Yearn & Cover Collaboration

Yearn and Cover Protocol join forces. Providing cover has been a key initiative at Yearn since working with Nexus Mutual to launch yInsure. Yearn developers have been working with Cover Protocol devs since inception, so this coalition comes natural for both. The two teams working together as one will help optimize, enhance, and amplify the work that is already underway. Yearn can focus on its best-in-class vaults, while Cover becomes the backstop coverage provider for the Yearn product suite, as well as for DeFi as a whole.


hey AC just wondering if there are any typos or errors in this bullet…?


Yes it will be corrected

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  1. COVER holders earn no fees from trading/providing insurance. This makes their market cap low, and investment potential much lower.
  2. They are offered no incentive for voting (besides pure altruism). This means voter turnout will be low.
  3. COVER will now be borrowable. This means you can borrow COVER and use it to vote (much cheaper than buying COVER).

Put the above 3 together and you can see a whale borrowing as little as $500k-1m worth of COVER and passing malicious votes through.

In the light of this, Yearn should consider buying up a sizeable portion of COVER and using it to vote. Voting using this portion can be done either by dev team or ideally by YFI holders. YFI holders have far more money and reputation at stake and are more incentivised to vote honestly. (A malicious vote using these tokens will diminish yearn reputation and YFI value)

How much COVER is to be bought is to be discussed. I wouldn’t be surprised if YFI holders want to buy up over 50% of the supply.

Update: To be clear, it does not really matter to this proposal how secure COVER is right now, what matters is that it’ll be exponentially more secure when YFI’s economic security is also tied in.


One point to discuss here is how voting will pass through - winner-takes-all or proportional.

Suppose 900 YFI votes claim and 100 YFI votes no claim. Suppose yearn owns 20k COVER. Winner-takes-all would mean all 20k COVER votes for claim. Proportional would mean 18k votes claim and 2k votes no claim.

I’m more in favour of winner-takes-all since it makes the decision binary. Yearn either passes correct votes as a system, or it doesn’t. Impact of this on yearn reputation is more clear. But proportional is also fine.

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It will be multi faceted for different cover types.

Sure the economic incentives are not aligned right now for COVER holders as long term value accrual, however once our governance is live there are already a number of proposals set to be launched to do just this.

So while the set up today seems light - and we are the safe guard (multi sig and core team) of what can happen today, we are already one eye towards aligning the right incentives for holders, making sure the claims process is 100% transparent and fair while allowing there to be a resolutions process for unforeseen issues in the process itself.

Armor has nothing to do with COVER and will do their own thing with that product.

I don’t think it is a great idea to purchase up COVER and be such a holder of governance weight, we already have aligned interests in what we are doing and our community is thrilled to be apart of the ecosystem as a whole.

So while we appreciate how you would like to see COVER operate - this feedback would be quite valuable in our discord where these discussions are taking place today :slight_smile:

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I agree that it is possible for Cover to make changes that better secure their protocol without yearn’s help. Even so, I see no harm and only upside with this proposal. What harm do you see?

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So, just to clarify for everyone, because I admit I was confused myself.

yInsure, which produced yNFTs, was originally rebranded to yCover, and then was merged into Armor and is their offering. This now has nothing to do with Yearn or Cover.

Cover is integrating with Yearn, but will not be referred to as yCover.

Hope this clears things up for everyone!


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