Cover Protocol $COVER

Cover Protocol is a remarkable innovation in the sphere of decentralized insurance markets, offering a peer-to-peer exchange platform that functions much like a prediction market. It presents a unique proposition by dissolving the role of governance tokens to underwrite risks, as seen in most other insurance protocols.

Market Mechanics

The Cover Protocol operates through an incentivizing mechanism designed for market makers. These makers are encouraged to stake collateral in the form of DAI/yDAI in order to mint CLAIM and NOCLAIM tokens. Every series within the protocol is grounded on a specified protocol and holds a specified expiry date. Upon reaching this expiry date, either the CLAIM or the NOCLAIM tokens will be entitled to the full claim of the collateral.

Case Study

Take for instance, a scenario where 100 DAI is utilized to deliver coverage for the Compound protocol until a specified expiry date. This scenario will generate 100 CLAIM and 100 NOCLAIM tokens. If a valid claim event occurs on the expiry date, every CLAIM token will be rewarded with 1 DAI while every NOCLAIM token will expire without any worth. If no valid claim event occurs, then every NOCLAIM token will inherit 1 DAI while every CLAIM token will expire worthless. This dynamic design of the Cover Protocol enables a degree of flexibility and adaptability uncommon in traditional insurance models.