Shield Mining Rewards Update

Since our launch on Thursday, a lot has happened and we have observed some unintentional side effects from shield mining that has caused some distortion in the prices of the CLAIM and NOCLAIM tokens.

Currently, the coverage price (CLAIM token price) is generally high. This is mainly due to the high rewards (500+%) from shield mining in the CLAIM pools.

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Example:

  1. You spend $0.1788 buying one Curve CLAIM token
  2. You use the purchased CLAIM token to mine COVER token
  3. You earn $0.1994 of $COVER by expiry (using current Curve CLAIM pool APY of 223%)
  4. In the end, assuming the CLAIM token expires worthless, not only will you get the coverage for free, but actually profit $0.0206 (~12% of $0.1788) by purchasing the coverage (Curve CLAIM token)

In order to reflect the correct coverage price (CLAIM token price) on Cover Protocol, we will be adjusting the mining weight on all CLAIM and NOCLAIM pools from 60/20 to 30/50 on Nov. 26th 2020.

  • 30% of the 654 $COVER will go to $CLAIM liquidity providers.
  • 50% of the 654 $COVER will go to $NOCLAIM liquidity providers.

There are no changes on pool 2 or the total rewards allocation to each protocol.

Those who are market makers in both the CLAIM and NOCLAIM pools will remain unaffected by the weight change since the total rewards from CLAIM and NOCLAIM are unchanged. However, by lowering the rewards of the CLAIM pool while increasing the rewards of the NOCLAIM pool, the price of the CLAIM token should decrease given the decrease in shield mining APY. Likewise, theoretically, the price of the NOCLAIM token should increase.

The purpose of these fine-tuned changes is to allow the price of CLAIM tokens to approach their true value and allow users to buy coverage at an affordable cost. Thank you for your ongoing support!

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