Bridge Mutual is a permissionless, decentralized, and DAO-managed discretionary risk coverage platform that provides coverage for stablecoins, centralized exchanges, smart contracts, and other services. The platform allows users to purchase coverage for their funds, provide coverage in exchange for profits and yield, vote on policy claims and their payouts, and receive compensation for assessing claims fairly.
Bridge Mutual is a platform that allows any person to create and provide liquidity for “insurance” pools for any smart contract, exchange, or service at any time in exchange for a yield. Other users can then purchase a coverage policy to “insure” themselves against hacks, rug pulls, or other exploits that result in a permanent loss of funds. Coverage for stablecoins, a different product within the platform, protects against any loss of value caused by an event that de-pegs the stablecoin from its pair, usually the 1$ value. Bridge Mutual will consist of thousands of coverage pools that represent coverage for every platform, exchange, and stablecoin asset in the industry.
Some aspects of the Bridge Mutual business model have been altered or delayed to speed up development time. Accordingly, there are features in v1.0 that will be improved or changed in v2.0 and beyond. As we release newer versions of the platform, we will update this technical whitepaper.
Any feature discussed here that will be released in v2.0 is clearly labeled (V2) and discussed in more detail in the Roadmap section.
v1.0. focuses on smart contract coverage and does not include stablecoin coverage or centralized exchange coverage.
Below is a high-level overview of the way the platform operates:
The various components of the model are marked as numbers and explained below.
Any user on the platform can create any pool for any project (Project X, for example) as the system is permissionless by design.
Initial capital (USDT) must be put into the Project X Coverage Pool by the user that is creating the pool.
Project X can create additional incentives for Coverage Providers to provide coverage to their pool by depositing any number of Token X into its designated Shield Mining pool (V2), which gets distributed to Coverage Providers alongside the typical yield, increasing APY.
Coverage provider gauges the risk of providing Coverage capital to the Project X Coverage Pool. If they decide to provide capital, they are essentially betting that the project is unlikely to suffer from a Coverage Event. In exchange for providing capital, they are rewarded with an APY coming from the purchased policies, Shield Mining (V2), and BMI tokens (when staking)
Policy Holder pays a Premium for Coverage to protect against a Coverage Event that could affect Project X and cause them to lose funds. The total cost of the Coverage paid by the Policy Holder (the Premium) is distributed as follows: 80% to Coverage Providers as a yield, 20% to the Reinsurance Pool (the Protocol Fee).
USDT deposited in the Project X Coverage Pool is deposited into the Capital Pool, where it is used to earn passive income for BMI stakers and the Protocol. This applies to all Coverage Pools.
When Coverage Providers supply capital to a Coverage pool, they receive a token representing their share in the capital within this particular pool. For project X, this token would be bmixCover (where x is the project's name). Coverage providers can stake bmixCover in the bmiCover Staking Contract pool in order to receive additional BMI rewards. Rewards are distributed on a block-by-block basis.
Apart from BMI, Coverage Providers that stake bmixCover in bmiCover Staking Contract pools are issued with a BMI NFT Bond representing the amount of USDT staked. BMI NFT Bonds are tradeable and can be sold on any NFT marketplace.
The Reinsurance pool consists of protocol-owned funds that are used to provide liquidity to Coverage Pools in order to increase capital efficiency and earn additional revenue for ecosystem optimization (V2). The Reinsurance Pool is funded through 20% of all premiums paid by Policy Holders and all revenue generated by the Capital pool.
The Capital Pool aggregates USDT from the Coverage Pools in order to generate additional revenue for the Protocol.
Capital Pool sends USDT to yield generating platforms with low risk. (V2)
The DAO determines how the revenue is spent. (V2+)
BMI from the Reward Pool is used to incentivize bmixCover staking and BMI staking for the first twenty-four months of the platform’s operations unless the DAO changes this schedule.