Introducing TIDAL, Open Marketplace for Programmable Insurance

Tidal Finance
5 min readOct 13, 2020

--

Background: Smart Contract Insurance — Enabling User Growth for Decentralized Finance

The DeFi space’s TVL (total value locked) has grown from $500 Million USD to $9 Billion USD in less than six months. Increasingly large quantities of money are being deposited into various financial protocols with lucrative returns. At the same time, concerns surrounding protocols security has never been stronger — millions in assets have been lost to security breaches, and even smart contracts that have been audited by notable third-parties have fallen victim to some complex attack.

The sudden boom of DeFi ecosystem and constant release of cutting edge financial protocols has significantly increased the demand for financial products that insure against hacking incidents that result in a loss of capital. Insurance is a fundamental infrastructure in the financial system, an impetus for enabling more people to participate in Decentralized Finance and cryptocurrency investments.

We’ve seen innovative insurance solutions such as Nexus Mutual’s contract covers gain a lot of attention in the past few months. However, the actual usage of these products did not keep up with the DeFi growth, caused by few shortcomings in capital inefficiency and closed market system. Currently there is a huge opening in the DeFi ecosystem with only 3% of the TVL insured.

Over $9 Billion in unsecured smart contracts

A new insurance protocol was needed which would keep up with the exponential growth of DeFi products — by empowering users and projects with tools to build the insurance they need.

Introducing TIDAL, Open Marketplace for Programmable Insurance for the Polkadot Ecosystem

TIDAL is a Balancer-like insurance market built on Polkadot, with functionalities to create custom insurance pools for one or more assets from multiple chains. We designed the open market protocol to maximize capital efficiency to attract LP’s, while offering competitive insurance premium to attract buyers. The platform introduces four key features:

Pool Creation and LP Participation

Pool Creation and LP participation Mutual cover pool can be created by selecting multiple protocols and assets to be covered. For example, the coverage could be a mix of protocols (Compound, Uniswap, Aave, Balancer, Curve, Synthetix, mStable, etc). Initially Tidal intends to offer a few pools with different risk levels, the detailed risk criteria and protocols inside each pool will be released at launch. New protocols can be added into the pool overtime depending on its risk profile.

LPs can quickly participate in any mutual cover pools and get exposure to the protocols they are interested in providing cover, from where they can leverage their capital to provide cover tokens, earning yield from multiple protocols.

Pool Statistics

Pool statistics are displayed and monitored to help the LPs and buyers in selecting the product that best suits their needs.

Users can also view the pool statistics by total amount of covers available, cover amount sold, Guarantor capital ratio, total payout to date, total premium earned, and so on. Users will also have their own statistics dashboard to monitor their reserve capital and cover status.

Control Algorithms

To assist in preventing insolvency of created mutual cover pools, TIDAL will set certain constraint parameters at launch that mitigate the risk exposure of each pool. This action is performed by several controlling algorithms, and can be adjusted through community proposals.

A few rules TIDAL intends to implement at launch are listed below:

  • The risk exposure level cannot go above a certain level, dependent on the correlation of contracts inside the pool, and the assessed risks of the assets;
  • Certain coins will be flagged due to their un-audited status which will limit the level of exposure from LPs capital;
  • The covered duration would also be limited to weeks instead of years, compared to traditional insurance products, due to the speed that the DeFi landscape changes.

Payout assessment:

Payout process is governed by the community. When a claim happens, assessment will be made by TIDAL token holders who staked their token during the assessment process. The majority of votes (above 70%) will decide the result on payout. Accordingly, the auditors from the protocol team will perform a final check, if the result is denied, a second round of voting will occur to include all TIDAL token holders.

$TIDAL Token

The TIDAL token will be used to operate and govern on the TIDAL platform. Tokens are designed to reward pool creators, LPs, and early insurance buyers to accelerate the product adoption.

Protocol Fees

Holders of the TIDAL token are entitled to receive a portion of the fees generated by the TIDAL Protocol.The majority of fees generated on the Protocol will go to LPs, some will be deposited into the Treasury Wallet as an emergency backup fund in the case of an insurance pool running out of reserves to pay out claims. The percentage of fees distributed to token holders, LPs and Treasury wallet can be adjusted depending on the level of current funding in the TIDAL Treasury Wallet, as well as the total liability of all insurance pools, so that the rate distributed to token holders can be increased if the Treasury Wallet is under-funded , or reduced if the Treasury fund is over-funded.

TIDAL DAO

In the TIDAL Governance Module, all stakeholders will be able to propose, vote, and implement changes to the protocol in a transparent and collective fashion.

Long term holders of the TIDAL token will have the right to vote on the backbone governance issues of the protocol, including:

  1. Voting on protocol guidelines and updates, in the variety of:
  • Risk assessment controlling algorithms
  • Assessment payout and processing methods
  • Audition processes

2. Vote on premium distribution (e.g. % to treasury, % to LPs, etc.)

After a proposal is submitted, the TIDAL community can submit their votes during a 7 day voting period. If a minimum threshold of votes is reached, and there are more affirmative votes than negative votes for the proposal, it is then queued into the execution query, and will be implemented after 14 days.

Summary

Insurance is a fundamental infrastructure in the financial system. As we grow the product to maturity over time, we expect more people to participate in the DeFi ecosystem and crypto investments because of insurance.

TIDAL is a multi-chain open market for programmable insurance, empowering users to create custom insurance pools for multiple assets. With pool statistics and ranking, it is the most efficient smart contract insurance market, launching on the Polkadot Ecosystem.

TIDAL’s core team consists of serial entrepreneurs and blockchain veterans who have tremendous experience and proven track record in cyber security, code auditing, finance, cryptography, blockchain, and engineering.

To learn more about TIDAL, or to join our team, please contact us at info@tidal.finance

Keep up with TIDAL’s latest announcements:

Twitter: @TidalDeFi

✳️ Telegram: https://t.me/TidalGlobal

--

--

Tidal Finance

Tidal Finance is the first flexible DeFi insurance platform and marketplace offering the highest APYs in the industry. https://tidal.finance/