In the last article, we talked about Nexus Mutual, a decentralized insurance solution created on the Ethereum network. Today we want to talk about a similar product that has recently emerged but which has had a bad day: Cover Protocol. Let’s first see what it is and then try to understand what happened to the protocol a few minutes ago!
What is Cover Protocol?
Cover Protocol, as mentioned above, is an insurance product on Ethereum that protects other crypto projects from hackers and thieves. So far the product seemed perfect, seeing that the features include:
– No KYC: It is indeed possible to get insurance without providing personal documents and revealing your identity. This is impossible when choosing insurance from traditional solutions.
– Decentralized: The Cover protocol is decentralized as these are smart contracts that have been launched and verified to bypass any kind of censorship (laws, states, governments etc). The website says that the solution has also been audited, but this was not enough today.
– Limitless: The future plans for Cover Protocol included the ability to insure anything, not just crypto projects or smart contracts. If there are people to cover insurance on a service or product, Cover will act as an intermediary and offer you insurance on that service or product.
– Market Efficient: Whenever someone requests some kind of insurance that is not covered by other people, the protocol is able to incentivize insurers to fulfil this request, creating a market out of thin air.
– Fungible Cover: Cover Protocol is able to send you ERC20 tokens tradable on Balancer whenever you choose to cover an insurance. The same is true for Uniswap, which is the best DEX at the moment.
COVER, the token of Cover Protocol
Like almost every crypto project, Cover Protocol has its own cryptocurrency. This is COVER, a token created on the Ethereum network that can be found on Uniswap and other major exchanges. At the moment, CoinGecko indicates that the lowest price for COVER tokens has been $200, while the highest price has reached almost $1500. The max supply of the token is 90,000 units, but the circulating at the moment is just over 74,000 units. However, as can be seen, the token is currently suffering a massive 60% loss. Why? What has happened?
COVER Protocol and the exploit of December 28th, 2020
This morning was an unfortunate one for the COVER Protocol, as someone managed to mine new tokens and dump them on the various decentralized exchanges. The address in question is this one. As you can see, the whole thing started about 3 hours ago with a mint of about 1000 tokens, followed by other mints of thousands of tokens in total. Finally, the hacker dumped all of the tokens on 1inch.exchange, making very high profits out of nothing, but causing the price of the COVER token to drop dramatically. Unfortunately, despite the fact that it is not a major hack, a product that offers insurance cannot afford such errors.
The first to report the news was the Twitter account @Luciano_vPEPO, who briefly explained how this exploit works: an infinite minting bug on the Cover Protocol incentive contract was exploited. Basically, it was enough to stake, then unstake and claim, then repeat the same procedure to get thousands of tokens minted out of thin air. It seems that the protocol is secure and has not been subject to the exploit, the only target was the COVER token. While this sounds like a great buying opportunity, please be careful! P.S.
Update: Hacker just minted unlimited $cover token. ITS OVER