Intro to Price Protection
Some insight into the powerful new NUTS use-case launching next week on Squirrel.Finance:
What is Price Protection? 🔏
Price Protection is a brand new DeFi product in our ecosystem which allows you to add cover to your favourite tokens, and if they fall 75%+ over 2 days then you will be able to automatically claim NUTS compensation. This is designed to protect users from “rugs” or economic attacks, where the price of their token vastly falls overnight from an exploit etc. This powerful feature allows users to feel safer farming other projects knowing they have rug protection. It is completely fee-free and all you need to get cover is deposit some NUTS into the Nuts Farm 🌰 These farming NUTS continue to earn rewards like normal and you can unstake at any time.
The amount of compensation you receive depends on how many NUTS you are farming with, at launch compensation will start at 0.1x of deposit but will be increased for popular tokens in future. So if you want to protect the price of more tokens you simply farm with more NUTS.
So how does it work? 👨🌾
Farmers first select which token they wish to protect (e.g. CAKE) then after 24 hours their cover begins. Every day an oracle records the TWAP (dex average price) of their token, if it has decreased 75%+ over 2 days then the user is able to claim NUTS compensation.
Farmer deposits 100 NUTS into Nuts Farm then selects to price protect CAKE, on Monday the price is $18 and falls to $14 on Wednesday, the farmer is not able to claim any compensation.
Farmer changes to price protect the POOP token which is $1 on Wednesday but their project gets exploited and price crashes to $0.20 on Friday, so the farmer can claim 10 NUTS compensation.