Remember the Yam Finance project that created the DeFi liquid mining wave in the food department. Today, the project team announced a new insurance agreement project Umbrella Protocol. Up to now, they are developing the alpha version code of the Umbrella protocol. After that, internal testing will continue in the Yam community, and this article will give a brief introduction to it.
Throughout the history of DeFi, the development of smart contracts has been facing threats. The rapid development and composability show that auditing alone cannot guarantee security. At present, the demand for smart contract protection, whether in terms of coverage or innovation, has not been fully satisfied.
The recent series of DeFi hacking incidents emphasized that the ecosystem needs new risk management solutions. We believe that these new solutions should be native to DeFi, which leverages the unique features of Ethereum, operates in an open and permissionless manner, and balances decentralized governance and immutability.
The design of the Umbrella protocol takes these factors into consideration, and is characterized by perpetual ERC20 streaming insurance, an immutable insurance coverage pool, and the creation of a license-free factory pool (allowing customization and iteration over time).
The construction of the Umbrella protocol draws on the factory design created by Uniswap and Balancer, the token function of Compound cToken, and the financing model of the encrypted perpetual futures market. This is a new experimental result.
The core component of the Umbrella agreement is MetaPool, which is responsible for keeping the funds deposited by the policyholder and collecting insurance fees from the policyholder.
Each MetaPool is composed of multiple insurance coverage pools, each insurance pool covers a specific agreement or contract, and the insured can individually insure the specific agreement or contract.
It is reported that these MetaPools are created through a Factory, and their fees to capital interest rates are highly configurable and immutable after creation. This open customizability is the key to iterating and creating new DeFi LEGOs, and immutability is essential for clear and unstoppable protection.
In order to be protected, policyholders need to deposit funds into the insurance coverage pool and receive ERC20 tokens that track their deposit balance. The protection of policyholders corresponds to their total pledged funds in the insurance coverage pool and the protection provided in MetaPool.
The financing rate function is one of several parameters set by the factory when creating the pool. In its simplest form, it can be a utilization function (insurance coverage pool pledge/MetaPool pool pledge), although the openness of the factory can take advantage of other indicators or data sources.
If an attack is made against a certain protocol covered and protected by the MetaPool pool, the policyholder can submit a claim to the MetaPool arbitrator. The arbitrator is also set when the pool is created, and must actively determine the validity of the claim statement based on the parameters created by MetaPool. If the arbitrator determines that a claim is valid, the amount paid by MetaPool is equal to the funds currently pledged in the insurance coverage pool plus any funds currently unused in other insurance pools in the MetaPool.
For example, take a MetaPool as an example in which policyholders pledged 1,000 US dollars, and they pledged 100 US dollars in 3 insurance coverage pools. If one of the pools is hacked, the amount paid is 100+(1000-300)=800 USD. In the event of an attack, the other two pools will ensure that at least 100% of the pledged funds can be obtained.
What’s next
Up to now, the project team is developing the alpha version of the Umbrella protocol code, and will continue to conduct internal testing in the Yam community. It should be noted that the agreement has not yet been finalized, and it is possible that the developer will modify the above design after testing.
