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
- 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.
- 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.
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