share. The "new" DeFi projects (though not chronologically) are the more aggressive and innovative ones in this year's fierce competition.

1. The table below briefly summarizes my thoughts.

2. Compound’s liquidity mining is the fuse that ignited DeFi’s bull market this year, but Uniswap and

3. These two winners got me thinking, what do we need in today's DeFi market? I think I can sum it up in three words.

limitless: the imagination of the protocol

Lightweight (light): Effectiveness of the design

Liquidity: willingness to participate

I will use Cover Protocol as an example to show my point.

Cover Protocol, formerly known as yinsure.finance. Under the halo funded by Andre Cronje, Yinsure was a popular project for liquidity mining when it was born. Some time after going live, the high APY of liquidity mining did not last long due to disputes between the two core members of the project. (More details can be Googled). All in all, after the turmoil, the young founder of the Cover protocol chose to take a break from university and become a full-time contributor to his project. In September of this year, Yinsure rebranded as Cover Protocol.

Infinity: the imagination of the protocol

When we build a new product, we need to have a clear idea of ​​what it should do, but there should be no constraints on what it will become in the future. That's limitless — allowing customers to unleash their imaginations when using a product.

The Cover protocol actually does just that. On many people's minds, insurance remains a very serious business because of its need to protect people from accidental injuries by accurately calculating claims and avoiding insurance fraud. Nexus Mutual is the pioneer of DeFi insurance. The project achieves this goal by hiring professional actuaries, while Cover Protocol takes another path.

1. In September, Yinsure (Cover’s name at the time) launched a new experiment — using NFTs to tokenize insurance policies so they can be freely traded and circulated. The market was very excited about the move, and Nexus Mutual policy sales were booming - Yinsure nearly drained the entire Nexus Mutual pool of funds.

2. Yinsure named it "Insurance Mining", and it evolved into "Shield Mining/Farming" in the Cover protocol. I believe that on the first day of creating Yinsure, its founders decided to do something different - let the market freely determine demand and supply.

3. The Cover agreement consists of three major elements:

market maker (MM);

1. insurance provider (CP);

2. Insurance Demand Side (CS)

3. Four tokens:

4. DAI (stable currency) represents the deposit that the market maker needs to pledge;

Insurance claim rights represented by CLAIM tokens;

1. Insurance demand side rights represented by NOCLAIM tokens;

2. COVER tokens represent rewards and governance tokens

3. Three capital pools:

CLAIM-DAI pool;

NOCLAIM-DAI pool;

Cover-ETH pool

I created the diagram below to show how the system works.

Aside from traditional complex premium or claim calculation models, the entire system circulates according to market demand. Every part of the insurance process is tokenized, allowing users to assemble it freely and unleash people's imagination. Cover Protocol initially launched 10 protocols on their insurance marketplace, and you can freely choose the role you want to play in the system by analyzing APY and APR statistics. I think in the future we can further customize our own insurance fund pool.

1 CLAIM token + 1 NOCLAIM token ≈ 1 Collateral (e.g. DAI)

Lightweight: Effectiveness of Design

Why do we need a long and tedious project BP to express the project vision? Code and economics will explain everything.

Both CLAIM tokens and NOCLAIM tokens can be put into the Balancer fund pool. This lightweight design allows the platform to launch quickly and operate smoothly.

Meme of Cover Protocol

3 days after launch, the Cover agreement encountered a claim. The Pickle.finance protocol was hacked for nearly $20 million due to a bug in a new strategy. The Pickle Protocol is one of the first 10 insurance pools deployed by the Cover Protocol. The community also responded quickly to this claim, and it only took 3 days from voting to claiming. Almost all Pickle.finance CLAIM (nonce 0) insurance tokens are now paid out in DAI. With a total payout of $282,000, the Cover agreement performed very efficiently and well compared to other insurance agreements.

The community created a meme of Internet celebrities playing meme

image description

Mobility: Willingness to Participate

What is the most important element in a transaction? I think it's definitely liquidity. Mobility determines people's willingness to participate and can create a virtuous circle in the system. In the first few months when human liquidity mining became very popular recently, many protocols chose to push up the token price to create an unbelievably high APY, so as to attract more people to participate and increase the total locked value TVL, but the contemporary Such behavior usually leads to a death spiral when the price of the coin falls.

As I analyzed earlier, the liquidity of the Cover protocol first comes from its top-level design—making every link of insurance tradable. You can easily buy and sell insurance policies by holding or not holding CLAIM tokens, and switch your identity back and forth between market maker, insurance provider, and insurance demander by holding different tokens.

A beautiful description can be found in its white paper: "Once CLAIM and NOCLAIM tokens are minted, they can be put into the Balancer fund pool, sold on the auction platform Bounce, and even used in various lending platforms. Collateral (highly risky, but technically feasible!)".

Take a look at the formula in the white paper:exampleActual insurance cost = purchase price of ClAIM tokens - mining rewards for pledge

When you buy CLAIM tokens in the market, you may really have a real need to insure your assets in the agreement. If the mining reward obtained by staking is very high (determined by the price of the Cover token), your factual insurance cost may be 0 or even a negative number. (Here is one given by the team

example