Factors to consider

As mentioned, given many cover events are subjective, we need to create a coverage policy with some key elements to ensure clarity, fairness, and enforceability for all users.

What does a comprehensive coverage policy typically include?

1. Coverage Scope and Conditions

• Scope of Coverage: What is covered and what is not (e.g., specific depeg events, operational failures, or solvency issues).

• Conditions for Coverage: Criteria that must be met to trigger the coverage (e.g., sustained depeg thresholds, specific time windows, or oracle data points).

2. Trigger Mechanisms

• Market Freezing Trigger: Events that cause markets to freeze temporarily, such as price thresholds being breached (e.g., USDe price below $0.99).

• Price Data Source (Oracle): A reliable and objective source for pricing information (e.g., CoinGecko, Chainlink, or custom oracles).

3. Compensation Framework

This will be set at inception using the variable Yield Distribution Framework.

• Cover Level: A formula or mechanism to calculate the amount of coverage available relative to deposited funds and risk levels.

• Payout Structure: How payouts are distributed among claimants (e.g., proportional distribution based on deposits).

• Limits and Exclusions: Any maximum payout limits or scenarios explicitly excluded from coverage (if any).

4. Claims Process

• Claim Submission: Steps for submitting a claim, including required evidence and timeframes.

• Grace Period: A period during which a claimant can withdraw or adjust their claim without penalty (e.g., if market conditions change).

• Challenge Period: A window during which others can challenge the validity of a claim (e.g., through Kleros or arbitration).

5. Dispute Resolution

SAFU will use Kleros

• Arbitration Mechanism: A process to resolve disputes over claims (e.g., using decentralized courts like Kleros).

• Final Decision: Binding decisions from the arbitrator to ensure disputes are resolved conclusively.

6. Market Behavior During Events

Tied to 2. Trigger Mechanisms and Variable YDF

• Yield Distribution: How yield or earnings are handled during freezing or claim periods.

• Market Status: Policies on freezing or unfreezing markets based on specific triggers or resolution outcomes.

7. Data Verification

• Oracle Data Integrity: A mechanism to verify and validate oracle data from that specific market.

  • The main source that should be taken as valid

• Fallback Sources: Alternative data sources if the primary oracle fails (e.g., consensus of credible market sources).

8. Timeframes

These will be built at the SAFU protocol layer at inception but might change for different markets.

• Freeze Duration: Duration for which markets are frozen during an event or dispute (no coverage purchases and no restakers opt-out)

• Cooldown Periods: Timeframes for slashing, claim resolution, or reactivating markets.

9. Policy Termination

• Conditions for Termination: Scenarios where the policy automatically terminates (e.g., permanent delisting of the asset or depletion of funds).

10. Acknowledgment and Agreement

• User Acknowledgment: Terms that users agree to by participating in the policy (e.g., agreeing to abide by Kleros decisions or oracle data).

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  Diagram exemplifying the whole process