Cover x Idle - Coverage Proposal

🗂 Proposals 📑 Formal Proposals
3

Thanks @ted9423 for your detailed explanation on how Cover works!

The starting point of the discussion is the creation of the Balancer pools, that are now live here: https://app.coverprotocol.com/app/marketplace/protocols/IDLE

There are 3 business cases now available, according to the needs of the users:

  • Buy CLAIM tokens to cover your assets in Idle protocol
  • Become a Market Maker
  • Become a Coverage Provider

This pool needs liquidity to bootstrap, lower the premium, and allow coverage seekers to buy the protection.
To become a Market Market or Coverage Provider, deposit $DAI and mint CLAIM/NOCLAIM tokens
https://app.coverprotocol.com/app/mint?protocol=IDLE

Become a Market Maker
Deposit both tokens in Balancer pools to earn trading fees.
CLAIM pool: Pool management - Balancer
NOCLAIM pool: Pool management - Balancer

Become a Coverage Provider
Sell CLAIM on the market: Balancer
And deposit NOCLAIM in the Balancer pool: Pool management - Balancer

Go long on Idle protocol
Buy NOCLAIM and bet on the survival of Idle on long-term, getting the fees if the protocol is not hacked and there is no loss of funds.

Enable Shield Mining to foster liquidity
$COVER holders can cast their vote and enable Shield Mining on Idle coverage. This allows liquidity providers to earn also $COVER tokens on their deposits. https://app.coverprotocol.com/app/governance/

How can Idle protocol incentivize the provision of liquidity?

  1. Reward liquidity providers with $IDLE incentives, a sort of liquidity mining
  2. Use a portion of the Treasury’s fees to provide liquidity. As reported by @Simoneconti some weeks ago, DAI fees represent only 0.75% of the total earning, so in this case we can expect some exchange costs (e.g. 0.3% trading fees on other assets) and tx costs.
    On the other side, if Idle protocol becomes an AMM it receives the trading fees of both pools (e.g. 2-3%) and $COVER tokens.

This could be the first step, while topics related to composability (aka embed the coverage directly in idleTokens) or Idle-owned coverage products might be discussed in a second moment.

What should be the next step? Let’s brainstorm on it!

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