Umbrella Protocol is an insurance protocol launched by Yam Finance. Its core component is the MetaPool, where the party providing protection can deposit funds, and the party seeking protection receives a premium. Each MetaPool contains multiple Coverage Pools, and each Coverage Pool has a specific agreement or contract. A party seeking protection may seek protection by accessing these contracts or agreements. In addition, the fees and funding rates of MetaPool will not change after creation.

Summary

Umbrella protection agreements are designed to benefit both the policyholder and the insurer. After depositing a certain amount of insurance and paying the premium, the policyholder can get compensation to reduce the risk when the investment product suffers from a vulnerability attack; , the corresponding premium income can be obtained. There are two different types of pools in the Umbrella Protocol: The first is the underwriting pool established by the insurer injecting underwriting funds, also called MetaPools, and the insurer has access to the meta pool. The second is to provide insurance services for different products (agreement or contract), and the policyholder deposits a certain amount of insurance amount into the insurance pool, also known as the coverage pool (Coverage Pools), the policyholder has the insurance pool access permission. At the same time, Yuanchi will provide compensation guarantee support for the insurance pool. Each meta pool will cover multiple insurance pools at the same time, and provide compensation fund protection for the multiple insurance pools it covers. For example, if a meta pool is used to provide protection for "loan agreement" products, it can simultaneously cover and protect multiple insurance pools that provide insurance services for loan products. Such as Compound insurance pool, Aave insurance pool and Cream insurance pool. If any of the products (agreement or contract) encounters a vulnerability attack and is ruled valid by the arbitrator, then a certain proportion of the underwriting funds of the meta pool will be used as compensation funds to pay those Policyholders who participated and insured the affected products.

The establishment and function of type pool

Anyone can create and submit a meta pool, which is an underwriting pool, and conduct claims review through an arbitrator of their choice. Once the meta pool is created, it cannot be modified any more. For any update requirement, a new meta pool must be recreated as a replacement. Therefore, when creating a meta pool, many setting parameters need to be considered:

Coverage Pools
are insurance pools. Each pool will cover a series of product (agreement or contract) insurance pools. A certain amount of insured amount is deposited into the corresponding product insurance pool. On the other hand, the insurer will provide compensation guarantee support for these insurance pools within the scope of the total underwriting amount.
Arbiter
The owner of the Ethereum address selected as the metapool arbitrator will be responsible for confirming whether the claim is true and valid.
Protection Description
The founder of Metapool specifies the protection responsibilities to be fulfilled by the arbitrator, and the arbitrator has the final decision on the interpretation of this description.
Arbiter Rate
The insurance premium is used to pay the arbitrator for providing arbitration services. The ratio of the arbitration fee to the total insurance premium is the arbitration rate.
Creator Rate
The fee allocated to the creator of the meta pool in the insurance premium. The ratio of this fee to the total premium is the creator rate.
Funding Rate
The Funding Rate function is used to determine the rate level at which the policyholder pays the premium.
Bonding Curve
The bonding curve function is used to determine the number of insurance tokens that need to be minted or destroyed when the policyholder deposits and withdraws his or her insured amount .
Provider Withdrawal Period (Provider Withdrawal Period)
The Underwriter Withdrawal Period is used to prevent the run-on behavior when a vulnerability attack occurs. The period of time it takes for the payment to be received.
Seeker Purchase Period
The Seeker Purchase Period is used to prevent excessive casting behavior when a vulnerability attack occurs, and it is to purchase insurance from the policyholder The period of time required for the insurance to become effective.
Protection Asset (Protection Asset)
Protection Asset refers to the assets deposited by the policyholder in other products (agreement or contract), which are insured due to the need to avoid risks.

Each meta pool (underwriting pool) and the insurance pool it covers (insurance pool) will constitute a self-sufficient independent unit. That is to say, [Compound Insurance Pool] in [Yuan Pool A] and [Compound Insurance Pool] in [Yuan Pool B] are completely independent and independent in terms of insurance price, compensation ratio, and claim handling. Not related in any way.

Underwriting

The underwriting funds invested by the insurer in the meta pool will receive premium cash flow returns, and at the same time, an ERC20 token will be generated as a proof of the insurer's investment in assets. Among the multiple different product (agreement or contract) insurance pools covered by the meta pool, if any product encounters a vulnerability attack and is out of danger, the meta pool will allocate a certain share of insurance funds for compensation and pay to the affected products Policyholders in the insurance pool.
The insurer will collect insurance premiums as a return for investing funds and taking risks. The funding rate for collecting insurance premiums is determined by the utilization rate of insurance funds for each product insurance pool, and the funding rate The function is set together with the creation of the meta pool.
The insurer can withdraw its underwriting funds at any time, and the withdrawal operation must meet the withdrawal lock period set when the meta pool was created. Because the utilization rate of underwriting funds in the meta pool will not exceed 100%, the amount of underwriting funds withdrawn by the insurer depends on the utilization rate of the underwriting funds in the meta pool at the time of withdrawal.

Insured

The policyholder deposits a certain amount of insurance in the product (agreement or contract) insurance pool in exchange for insurance services, and pays the premium according to the fund rate. At the same time, the policyholder will obtain an indefinite ERC20 token as proof of his insurance status. In operation, this undated ERC20 token is similar to the pledge certificate (cToken) of the Compound project, and the balance of the underlying asset (balanceOfUnderlying) will gradually decrease with the accumulation of premium payments. Since the amount available for compensation should be consistent with the deposited insured amount, the amount of compensation available to the policyholder will also gradually decay over time.
When the policyholder deposits a certain amount of insurance money in exchange for insurance services, the insurance will take effect after a delay period. The purpose of this is to ensure that in the event of a vulnerability attack, policyholders will not take the opportunity to over-mint to make profits in an unethical manner.

Claims processing

Any policyholder who suffers from a vulnerability attack can submit a claim application to the arbitrator on behalf of the relevant insurance pool. According to the agreed protection statement, if the claim is ruled invalid, the operation of the umbrella protection agreement will not make any changes; and once the claim is found to be valid, it will enter the compensation process program.
The compensation amount is equal to the sum of the insured amount in the affected insurance pool and the unused insured funds in the meta pool. For example, there is currently 1,000 DAI stored in a meta pool, and 100 DAI are stored in each of the three insurance pools covered by this meta pool. At this time, if the product agreement in one of the insurance pools encounters a vulnerability attack, the corresponding compensation amount of the insurance pool should be 800 DAI. The calculation method is as follows:
Insured amount of the affected insurance pool + (total insured funds of Yuan pool − total insured funds of all insurance pools) = 100DAI + (1000DAI −300DAI) = 800DAI.
With the same algorithm, if the pool covers 6 insurance pools, and each insurance pool contains 100 DAI, the compensation amount when a certain insurance pool is out of danger will become 500 DAI. In this way, it can be guaranteed that each insurance pool can obtain a compensation amount not lower than the insured amount in the event of an accident. At the same time, the insurer can also calculate the maximum withdrawal of funds after payment.
Whenever a claim application is ruled valid, the relevant affected product (agreement or contract) insurance pool will be automatically re-established, and the meta pool will continue to operate after the claim processing is completed.

Disband type pool

If the arbitrator does not intend to continue to perform the arbitration function, he can choose to dissolve the Yuanpool. At this point, the funding rate is set to zero, and participating parties are allowed to withdraw funds instantly, while depositing funds is prohibited.