Introducing Flash Coverage Swaps

Benefits of Flash Coverage Swaps

  • Cheaper coverage and less slippage! With our new model, farmers buy NOCLAIM to farm for rewards and/or earn trading fees, which effectively decreases the price of CLAIM tokens ( 1 CLAIM = 1- NOCLAIM token price). In our previous liquidity model, incentivizing liquidity for the CLAIM/DAI pool was difficult because, 1) Market Makers wanted to keep their CLAIM to hedge; 2) Farmers would purchase CLAIM to farm, which would distort the price of coverage.
  • More trading fees for NOCLAIM pool liquidity providers! Due to our usage of flash liquidity, for every CLAIM $ amount traded, there is always a greater NOCLAIM $ amount worth of volume. This essentially means any CLAIM trading volume generates 5–20x as much trading volume in the NOCLAIM pool. Combined with minimal impermanent loss, market making becomes much more attractive!
  • More platform revenue! Through flash loans, $1 for every CLAIM purchased and sold will pass through the protocol, experiencing the 0.1% fees charged by the protocol. This means that the protocol will earn increased fee revenue, directly benefiting from any CLAIM trading volume.
  • Operation cost savings! Balancer pools are notoriously expensive to deploy (almost 1 ETH each). With the new change, we will only have to deploy a single Balancer pool per coverage

Changes for Cover Protocol Users

Coverage Seekers and Providers

Market Makers

How Flash Coverage Swaps Work

  1. A user wishes to buy CLAIM, and executes our zap.
  2. The zap then flash loans DAI from dydx (with lowest fee ~2wei).
  3. The loaned DAI is deposited into Cover Protocol to mint CLAIM/NOCLAIM.
  4. The newly minted NOCLAIM is then sold on market for DAI.
  5. The newly minted CLAIM is sent to the user.
  6. The user is charged remaining costs and fees in DAI.
  7. This received DAI is then used to pay back the flash loan.
  1. A user wishes to sell their CLAIM on market and uses our zap.
  2. The zap flash loans DAI from dydx (with lowest fee ~2wei).
  3. The flash loaned DAI is used to market buy NOCLAIM from Balancer.
  4. The zap takes the users CLAIM.
  5. Now that the zap has both NOCLAIM and CLAIM, it redeems them for DAI.
  6. The zap uses most of the DAI from redemption to pay back the flash loan.
  7. With the flash loan paid, the remaining DAI after trading fees and protocol fees is sent back to the user.

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https://www.coverprotocol.com/

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Cover Protocol

Cover Protocol

https://www.coverprotocol.com/

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