Name of Project
Partnership with UNION (UNN) Finance
Background
In 2021 over $10.2 Billion Dollars were lost as a result of crypto hacks, scams, and other malicious activities. Immunefi 2021 Loss Report.
In the first few weeks of 2022:
• Wormhole Bridge Hack (2/2/2022) - 120,000 wETH (≈$321mm)
• Qubit Finance Hack (1/28/2022) - 206,809 BNB (≈$80mm)
• Multichain Hack (1/19/2022) - Misc. Tokens (≈$3mm)
• Crypto(dot)Com Hack (1/19/2022) - 444 BTC (≈$18mm) / 4,600 ETH (≈$15mm)
• Lympo Hack (1/10/2022) - 165.2mm LMT (≈$19mm)
• LCH Exchange Hack (1/8/2022) - Misc. Tokens (≈$7mm)
As exhibited above, more than $450 Million Dollars have been lost or stolen in the very beginning of 2022 alone. Hacks, scams, and malicious activities decimate communities and literally bankrupt users.
Proposal Overview
UNION FINANCE brings the Harmony ecosystem Protection for Smart Contract Hacks, Exploits, and other DeFi Event Risks. UNION is a technology platform that allows DeFi participants manage their risks across smart contracts and protocols in one scalable system. UNION decreases the entry barriers for retail users and lays the foundation for institutional investors.
UNION’s DeFi protection is fully composable, allowing it to be easily tailored to specific first and third-party risks through its use of standard, battle-tested capital models borrowed from TradFi but applied with the needs of a complex, emerging DeFi ecosystem.
UNION provides a robust product marketplace where users can easily purchase protections (Protection Buyers) or earn premiums in return for providing coverage liquidity (Liquidity Providers).
In its proposed deployment, UNION will initially release three protection products to the Harmony ecosystem: U-CDS, C-OP and Bridge Protection. Additionally, UNION will spearhead an education campaign, educating and informing Harmony users about the importance of protecting their funds and using protection products to mitigate their DeFi risks. Finally, and most significant, UNION will enable the development of a robust Harmony Ecosystem Protection Fund. This Fund can be used to provide base liquidity and incentives for projects launching and porting on Harmony to offer protections for first and third-party risks, including potential reimbursements from smart contract hacks, code malfunctions, and team wrongdoing. An Ecosystem Protection Fund will expand the demand for and use of dApps on Harmony chain.
UNION’s Crypto Default Swap (U-CDS)
UNION will provide the composable pool architecture for smart contract protection to the Harmony ecosystem. UNION’s Crypto Default Swap (U-CDS) protects purchasers against event risk such as smart contract exploits, oracle manipulations, and rug pulls. U-CDS implements a model where the buyer premium is paid 100% upfront. If an event is triggered, payout is always 100% of cover bought.
All pool liquidity is on chain and every dollar of provided protection is backed by a dollar in UNION’s protection pool. Pool liquidity and governance are intentionally separated, preventing the perceived conflicts that plague other protection projects. Claims are voted on by holders of the Union Protocol Governance Token (UNN Token), and not by pool Liquidity providers. Kleros provides final adjudication when outcomes that fail claimant appeal are further challenged.
Collateral Optitimization/Volatility Protection (C-OP)
UNION’s C-OP is a DeFi derivative primitive, commonly thought of as a DeFi Option Vault (DOV), that can be used to protect the value of a borrower’s collateral base in the context of DeFi lending, or as a standalone put option to hedge the risk of a sudden downward price movements. When integrated with a lending platform, C-OP allows a borrower the ability to increase collateral factors to 100%. When C-OP is deployed, the user reduces risk in portfolios and enhances capital liquidity in the form of lowering margin requirements.
C-OP operates as a contract-by-request (CBR) pool where Protection Buyers are buyers of puts and Liquidity Providers are sellers of puts. The pool is a consistant put writer. Protections for otherwise volatile currencies can be purchased or paid in stablecoin, wBTC, or wETH. Pool premiums are paid by Protection Buyers and are split amongst Liquidity Providers and UNION’s Foundation Reserve. As long as the pool’s liquidity does not fall below the pool’s minimum capital ratio, liquidity Providers accrue yield and can withdraw their liquidity at any point.
Bridge Protection
Cross-chain bridges are critical infrastructure for a scalable and interoperable ecosystem of public blockchains. As the volume and value of transactions deployed across bridges increase, asset protection plays a pivotal role. It ensures that the funds invested by DeFi participants are adequately protected in the event of cross-chain bridge problems. Cross-chain asset coverage is a nascent space but one that will soon absorb a significant portion of DeFi’s demand for protection pools and other instruments as interoperability expands. UNION provides the composable pool architecture for asset protection for balances and NFTs that move over Harmony partner bidirectional bridge(s). Using UNION’s U-CDS structure, Bridge Travelers trade event risk with Liquidity Providers who receive premiums and farming opportunities.
UNION’s protection products are currently live on Ethereum and Avalanche. UNION code and infrastructure is extensively audited, and subject to ongoing external bounties. UNION’s hygene is additionally bolstered by an in-house Cybersecurity Center of Excellence, called Sanctum Security, which performs operations, infrastructure, data, and team risk assessment and remediation, in addition to traditional smart contract audits.
UNION conducted a Private Sale in November 2019 with backing from Alameda Research, Bearing Waters Ventures, Spark Digital Capital, AAM, 3 Commas, Cluster Capital, Rarestone Capital, and Black Edge Capital.
Proposal ask
UNION Requests a total of $370,000 USD for development funding and $4.5mm USDC in TVL to be split between C-OP/U-CDS protection offerings, Bridge Protection, and a Harmony Ecosystem Protection Fund. Harmony will have full discretionary control of all TVL contributed to the UNION Protection Marketplace.
Milestone 1: UNION is officially deployed to the Harmony main chain.
• Duration (weeks): 3-4 weeks
• Deliverables: Mainnet deployment, certification, and validation
of test and production front end for C-OP and U-CDS.
• Funds Request: $50,000 USD
Milestone 2: Harmony ONE Token support added to C-OP product. Allows for ONE C-OP Protection Policies written/paid in wETH, wBTC, and USDC. Allows ONE token to be used as an underwriting denomination in UNION protection pools on Harmony chain.
• Duration (weeks): 3-4
• Deliverables: C-OP Policies for ONE. ONE use in UNION C-OP protection pools.
• Funds Request: $120,000 USD
• TVL Request: $1mm USDC
Milestone 3: Harmony Bridge Protection
• Duration (weeks): 3-4 weeks
• Deliverables: Harmony Bridge Audit. Bridge Protection product on Mainnet
• Funds Request: $50,000 USD
• TVL Request: $1mm USDC
Milestone 4: Harmony Ecosystem Protection Fund
• Duration (weeks): 3-4 weeks
• Deliverables: Creation of Harmony-managed protection pools that can be used to incentivise hygene and contribute base liquidity to projects seeking to offer first and third party protections on the Harmony platform.
• TVL Request: $2.5mm USDC
Milestone 5: UNION Risk Education for Harmony Community
• Duration (weeks): 24-32 weeks
• Deliverables: Production of platform content and marking associated with safer network and
application use. Incentives will be incorporated into the UNION hUNNy Badger Badge
program.
• Funds Request (USD): $150,000 USD
Metrics for success
• 10,000 users within 6 months of launch
• $5mm USDC (or equivalent) in additional liquidity locked with C-OP and U-CDS products within 6 months of launch
• First and Third Party Protection Policies for 100 Harmony projects partially funded through Harmony Ecosystem Protection Fund
External links
General Links
• UNION (UNN) Finance Web: https://www.unn.finance
• UNION Twitter: twitter.com/UNNFinance
• UNION Telegram (Main): Telegram: Contact @UNNFinance
• UNION Telegram Announcement: Telegram: Contact @UNNFinanceANN
Security and Audit Links
• Certik Audit (UNN, December 2020): github(dot)com/UNIONProtocolFoundation/union-protocol/blob/main/docs/audits/REP-Union_Protocol-29_12_2020.pdf
• Cyber Unit Audit (C-OP, March 2021): github(dot)com/UNIONProtocolFoundation/OC-Protection/blob/main/docs/audit/UNN_Audit_March_2021.pdf
• Sanctum Security Audit (C-OP, April 2021): github(dot)com/UNIONProtocolFoundation/OC-Protection/blob/main/docs/audit/C-OPAudit_SANCTUM_MB-20210421_V1.pdf
• Cyber Unit Audit (U-CDS, May 2021): github(dot)com/UNIONProtocolFoundation/SC-Protection/blob/main/docs/audit/CYBERUNIT_UNN%2520Internal%2520Audit_Protections_20210509.pdf
• Sanctum Security Audit (U-CDS, July 2021): github(dot)com/UNIONProtocolFoundation/SC-Protection/blob/main/docs/audit/SANCTUM_UNN_Audit_SCP_20210721.pdf
• Immunefi Bug Bounty (since April 2021): immunefi(dot)com/bounty/unionfinance
• Github: github(dot)com/UNIONProtocolFoundation
• Gitbook: union-protocol.gitbook(dot)io/union-protocol/guides/c-op