Are you a DeFi enthusiast that looking for a game-changing opportunity and don’t afraid of high-risk investments? Look no further!
Overnight introducing Insurance – a safety net for profitable, but not profitable everyday strategies! In the presence of insurance, Overnight has the confidence to invest in these strategies, which would be too risky otherwise.
Insurance provider’s benefits: Investing in insurance can lead to significantly enhanced profit growth for insurance providers while creating a substantial demand for OVN tokens.
Protocol benefits: This system allows Overnight protocol to diversify and grow its business through new strategies leading to increased revenue and, naturally, benefiting a larger number of OVN token holders.
Don’t miss out on this opportunity to reshape your investment journey and let’s dive into details in our article.
Overnight Insurance TL;DR
Overnight provides a way to earn more money, but it comes with a higher chance of losing it too.
When you invest in the insurance vault, you can get extra profits from the protocol’s earnings called premiums. But if the protocol’s earnings turn negative, you might end up losing some of your investment
How does insurance generate revenue?
In Overnight, we designed our rebase tokens (USD+, DAI+, USDT+) to use in various yield-generating strategies or investments. These strategies can carry risks, and losses can occur, even if they are designed to be relatively low-risk. So we decided to develop an Insurance system to mitigate and manage these risks.
Overnight aims to provide not only stability and reliability for USD+ holders via a transparent way of managing collateral, but also find the most profitable ways to generate high yields by diversifying their collateral in different strategies, some of them are low risk, some middle, and some them can have high risk of investing, but also quite profitable.
Let’s delve into our effective utilization of Pika’s strategy, which has proven to be one of the most lucrative approaches. This strategy involves supplying liquidity to the Pika vault for trading assets. We’ll use Duna dashboards for it.
The income we derive from the protocol is contingent upon the following factors:
– Commissions, and rewards from the pool.
By participating in the strategy we get daily APR from the Pika.
– Profit/loss of traders and collateral liquidation.
In these charts, we can see how much money Pika v4 has made. However, some days aren’t profitable which leads to a strategy loss
The insurance aims to cover these losses and make the rebase system more sustainable and reliable.
You can observe that Pika’s strategy can be quite profitable on certain days, like on August 17 when it made $80,000 in profit. However, there are days when it can result in losses, especially at the start.
In the initial period, this strategy didn’t seem like a good investment. But if we look at the cumulative vault performance, we can see a total profit of $328,000, which makes this strategy appear quite lucrative.
That’s why we created the Insurance Vault. It allows Overnight to invest in such a risky strategy for the short term, with the potential for good returns in the long term. It provides us with the opportunity to incorporate more risky strategies into the USD+ collateral.
Key metrics of Insurance
1. Insurance premium – How much APY insurance gives returns to its contributors. It’s uploaded daily.
2. Insurance vault – Current amount of locked OVN tokens.
3. Value vault – Current TVL of OVN tokens in $.
4. Insurance coverage – This indicator shows the maximum coverage by insurance of negative rebase USD+ on a particular chain.
This is calculated as follows: insurance TVL/ USD+ TVL( Optimism USD+ TVL on a screenshot).
5. Risk factor – risk level of investing in insurance right now. It depends on the current strategies protocol is investing at the moment.
Insurance mechanics
The insurance system uses a native token, OVN. OVN holders can stake their OVN tokens in exchange for insurance premiums (1 INS = 1 OVN).
OVN holders can stake their OVN tokens in the Overnight Insurance Vault. By doing so, they effectively provide liquidity that can be used to cover potential losses incurred by certain strategies on certain days, employed by rebase tokens (like USD+, DAI+, USDT+).
On profitable days, the excess returns generated by the strategies accumulate in the Insurance Vault by purchasing OVN tokens from the market and adding them to the vault.
If a rebase token strategy incurs losses on a particular day, the losses will be covered by the funds held in the Insurance Vault. OVN tokens will be used to cover the losses and keep rebase tokens profitable.
Minting insurance tokens does not incur any fees, making it cost-effective for users.
However, to withdraw insurance coverage, users need to initiate a redemption request. There’s a waiting period of 72 hours before the user gains access to a 96-hour window to complete the withdrawal. This process is designed to manage insurance withdrawals efficiently while maintaining security.
The insurance system is designed to align the ecosystem with the OVN token. Insurance providers deposit OVN tokens, insurance premiums are collected in OVN, and the insurance vault is denominated in OVN. This ensures that the native token is central to the insurance operations.
The insurance system was initially launched on the Optimism chain and is planned to be rolled out on the Base chain later. This allows users on both chains to benefit from the risk management and insurance mechanisms.
Insurance Performance
The graph displays the performance of USD+ Insurance and the annual percentage yield (APY) it offers to INS token holders.
In the spreadsheets above, you can find the daily performance and corresponding APY.
You can check the timing of the last payout made to contributors.
On the right side of this page, you’ll find:
1. Your Balance in insurance – the amount of OVN tokens you’ve locked in the contract.
2. Profit/Loss – Your insurance performance from the previous day.
3. Mint Insurance – deposit your OVN tokens to receive INS tokens at a 1:1 ratio.
3. Redemption Request – Withdraw your funds from the insurance vault (please note it can take up to 96 hours for your funds to become available).
4. One-time fees, Mint Fee, and Redeem Fee are not applicable, which makes it cost-effective for users.
There’s a warning about investment risks, advising caution regarding potential losses.
Always conduct thorough research before making any investment decisions.
Insurance Premiums
This page is designed to show you how profitable insurance can be and its PnL for the previous day.
Premiums are a portion of strategies kept by the protocol, taken from the rebase token yield, and distributed as payouts.
On the main spreadsheet, you can find information about all the strategies in the collateral of our rebase tokens, the percentage in collateral, the NAV in USDC (Net Asset Value), and Premiums Percentage. Each strategy has its own premium percentage, determined by the level of risk associated with that strategy. For example, the Pika v4 strategy, while profitable on certain days, is considered quite risky. Consequently, it receives 50% of the USD+ yield as premiums.
In the “total” section we can see the weighted average for premiums which consists of the numbers of calculated premiums for each strategy based on its risk level(% in collateral * Premiums %/100) and a sum of these strategies.
The final amount we hold from the USD+ yield and add to the vault
On profitable days, premiums are added to the Insurance, which boosts the profit for contributors. In the event of a loss, the opposite happens.
Currently, we focus on the Optimism chain collateral, but as we expand and achieve the expected results, we plan to extend our insurance coverage to Base and Arbitrum in the near future.
Insurance Guide
How to mint
To provide insurance you need to:
1. Connect with your wallet on our dapp.
2. Go to the Insurance page.
3. Make sure you switch on the Optimism network and have sufficient OVN tokens on this chain.
4. Click on a mint.
5. Choose how much OVN you want to invest and click Approve OVN.
6. Approve transaction on your wallet.
7. Click on a confirm transaction.
8. Approve transaction on your wallet.
9. Congratulations you successfully depositing OVN to the Insurance Vault.
How to redeem your funds
1. Click on the redeem button.
2. Click on a Redemption request.
3. After it you will get a notification about the time for withdrawing the funds.
4. Approve transaction on your wallet.
5. You have successfully requested to withdraw the funds, now you can wait for the approval from the Overnight side.
6. After that user have up to 96 hours to complete the withdrawal of their insurance tokens.
7. Enter the amount you want to withdraw from the vault and Click on the withdraw button.
8. Choose how much OVN INS you want to withdraw and click Approve OVN INS.
9. Approve transaction on your wallet.
10. Click on a confirm transaction.
11. You’re successfully withdrawing INS from the Insurance Vault.
Conclusion
In conclusion, Overnight Insurance represents a flexible approach to risk management in the crypto space. By staking OVN tokens, investors can participate in high-yield strategies but also do your own research about the risks.
Insurance allows entry into riskier strategies, with high yield, but yield not every day, therefore increasing potential returns for both INS and USD+ holders.
It’s a win-win for those looking to balance risk and reward in their crypto investments.
