Providing coverage

Coverage Provider

  1. 1.
    Can be anyone, even the projects themselves.
  2. 2.
    Provides USDT on the risk-taking side of the Project X Coverage Pool.
  3. 3.
    Jointly entitled to 80% of all Premiums paid for Coverage against the Project X Coverage Pools in exchange for providing capital to the Project X Coverage Pool. The individual yield rewarded to a Coverage Provider is proportionate to the amount of capital they provided to the Project X Coverage Pool.
  4. 4.
    Upon a successful claim, the Claimant is rewarded with funds provided by the Coverage Providers, up to their policy maximum. Coverage Providers share in the loss proportionately to the amount they contributed to the Project X Coverage Pool.

Where can I see all Coverage pools and their APY?

What risk do I bear when providing capital to a Coverage pool?

Your funds are used to provide coverage to Policy Holders for the particular Project X Coverage Pool. If a claim against this pool is approved, you might lose some or all of your funds in the pool.

How do I gauge the risk level of a pool?

A good indicator of risk is the utilization ratio of the pool. Recall that this is the ratio between the covers bought and the capital supplied to the particular pool.
A high utilization ratio implies that many users are willing to take insurance against the project, and few ready to provide coverage for this. Hence the project is risky.
A high utilization ratio also implies that more of your funds are at risk. If a pool has a utilization ratio of 50% and all policies bought against the pool are claimed and approved in full, 50% of the capital in the pool will be distributed to policyholders.
On the flip side, high utilization ratio Coverage pools charge higher Premiums and, in general, have higher APY.
Please do your own risk assessment before putting money in any pool.

When can I withdraw my funds from the Coverage pool?

In order to ensure there is enough liquidity in a pool to pay all outstanding policies, Coverage Providers are forced to wait eight days before they may withdraw their USDT after they make a withdrawal request. After a Coverage Provider has submitted a withdrawal request, their funds may still be used by the Protocol to pay out a successful claim against that pool. A user can only withdraw an amount that pushes the utilization ratio to 100%.
After eight days have passed, the Coverage Provider has 48 hours to withdraw their funds. If they fail to do so, they must submit a second withdrawal request and wait an additional eight days. An example: Coverage Pool A has 20.000 USDT in coverage liquidity. A user decides to provide liquidity and bear the risk in exchange for profits and puts in 80.000 USDT to coverage pool A. There is currently 100.000 USDT in Coverage Pool A. User B decides to purchase coverage for his 60.000 USDT worth of assets for a duration of 1 year. The utilization ratio is now at 60%.
After one month, user A decides he would like to withdraw all of his initial 80.000 USDT liquidity - At this stage, the user can't do it, as you can only withdraw the amount that pushes the utilization ratio 100% and no more than that. In this case, the amount available is 40.000 USDT.

How does the coverage withdrawal process look in detail?

In general, the process can be described in 3 steps:
  1. 1.
    The request of the withdrawal. The request does not affect the UR (because if it would, coverage providers could manipulate the BMIxCover tokens price easily and game the system).
  2. 2.
    The withdrawal itself. Once the user has waited for 8 days, the user can withdraw his or her requested amount during a 2 days period (but not more than it is currently available to withdraw within the given coverage pool).
  3. 3.
    The withdrawal works in a "First come first serve" sequence. If the user hasn't received his or her full payout (because someone bought coverage while the user was waiting) the remainder gets placed into the special "set" where anyone is allowed to withdraw the remaining funds instantly as soon as UR drops down.

What does the "saturation" of the coverage pool mean?

Saturation represents the relation between the given BMIxCover token (the token of a given Coverage Pool, where "x" stands for the name of the protocol) and USDT. A 1:1 saturation means that 1 BMIxCover token is worth 1 USDT.

How is the APY of a pool determined?

There are multiple components to the yield which Coverage providers can earn. Those components include:
  • Premiums from Policy Holders
  • BMI rewards for staking bmiCoverx
  • Rewards via Shield Mining (V2)
The entire next section is dedicated to explaining those rewards.