This is a guide on how to buy COVER token from Cover Protocol. Read on to find how you could also earn COVER via liquidity mining incentives.
What is COVER
Let us first look into what Cover Protocol is. In a nutshell, Cover Protocol is a way to hedge smart contract risk. In some ways, this is similar to Nexus Mutual.
However, the tokens on Cover resemble UMA futures tokens in some ways except their payout is not fixed but determined based on whether a smart contract breach occurred or not.
For example, you can buy the following token: COVER_YEARN_2021_02_28_DAI_0_CLAIM. As the name suggests, this token expires on 28th of February 2021. If there is an approved claim on YFI, i.e. if there is a breach in YFI smart contracts where you lose money, you can buy this token and protect your downside. This will expire at 0 if there is no claim and 1 DAI if there is a claim.
The CLAIM token is the “Coverage” token and NOCLAIM token is the “Underwriting” token.
Anyone can buy the CLAIM tokens, whether they have actual money in the smart contract or not. Of course, this generally raises the issue of people betting on a bug before exploiting it and making even more money, but that’s part and parcel of most insurance on DeFi.
How to Buy COVER
COVER is the token for Cover Protocol with a max cap of 160,000 COVER tokens. Most of these tokens (70%) are released via the liquidity mining program over a period of 12 months.
If you want to buy COVER token, there are a few places to go to:
Normally, it is a good idea to buy DeFi tokens like these on Uniswap. However, you should always do your research first. Currently, it is way better to buy COVER on Sushiswap than Uniswap. Why? Because COVER is advised by SBF (of FTX fame, but also Sushiswap) and thus they launched their liquidity mining program on Sushiswap instead of Uniswap. Therefore, Sushiswap has much better liquidity and lower slippage than Uniswap.
The experience of buying on Sushiswap via the link above should be very similar to Uniswap. Hopefully, aggregators like 1inch will add COVER soon, so there is no need to manually check for prices.
How to Earn COVER
COVER has a an ongoing liquidity mining program. Therefore, you can earn COVER from this program for the next 12 months instead of buying from the market.
To earn COVER, head over to the “Shield Mining” section of the Cover app. There, you’ll see the release schedule for how much COVER each bucket has and how much is already staked.
As you can see, there are many different pools, encouraging you to buy Coverage for various smart contracts and creating liquidity pools so price discovery can happen easily. In return, the team is compensating you via the COVER tokens for the risk you take on.
If you are an LP, be careful especially around the contract expiration days and make sure your LP tokens are safe and protected from the downside.