The Mint: Continuation of Shield Mining

This is not a binding vote, we would like a discussion first before posting to snapshot.

Summary & Background

Cover Protocol’s liquidity mining program, otherwise known as Shield Mining, was a crucial component to attract Coverage Providers and Market Makers early on in. Shield Mining encourages Coverage Providers and Market Makers to mint and sell coverage. Coverage Providers and Market Makers are the backbone to Cover Protocol, as they allow for coverage seekers to purchase coverage at market-based pricing. Since the COVER token now has a capped supply of 70,200, we can no longer encourage the actors mentioned above to do their service.

At the height of Cover Protocols’ shield mining program, we saw TVL grow rapidly up to around $50 million. Soon after we were exploited, as you can see from the graph below.

Many coverage options had millions in liquidity and plenty of CLAIM tokens for sale at fair market based rates. A main reason for this growth was due to Coverage Providers and Market Makers being able to earn $COVER tokens for providing the service of minting, selling coverage and providing liquidity for coverage seekers.

On 28th December 2020, Cover Protocol was exploited which led to an infinite amount of $COVER tokens being minted, an infinite mint exploit. Because of this, we had to move forward with a migration and compensation plan. Along with the migration and compensation plan, the COVER token was given a capped supply.

Due to this cap in supply, we were no longer able to continue our normal shield mining program. This has hindered our growth and coverage offerings to date. We now can only rely on other protocols providing incentives. While this does help, the protocol must not be reliant on others. More is needed to showcase Cover Protocol’s full potential and once again, become one of the leaders in the industry.

Specifications and Benefits

  • Token Minting

    • The current max supply is 70,200 (including un-migrated tokens). The current amount of circulating tokens is 67,509. The mint will increase the max supply to 82,000, around a 16.8% increase.
    • Option 1: End migration at ~67,509 tokens and mint ~14,495 tokens to the treasury multi-sig to allow for shield mining to resume. After minting, set the minter to the treasury.
    • Option 2: Mint ~11,800 $COVER tokens to the treasury multi-sig to allow for shield mining to resume. After minting, set the minter back to the migrator for people who have not migrated to the new COVER token yet.
    • Mint 238.63317219152854512 tokens to 0x3e677718f8665A40AC0AB044D8c008b55f277c98 to correct an error whereby old COVER tokens were vested instead of new
    • No other changes will occur.
  • Introduce order book shield mining programs

    • The ~14,495 tokens or ~11,800 (depending on which option is chosen) minted tokens will strictly be used to incentivize Coverage Providers and Market Makers who utilize the order book. These incentives will help increase covToken minting and coverage in order for coverage seekers to obtain the coverage they need.
  • Supply Concerns

    • In the long run, the minting of these tokens will benefit token holders as more people will be drawn to use the platform. While there will be an increase in emission, this will allow for the protocol to succeed in the mid and long term.
    • Currently 24% of supply locked is staked in xCOVER. If this proposal were to pass, by reintroducing shield mining, more fees will be generated for stakers due to protocol usage increasing. Thus, more COVER will be staked in xCOVER by holders who want to benefit from the protocol. This should help reduce the pressure on the market while emissions are being generated.
  • List more coverage options

    • Shield mining will allow us to list more coverage options with more coverage available to coverage seekers and allow us to create more partnerships.

Voting Options:

For 1: Mint ~14,495 COVER tokens and end migration

For 2: Mint ~11,800 COVER tokens and continue the migration

Against: Do nothing.

  • For 1
  • For 2
  • Against

0 voters

1 Like

I am personally against both of this options. I feel there should be a smaller mint at first to test this up and see if we attract legit people and is the plan working in the first place.

Also this mints doesnt explain for how long incentives will run and at which rate? I feel incentives should be aligned properly, but for a shorter duration of time to see in real time the benefits. Then if everything works as intended, mint more and increase durations. No point to dilute COVER holders if this will have minimal effect. More bad then good.

The minting is not dilutive - we have not put in place a suggestion for the distribution schedule of emissions, this is to see what we have to work with.

I agree with starting small, however we are wanting to know what we can work with here from the community.

The idea of minting an amount and continually doing a community vote seems tedious. If we put in place the fixed amount for rewards we can schedule out a 2-3 year process for these.

As i said this is to get an amount across the line first, then we put in place the distribution schedule for voting. Tokens minted vs tokens in treasury is not really an issue, burning still exists.

2 Likes

Agreed! This is the best solution for Cover to move on. And 16% is not much. Protocols generally use 30-50% for liquidity mining. People need to use the protocol before becoming comfortable with it.

Incentivizing with xCOVER (instead of COVER ) would make some users becoming holders and therefore is good for the protocol. Sure they can unstake xCOVER for COVER at any time.

Agree with the spirit of the proposal, history has shown that it is very difficult to attract liquidity without a competitive incentive program. Fair point form Sminem, probably better to do a first experiment at a smaller scale and further mint once concept is proven.

True, you have a point. I was too hasty on the response without realizing minting isn’t necessarily dillution, and excess COVER can be burned.

Option 2 seems better. Because some holders are still trying to get across to the devTeam for assistance on how they can migrate from cover old to cover new. Going back to allow migration will still reinforce users confidence on the project.

Alternatively, through info channels, cover old holders can be given a timeline upon which after expiration, all cover old holders tokens become invalid. Then the complimenting amount could then be minted and no going back to migration.

1 Like

I do think it’s time to end the migration. We should start making announcements on comms channels as soon as possible. Giving people final notice before ending the migration shortly – two weeks to the end of June seems reasonable considering the amount of time that’s already passed. Assuming no additional coins migrate, that would provide 2,691 coins to begin the shield mining program.

What would the community and team think about a vote to end the migration in two weeks and start the shield mining program while a more detailed proposal addressing the mint separately can be drafted including proposed annual inflation rates, etc. to be considered?

1 Like

I did go ahead and signal for Option 1, as ending the migration and bootstrapping liquidity for v2 and the OB is a good idea.

Not agree at all! Don’t see any help

Yes a 2 stage process would be the way to go;

  1. Announce now the minting proposal to come to vote with this signal
  2. Final call for migration (2 weeks)
  3. Proposal to detail liquidity mining breakdown
  4. After 2 weeks close of migration, introduce minted tokens to treasury and begin new liquidity mining campaign for COVER V2 and beyond.

When mint first time will possibility to mint 2nd, 3rd and more, i hate token mint like usd, I will sell all my cover if confirmed to mint