Announcing Cover Pools: the Liquidity Pool for Stop-Losses on Fungible Tokens. Built in-house at @PoolsharkLabs.
Cover offers LPs proactive protection similar to a Stop-Loss.
@arbitrum Public Testnet launching soon ™️
Let's dive in 🤿
Cover, short for Covering Volatility, allows users to increase exposure to assets increasing in price 📈
Equally users can decrease exposure to assets decreasing in price 📉
Token markets continue to see growth year over year and will require stronger financial primitives to capture volatility.
Cover resembles one of the key primitives from the traditional markets: a Stop-Loss mechanism.
Cover was built on the principle that self-custody users need better methods to rebalance their portfolio as pricing of assets changes over time.
Crypto can be quite a volatile environment during large shifts in the market, and being able to capture this volatilitiy is critical.
twitter.com/KyleLDavies/status/1522813352665403392?s=20
With the current LP tooling available, it is quite difficult for LPs to be able to hedge against impermanent loss and manage market volatility.
The goal with Cover is to allow passive portfolio rebalancing without having to close other positions (i.e. lock in impermanent loss).
Cover starts by unlocking pool liquidity based on a TWAP source.
Unlocked liquidity is then auctioned off at each price tick. 🦈
Gas costs are fixed no matter how wide the range. ⛽
A Dutch Auction will continue to discount the asset according to a fixed rate, until the current auction is over.
This allows the pool to find the natural market price at each price tick interval.
Initially Cover will leverage raw Uni v3 oracles until the point where Poolshark has sufficient liquidity to provide accurate pricing.
Cover limits the volatility that can take place over some time period, placing a hard limit on the damage short-term manipulation can have.
Cover can support any decentralized exchange present and future through its modular design.
For example, all that would be required to support @CurveFinance via governance would be
A) enable a new TWAP source
B) add the relevant curve math
Cover will have 0 fees at launch for traders and LPs.
Cover fees can be turned on in the future case a DAO were to govern the protocol.
Cover's code is licensed under BSL similar to GMX v2. Additional use grants will be subject to review.
To learn how Cover works, visit docs.poolsharks.io or read the full whitepaper here 👇
twitter.com/poolsharks_labs/status/1613186619141664770
Cover is expected to be used in the future to build new products that require this type of new financial primitive.
We'll be doing a Twitter Spaces with @FactorDAO at 5pm UTC!
twitter.com/i/spaces/1yNGaNvygXqJj
If you'd like to start the conversation with us, we recommend joining our Discord to learn more:
discord.gg/poolshark-896196350310514739