Hello everyone! On behalf of the Ruler and Cover protocols I would like to outline our application for the following joint grant that was announced between 0x and Polygon.
let’s start by quickly introducing both protocols:
Cover Protocol provides peer to peer coverage with fungible tokens. It lets the market set coverage prices as opposed to a bonding curve. The process starts when market makers (MMs) deposit collateral to cover a product. MMs will receive two types of fungible cover tokens in exchange for their deposit. MMs can choose to sell the fungible token(s) to earn a premium. Coverage seekers can then buy the coverage they need.
Ruler Protocol is a peer to peer lending protocol where loan interest is also set by the market. Key features of the Ruler protocol is that it offers non-liquidatable loans at a fixed rate. Just like with Cover, the process starts with depositing collateral, in this case by the borrower, in exchange for fungible tokens. Borrowers can then sell these tokens to lenders for stable coins at a market price. After the expiry of the loan lenders can use these tokens to claim their premium or defaulted collateral if any.
As you can see both protocols rely heavily on the trading aspect between the coverage seekers/providers or lenders and borrowers. For a long time we had been using the Curve metapools to facilitate such trading but that requires a lot of incentivization in order to maintain deep enough liquidity. That would render large trades impossible due to high slippage as well as make the entire model not so capital efficient.
From the very start of Cover and Ruler we were looking for better ways to facilitate trading among our users and 0x provides a solution for us. A few months ago we launched Coverrulers. Coverrules is a orderbook-like trading platform that would allow our users to exchange internal fungible tokens with no slippage and low gas fees. Coverrules is now the only way to trade Cover coverage and soon will become the only way to trade Ruler loans. Despite this switch not being officially announced for Ruler yet, Coverrules already facilitated larger loans that were not possible with the AMM system that is in place.
We believe that with low gas fees of Polygon and the order book system of 0x Cover will be able to offer some very attractive coverage rates on a wide variety of protocols that appear daily on the Polygon ecosystem. Ruler in its turn will enable users to borrow substantial loans without fear of being liquidated (first protocol of this sort on Polygon) and even use our platform to obtain pretty much the cheapest options in crypto.
What do we need funds for
Our protocols do consistently generate revenue and have a sustainable economic model. Despite that, in the current DeFi environment it is hard for a new protocol to attract lenders and coverage providers purely by generated fees. We are asking for MATIC rewards as well as ZRX rewards that we will offer as an incentive to lenders and borrowers trading loans as well as coverage providers and seekers trading insurance on Coverrules on Polygon. Besides that we will be considering incentives in our own native tokens - COVER and RULER. This grant we are asking for will directly translate to the fees that 0x will generate, as incentives will only be distributed to those users who trade on Coverruler - 0x based solution.
For both Cover and Ruler we ask our partners to provide $6000 worth of rewards per week per one collateral. Once we launch on Polygon we plan to support 4 native collaterals:
Given the above number we would need $24,000 of rewards a month per individual pair or $96,000 per month. For Ruler we would want to run the incentives program for at least 3 months.
For Cover at a start we are planning to provide coverage for the following protocols:
Given the above number we would need $24,000 worth of rewards per month per insured protocol or $96,000 worth of rewards per month. For cover we would also want to run the incentive for at least 3 months.
Below you will see three options that are only different by how long we would like to run the incentive program for: 3 months, 5 months or 6 months. We would also want to break down the rewarded tokens in a 70:30 proportion in MATIC:ZRX respectively.
TG: @Cryptocorgi, @DeFi_Ted
DISCORD: cryptocorgi#7032, DeFi Ted (Bakes)#0367
Also feel free to reach out in any official Ruler or Cover group on any platform. We are open to any suggestions and opinions.
1. Option 1
Run the incentives program for 6 months thus award Ruler protocol and Cover protocol $576,000 of rewards each or $1,152,000 total.
2. Option 2
Run the incentives program for 5 months thus award Ruler protocol and Cover protocol $480,000 of rewards each or $960,000 total.
3. Option 3
Run the incentives program for 3 months thus award Ruler protocol and Cover protocol $288,000 of rewards each or $576,000 total.
4. Option 4