Decentralised Finance (DeFi) project COVER and its lending affiliate RULER have closed down after the unexpected departure of the protocol’s development team, causing a significant drop in the value of both tokens.
In the announcement by COVER community manager DeFi Ted, there was no mention as to why the development team decided to pack up:
The decision to do this did not come easy and is a final decision the remaining team made after reviewing the path forward after the core developers suddenly left the projects.DeFi Ted, COVER community manager
It was decided that the remaining treasury funds would be split among the token holders and that they will no longer continue with the RULER & COVER token or contracts, meaning the user interface will remain shut down.
Compensation will be distributed as per block number 13162680, though founding members won’t be among the holders being compensated.
Tokens Take a Dive
COVER’s token has fallen US$45 since Ted’s announcement, from US$269 to $224. As uncertainty from the news grips token holders, daily trading volume has soared from US$3.5 million to $19 million. The price of both protocols’ tokens dove on the news, RULER also crashing from $10.68 to $1.37, according to CoinMarketCap.
After it fell victim to an infinite minting hack in December 2020 which left its customers markedly uncovered by its insurance policies, there has been speculation about the protocol’s safety. At least the white hat hackers returned the 4350 ETH they stole, attaching to the transaction the message, “Next time, take care of your own shit.”
Both DeFi and their insurance platforms are targets for hackers looking to exploit volatilities on platforms holding large volumes of assets. Earlier this year, Nexus Mutual was also targeted by an attack.
What is DeFi Insurance and Why Do People Want It?
By locking up tokens on COVER as collateral, users received tokens that would cover them in case a DeFi protocol they invested in was hacked, rug-pulled or exploited. The value of these tokens depended on the degree of risk of the smart contract.
According to fintech company Yield, “DeFi insurance aims to protect users from losses in return for a specific premium based on the size of their holding and which platform they are holding it with. “
A DeFi insurance policy instead relies on its community of users to dictate premiums and orchestrate payouts, where traditional finance relies on a multinational insurer.
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