C- Coverage Allocation Vote

This is the third of four parts of a community drafted proposal that originated from Discord chat and being moved here-

Purpose: The goal of this proposal is to further align the interest of the stakeholders (capital provider, cover buyers, liquidity provider) and the DAO as a whole by encouraging long term stakeholders. We would like to encourage and attract long term capital and liquidity providers as well as provide additional value and utility to long term stakeholders in USF.

Staked USF (sUSF) vote in a gauge to allocate/incentivize coverage volume offered, on a per-risk-pool basis, to one of the policies within that pool. This shall be done in a manner that keeps the risk of the pool unchanged. Two ideas

  • Either the volume of coverage that can be bought for a specific project is limited to a certain % of the pool. The Gauge vote can raise that ceiling, by a % depending on the vote result
  • Or, a discount on the premium for that policy. This may be a more advantageous solution for everyone (cheaper premium for user and more volume for the DAO)

This will increase the utility of the USF token, and align the interest of all parties. Projects benefits from advertising additional security for their user. As a result, they will buy USF to vote in gauge (and they will keep accruing rewards and fees in sUSF like anyone else, as well), in order to make it easier/cheaper for their users to buy coverage.

Initial feedback on this from Marh- The gauges in Curve’s case are used to incentivize pools.
In our case we have 2 levels:

  • Pools for cover buyers and per pool/policy limit in a bucket
  • Buckets themselves and the incentive for capital miners

Trying to understand this one a bit better…

We clearly want Unslashed to issue as many policies, as much volume, and to as many projects as possible, but isn’t capital (ETH) the backstop right now? Are you saying we could vote, using sUSF, to increase coverage ceiling? Sorry if I’m misunderstanding, but IMO that’s dangerous - the volume should be directly related to available capital. If the USF pool will be included in the backstop, we could start raising limits (it would be really helpful to have a visualization of total capital and overall coverage volume @Marh )!

Aside from taking measured risk, my preference is for policy discounts too. Assuming the USF staking pool can be used as a backstop/payout for claims. Protocols who are covered by Unslashed and acquire USF have a vested interest in maintaining strict security for their users because they have skin in the game.

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yes, the ceiling is the ETH provided (times a certain risk factor decided by the Unslashed team), applied on the whole bucket. My initial idea was about the amount of coverage per policies within that general cap. However, it is restrictive and do not bring growth.

I would therefore suggest to drop that part of the idea, and focus on growth : how can we encourage policies growth ? The sUSF gauge vote could either
A- direct a pool of rewards to coverage buyers (extend the USF coverage mining program)
B- or a discount on policies

I think A is easier to implement, leads to better USF distribution, but is more inflationnary. Any thoughts ?

I would suggest both! A to start since this is a new protocol and first movers would get the largest benefits/rewards. B for renewals or increases in coverage (volume/tiered discounts). These are excellent ways to grow the protocol.

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Agree with this and I imagine since the end of Epoch 5 is the end of currently defined rewards, we will have some additional discussion/vote on extending those for capital (and possibly liquidity providers) soon.

That being said, at this point, I would suggest we have a separate proposal for that specific discussion and retire this one if we are going in a slightly different direction.