Tidal Finance’s Cover Mining Program
Tidal Labs is introducing the Tidal Cover Mining Program to educate and incentivize Reserve Providers to begin using the platform.
Reserve providers are version of liquidity providers, they provide the “backing” for cover purchasers in the event of a hack. Their overleveraged structure where RPs can back multiple protocols offers a higher yield to the reserve. Also, due to this structure, it is crucial that protocols have good audit hygiene, a strong/long-term team, and are responsive to new security and market news relating to smart contracts and general security issues.
In total — Tidal has allocated 30% of total token supply to the cover mining program.
Early Participation for Reserve Providers (RP)
TIDAL connects Protocols with Reserve Providers to back them in the event of a smart contract hack in what we call mutual discretionary cover pools. In these pools, the Reserve Provider can select up to 20+ protocols to back — with each additional protocol, they stand to earn more APR, while also increasing their full principal risk. This concept is well known in traditional finance (think collateralized debt obligations), however requires additional incentives to elucidate the benefits to the crypto ecosystem.
They are projecting 100% APR for those that contribute to the $1 million USDC reserves to backup multiple protocols at initial launch.
With TIDAL’s initial launch, early Reserve Provider adopters will get weekly rewards by depositing USDC into the cover pool. Up to $13,700 USD value of TIDAL tokens will be distributed on a weekly basis across the mutual pool, accumulating to an approximately 100% APR for the 1 million USDC provided by Reserve Providers (assuming max $1M backing).
Let’s talk through how you as a Reserve Provider would receive rewards with an example.
Say you put up $1M reserve and select 7 of the below protocols to back in the event of a smart contract hack. In this scenario, most of these protocols are paying 5% or 2% as yearly cost in premium covers; from these payments: 10% go to guarantor & treasury pools, while the rest of the 90% go straight to the Reserve Provider. This Premium Cover APR totals 28.80% for you as the Reserve Provider. Our Cover Mining Program covers the rest of the APR to bring you to 100%, which totals approx. $19k weekly rewards with 100% APR.
The reward amount is designed to bootstrap approximately 1 million USDC reserves backing up multiple protocols in the initial launch pool. The deposit amount will be monitored and capped at launch to ensure a high APR for early reserve providers. Nevertheless, max deposit amount and reward incentives could be adjusted to maintain the healthiness of the reserve pool weeks after the launch.
A few things to note with this program:
Asset Deposit Amount: The reward tokens are distributed formulaically based on the amount of deposits. Reserve providers receive reward tokens based on their proportional supply into the pool. Larger deposits result in a higher token reward potential.
Deposit Duration: The USDC Reserve deposit stays in the discretionary mutual pool at a period of the reserve provider’s discretion. Withdrawal takes 14 days to become effective in your wallet. During the pending period, reward is still being earned on a weekly basis.
Governance: Tidal reserves the right to make all decisions regarding the operations of the Tidal Cover Mining Program, including the level/allocation of rewards, withdrawal period, duration or discontinuance of program at any time, or other modifications to the program (whether due to regulatory requirements or otherwise). These decisions could adversely affect any projections or any rewards held by participants.
What is Tidal?
Tidal Finance is the first flexible DeFi insurance platform and marketplace, offering the highest APYs and gas-free transactions. The flexible insurance model allows companies to adjust their premiums on a weekly basis based on fluctuating TVLs (Total Value Locked).
📰 INFO:
https://medium.com/tidal-finance/tidal-finances-cover-mining-program-4196aec48a20
