The Stabilize Protocol is a decentralized finance application designed to help keep stablecoins and BTC proxy tokens prices stable by rewarding depositors with STBZ tokens and by using active strategies to balance coin demand. Users have the option to swap pools manually to achieve a higher rate of reward or deposit into the active strategies that swap tokens on their behalf.
As we want to bring peace of mind to depositors, we have sought ways to protect our depositors from unexpected events. We recognize that while audits are good, they can only protect depositors on the front-end by exposing smart contract vulnerabilities prior to depositing. They offer, unfortunately, insufficient protection as audits may miss critical vulnerabilities and users may be responsible themselves from recovering from a hack. There have already been cases where audited protocols have been / could have been exploited and user funds drained. Auditors are not responsible for lost funds so the cost of an oversight is merely reputational. At Stabilize, we want to give depositors more protection.
Enter the Cover Protocol
Cover is a decentralized marketplace where users can buy and sell coverage tokens for a variety of protocols, Stabilize included. It is the catch-all protection for smart contract protocols.
Users can buy coverage tokens on Cover, which are called CLAIM tokens. When the insured period expires without an approved claim, the CLAIM tokens become worthless. When an event does occur (ex: hack, exploit) prior to the end of the insured period, a user can submit a claim that is then evaluated by the Cover protocol (more information here). If the claim is approved, each CLAIM token will be worth 1 DAI. This process is similar to how insurance is handled in the real world.
CLAIM tokens typical cost a fraction of the DAI amount redeemable in case of an event. This is due to the fact that events are typically infrequent.
Cover also allows those betting on the success of the protocol an avenue to make money from participating in decentralized insurance. Cover has a NOCLAIM token. These tokens are redeem 1:1 with DAI when the insured period has expired without an event; however, if an event occurs prior to insurance expiration, NOCLAIM tokens become worthless. Since events are infrequent, these tokens tend to be worth more than CLAIM tokens but less than 1 DAI due to uncertainty. Their condition for redemption are the opposite of CLAIM tokens.
Liquidity providers on Cover are rewarded with trading fees by those buying and selling insurance tokens and they receive COVER tokens by staking their liquidity tokens. Users can simply mint CLAIM and NOCLAIM tokens with DAI, then send those tokens into Balancer liquidity pools to redeem Balancer tokens that can be staked.
How do I get insurance for my deposit on Stabilize?
There are a couple ways to get insurance, either by buying CLAIM tokens directly or minting.
- Buy CLAIM tokens
- Head to the Stabilize page on the Cover Marketplace
- Press Buy button for CLAIM token. It will bring you to Balancer pool where you can buy CLAIM with DAI for a fraction of the covered amount.
- You are now covered until the expiration date. If an approved claim occurs prior to that, you can redeem DAI 1:1 with CLAIM token.
2. Mint CLAIM tokens
- Head to the Stabilize page on the Cover Marketplace
- Press Mint button and stake DAI to receive both CLAIM and NOCLAIM tokens. 1 DAI will return 1 CLAIM and 1 NOCLAIM token.
- Sell NOCLAIM token into Balancer pool to redeem DAI. Now you only have CLAIM tokens.
- You are now covered until the expiration date. If an approved claim occurs prior to that, you can redeem DAI 1:1 with CLAIM token.
How do I make money off others seeking insurance?
There are a couple ways, the first way is by providing liquidity and the second is by becoming a coverage provider.
- Become a market maker and provide liquidity
- Head to the Stabilize page on the Cover Marketplace
- Press Mint button and stake DAI to receive both CLAIM and NOCLAIM tokens. 1 DAI will return 1 CLAIM and 1 NOCLAIM token.
- Add to both CLAIM and NOCLAIM Balancer pools to redeem BPT tokens. You will begin to earn trading fees.
- Stake your BPT tokens in Cover’s shield mining program to start earning COVER tokens.
2. Become a coverage provider
- Head to the Stabilize page on the Cover Marketplace
- Press Mint button and stake DAI to receive both CLAIM and NOCLAIM tokens. 1 DAI will return 1 CLAIM and 1 NOCLAIM token.
- Sell CLAIM token into the Balancer pool to redeem DAI. Now you only have NOCLAIM tokens.
- Optionally, add to the NOCLAIM Balancer pool to redeem BPT tokens. You will begin to earn trading fees. Stake your BPT tokens in Cover’s shield mining program to start earning COVER tokens.
- At the end of the expiration date, you can redeem DAI 1:1 with your NOCLAIM tokens if there wasn’t an approved claim. You will have earned what you put in plus profit from selling CLAIM tokens.
Developing an industry standard
With the introduction of insurance to Stabilize, the protocol is heading towards what will become an industry standard for DeFi yield aggregators. This year has been defined by many protocol hacks and exploits that have made many hesitate to try DeFi and we believe if we can offer depositors with insurance options, we will be closer to what is already standard in the real world.
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Website: stabilize.finance
Twitter: @StabilizePro
Telegram: StabilizeProtocol
