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DeFi Insurance Protocol Cover Follows The $19 Million Dai Hack Of Pickle Finance

DeFi insurance protocol Cover is following the $19 million Dai hack of Pickle Finance and the majority of users want to see a payout happen.

It has been reported according to the claim on Cover’s website filed November 21 that there have been 99 votes at the time of publication throwing around 9,800 COVER tokens — more than 99% of respondent tokens — behind a “yes” vote to pay out affected coverage holders.

Ivan Martinez, a technical advisor for Cover, said on Twitter that the vote pass, the claim will move to its Claim Validity Committee “to decide if it’s valid for a payout or not.” 

$COVER Protocol needs $COVER holders to head to the snapshot page to vote for the claim on $PICKLE finance. So far it seems a resounding yes to be paid out. — DeFi Ted (Bakes) (@DeFi_Ted) November 21, 2020

As the hacker absconded with around $19 million in Pickle user funds, Cover clarified that any payout was not going to cover the entirety of the loss.

20 million would not be paid out. Only people who hold CLAIM token aka coverage seekers would be compensated. — Cover Protocol (@CoverProtocol) November 22, 2020

Semi-anonymous and core Cover developer Alan said:

“After CVC approval, all PICKLE CLAIM token holders will be able to redeem 1 CLAIM token for 1 DAI.”

However, there are over 340,000 Pickle CLAIM tokens outstanding, where they trade on secondary markets for $0.90, as he pointed out that this could lead to some “arbitrage opportunities” for traders who expect the proposal to pass. 

The report said that Pickle’s claim is one of the first test cases for a decentralized insurance protocol using a blockchain snapshot to vote on coverage. As many in the crypto space have been affected by hackers taking advantage of exploits since the DeFi boom began, the response on social media has been supportive of a payout, but also skeptical.

In a decision that may have widespread ramifications for the DeFi community, @CoverProtocol users are currently voting for the DeFi insurance protocol to cover a portion of @picklefinance’s recent loss of $19M in DAI — Cointelegraph (@Cointelegraph) November 22, 2020

The hackers were able to swap funds between a malicious copycat contract and Pickle’s yield-bearing vault called the “cDAI jar” leading to users noticing the jar had been emptied.

It has been analyzed that under Cover’s guidelines, the project states that it will pay out claims from exploits or certain attacks on smart contracts, specifically referencing flash loan attacks by resulting in “a material loss of funds from the smart contract, or smart contract system with funds either moved to another address which the original owner or owners do not control or the funds are made permanently irrecoverable.”

Likewise, in addition to Pickle Finance, hackers have targeted several DeFi protocols this year resulting in the loss of millions in funds, from Harvest Finance, Value, Akropolis, Cheese Bank, and Origin, to name a few.

A robust selection of insurance protocols such as Cover may help mitigate the fallout from such attacks.

Thus, Alan concluded:

“I think DeFi coverage is essential for mass adoption of these protocols. Some of these protocols that people are creating will change the financial industry for good, but since we are especially early, there are many attack vectors present, and many more unknown. Our job is to allow users to experiment with game-changing protocols while also remaining hedged against exploit risk.”

Source: Cointelegraph



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