COVER is the governance token for the Cover protocol.
COVER token is used for
Once a proposal is approved, the governance multi-sig (held by the 6 team members) will execute the proposal on behalf of the holders.
Full decentralization is the end goal of the COVER team. Token holders will be the owner/admin of all deployed contracts from Cover Protocol and will be able to lock their tokens and vote on proposals.
Why would value accrue to COVER?
The value proposition of most governance tokens is a promise of future cash flows.
Currently for COVER:
- There will be a default 0.1% (changeable by governance) fee on all redeems.
- The Balancer pool for CLAIM and NOCLAIM tokens will have a 1–2% fee on swaps.
How COVER token works
COVER protocol protects DeFi users against smart contract risk. It lets the market set coverage prices as opposed to a bonding curve.
COVER protocol has 3 user types. The protocol mints CLAIM and NOCLAIM tokens and use a Balancer pool to create the game theory.
1. Liquidity Providers. Liquidity Providers earn fees on capital provided as collateral to specific protocols that are within their risk tolerance. Liquidity providers stake funds and mint both CLAIM and NOCLAIM tokens.
- In case of any incident CLAIM tokens are worth 1 DAI.
- In case expiry date is reached without any incident NOCLAIM tokens are worth 1 DAI.
- CLAIM+NOCLAIM can be redeemed together before incident or expiry is reached for 1 DAI
Whenever a new cover has tokens minted by Cover Protocol for the first time, Cover Protocol will create a Balancer pool with 80% CLAIM tokens and 20% DAI and another pool with 98% NOCLAIM and 2% DAI. The COVER UI has a convenient interface to see all of the relevant Balancer pools for each cover.
2. Coverage Seekers. As a coverage seeker one can buy COVER for a certain period for a specific protocol. The coverage seekers only need the CLAIM token, not the NOCLAIM token. For example if the price of the CLAIM token is 0.19 DAI, this means for every 1 DAI of cover you need will cost 0.19.
The high price is supposedly due to incentives during the shield mining phase, and COVER team are takeing steps to mitigate this.
3. Prediction Market Users. These COVER token holders can earn profit on the perceived risk on a specific protocol. In this use case COVER protocol asks a question, “will protocol A have a claimable incident before expiry date B”.
Current supply: 64,414 (max 90 000)
The COVER token will be launched in a multi-year schedule:
- 87% (78,400) will be distributed to COVER community members.
- 26% can be accumulated in first 12 months via shield mining.
- 61% will be distributed to SAFE2 token holders, immediately at launch.
- 12% (10,800) will be reserved for the team and distributed in first year.
- 1% (800) will be vested to the COVER treasury.