Tidal’s core function is mutual insurance pool and corresponding reserve smart contract, and improve capital efficiency by promoting competition between different fund pools.
Written by: Holmes
DeFi Pluse data shows that the amount of DeFi locked up has increased from US$558 million to US$45 billion in just one year. Curious and adventurous early entrants gathered in DeFi, not only to be able to control digital assets through the wallet private key, to participate in DeFi investment and financial management without permission or intermediary, and feel free and excited, but also for a variety of flexible combinations DeFi products bring high returns and crazy.
However, in this frenetic environment, the market has almost ignored the risk of nearly 98% of DeFi TVL being in uninsured smart contracts. At present, most DeFi protocols are created on the Ethereum platform. As Ethereum smart contracts and their virtual machines are more vulnerable to attacks, the DeFi ecosystem will lose US$121 million due to hacker attacks in 2020. DeFi’s enthusiasm has also become a “hotbed” for hackers.
Because of this, insurance against loss of funds due to contract vulnerabilities and hacking attacks has become a rigid demand in the DeFi world, but the number of mainstream decentralized insurance agreements on the market is currently limited, and the insurance value provided is less than 10% of DeFi TVL, and There are problems such as the high cost of funds in the insurance reserve pool and the low rate of return, the inability to attract incentives to provide liquidity, the inability of the demander to buy cost-effective insurance, and the inability to obtain underwriting for most new smart contracts.
Tidal.Finance, an open insurance market established on Polkadot, is trying to solve the above-mentioned needs and pain points.
What is Tidal?
Tidal is a cross-chain decentralized mutual insurance agreement. Its core function is the TIDAL mutual insurance pool and the corresponding reserve smart contract. Each set of pool provides protection for a combination of cryptocurrency contracts or assets. This allows reserves to be in the form of partial reserves, according to the correlation between the reserve ratio and the insured assets, to provide liquidity providers (LP) with various levels of leverage, returns and risks. As Tidal CEO Chad Liu stated, if you want to maximize the use of capital and returns, you must increase the amount of insurance by providing low-correlation bundled insurance agreements to increase the amount of insurance, and at the same time use multi-level reserves to reduce control of bankruptcy and other risks.
Open Tidal official website , users can enter the platform to sell or buy insurance. To sell insurance, users (LP) only need to provide liquidity, and then choose the agreement they have confidence in the insurance, and the income will be estimated based on their custom selection. For insurance buyers, just search for the agreement that you want to get insurance and buy the amount of money you want to get insurance.
Tidal provides buyers with key indicators such as premiums, reserve capital pools, and pool bankruptcy risks to ensure full disclosure and transparency of information. These parameters will be permanently monitored to ensure the highest quality and safety. For LP, it not only discloses information about the insured agreement such as project background, audit report, time to market, hacker history, total lock-up value, etc., but also provides indicators such as deposit capital return rate, principal loss risk and lock-up period to evaluate The rate of return and risk between different asset pools.
Governance token TIDAL
Mutual insurance pools can be created with the help of TIDAL, and LPs can mortgage stablecoins in these pools and provide reserve funds to any pool. They received the following two tokens in return:
- Insurance tokens whose nominal value is equal to pledged funds;
- The TIDAL governance token is an additional reward for participating in the construction of the TIDAL ecosystem.
To encourage active participation in governance, TIDAL token holders have the right to collect part of the fees generated by the TIDAL protocol, and they need to vote on most of the proposals submitted to the DAO for decision-making. In the unlikely event that the mutual insurance pool runs out of reserves to pay for insurance claims, most of the costs incurred by the agreement will be deposited in the Treasury Wallet as emergency reserve funds. However, a certain percentage of the fee will be allocated to TIDAL token holders as a profit share to encourage users to actively participate in ecological construction.
Team and investment background
Tidal Finance was founded in April 2020 by Chad Liu. He has a dual degree in applied mathematics and computer science from Peking University, a master’s degree in engineering from Texas A&M University, and an MBA from Wharton School of Business. He entered the cryptocurrency field in 2017 and is also an early use of DeFi. People, investors.
CTO Dan Raykhman is a veteran with more than 20 years of experience in financial markets and cryptocurrency trading. The team led by the two is composed of entrepreneurs and blockchain veterans with rich experience and reliable records in the fields of network security, code audit, finance, cryptography, blockchain and engineering.
Since November last year, KR1, a blockchain investment company, has successively received investment from Hypersphere Capital, Spartan Ventures, NGC Ventures, Kenetic Capital, AU21 Capital, LD Capital and Genesis Block.
The core competitiveness is to improve capital efficiency, and the goal is to maximize DeFi insurance coverage
Chad Liu believes that improving capital efficiency is Tidal’s core competitiveness. Tidal’s open market design allows the supply and demand of insurance to converge in a mutual insurance fund pool created based on one or more assets in multiple chains, not only by incentivizing pool creators, but also by promoting exchanges between different fund pools. Competition to improve capital efficiency.
Tidal’s goal is to expand the adoption rate of insurance products in the DeFi field as much as possible, and expand the insurance coverage of DeFi TVL. Recently, it has cooperated with Rai Finance, Konomi Network, Crust Network, Equilibrium, EdgeWare, Bandot, StakeDAO, Cere Network, Stafi Protocol, Reef A series of DeFi agreement products such as Finance and KnitFinance cooperate to provide insurance services for them. Second, provide good returns for ecological participants to ensure that Tidal always has sufficient funds for adequate underwriting. Therefore, in addition to premium income, Tidal will also launch liquid mining, pledge plans and other projects to continue to attract users.
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