Insurance Vault

Overnight Insurance Overview

The Overnight Insurance is a strategic initiative designed to minimize risks associated with the protocol while providing OVN token holders with an opportunity to earn premiums and participate in the insurance ecosystem.

Rebase Tokens and Risk Management

Minimizing Protocol Risks Overnight rebase tokens (USD+, DAI+, USDT+) are specifically designed to minimize protocol risks. To achieve this, we prioritize established, low-risk protocols. We avoid newer protocols or forks developed by untested teams, as we consider protocol risk akin to a black-swan event—something that cannot be effectively hedged, insured, or diversified away.

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Yield Generation Through Delta-Neutral Strategies

Delta-neutral strategies to maximize yield Because established protocols tend to offer lower returns, our rebase tokens, particularly USD+, employ delta-neutral strategies (ETSes) to generate attractive yields for users. These strategies come with varying levels of risk—low, medium, and high—so there may be occasional days when losses occur by design. However, these losses are usually modest, and we mitigate them through diversification and partial insurance.

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Introducing the Overnight Insurance Vault

OVN Staking and Premiums To further manage risk, Overnight has introduced the Overnight Insurance Vault, available on each blockchain. Holders of OVN tokens can stake their tokens in exchange for insurance premiums (1 INS = 1 OVN). Staked OVN tokens will receive a portion of the yield generated by insured strategies from the rebase token collateral (note: not all strategies are insured).

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How the Vault Works

Covering Losses On any day when a loss occurs due to an insured strategy, the vault will cover the full amount of the loss. This ensures that users are protected from potential downside risks.

Accumulating Excess Yield On profitable days, any excess yield generated will accumulate in the vault. This yield will be used to purchase OVN tokens from the market, adding to the vault's holdings. If a loss occurs, the reverse happens, with assets being liquidated to cover the loss.

Incentivized Staking Since the vaults are not immediately redeemable, stakers are encouraged to support strategies that balance risk and reward optimally, ensuring the long-term sustainability of their investment.

Conclusion

The Overnight Insurance Vault not only provides a mechanism for risk mitigation but also incentivizes OVN holders to engage actively in the ecosystem. With its focus on stability and yield generation, the Insurance Vault enhances the overall value proposition of the Overnight protocol.