It is no longer news that decentralized finance [DeFi] is one of today’s buzzing topics among crypto enthusiasts. Wherever there is tremendous popularity and hype, predators are there. And thus, investors and traders are highly skeptical of any product offering because of the nascent nature of this space.
The latest platform that has come under tight scrutiny by community experts is the COVER protocol and its founding team more specifically. Jason Choi, the Founder of ‘The Blockcrunch Podcast’, criticized the project and revealed he was hopeful that about Cover protocol and thought that it could be a viable addition to DeFi insurance, but the team’s “repeated reckless decisions” suggested otherwise.
Was hopeful that @COVERProtocol could be a viable addition to DeFi insurance, but the team's repeated reckless decisions suggests otherwise.
— Jason Choi (@mrjasonchoi) October 18, 2020
Jason Choi went on to claim,
“70% of new supply is rewarded to a new yield farm, to be launched. SAFE1 farm and dumpers are irrelevant. SAFE2 holders who backed the project now own 17% of the project vs 100%”
Unveiled in September this year by Chefinsurance, the Cover protocol is basically insurance to the DeFi’s smart contracts. These are inherently risky. The protocol promised to address the biggest obstruction to the DeFi space, which happens to be the involvement of humans.
Its native SAFE token witnessed two massive pumps in its price which was then followed by and two huge dumps. This happened when the token was called ‘SAFE’ and the other, after its migration to SAFE2. The SAFE token saw a meteoric surge of a whopping13,500% driving its price all the way to roughly $73,640 before crashing to the press time price of $3.66 per token.
With respect to SAFE2, soon after the token migration on the 26th of September, the token climbed all the way to $700 before dropping by nearly 90%, at an approximate press time value of $88.86.
It all started with the departure of its lead investor, Azeem Ahmad. It was primarily due to dumping and the inexperience of developers, which led to several prominent players in the industry taking over the insurance protocol.
Notably, Cover Protocol’s official blog post claimed to have received grants from Andre Cronje and Blue Kirby, both from Yearn.Finance. Additionally, Sam Bankman-Fried, the CEO of FTX was also mentioned as one of the key advisors of the platform to which he commented,
OK guys I have no idea what's happening with COVER. I'm not involved in any of the decision making. This tweet also isn't passing judgement since I DON'T KNOW WHAT'S HAPPENING.
not investment advice
— SBF (@SBF_Alameda) October 18, 2020
It is important to note that this isn’t an isolated bizarre event. Both SBF and Andre Cronje are two very popular and vocal industry experts on Twitter and their alleged involvement in several other projects have been a bone of contention for quite some time. SBF was recently accused of allegedly borrowing YFI and destroying its price, before later selling it on Binance. Cronje, on the other hand, was in the receiving end of a severe backlash and was also sued over his unfinished Eminence Finance [EMN] project, which was hacked.
If you want to look for yourself, this wallet might be Alameda's because it has $72M in FTT.
They have borrowed 2.7M UNI + 165 YFI (+ no CRV) yesterday and sent them to Binance. They have repaid 1.3M UNI since.
— Julien Thevenard (@JulienThevenard) October 7, 2020