Ozone (OZ)

Basics

• Based in:
• Started in / Announced on: 3-5-2021
• Testnet release:
• Mainnet release: 31-12-2021
• An algorithmic risk management marketplace for the Terra ecosystem.

History

• Insurance protocol proposed by Do Kwon (7-5-2021) which would not work with manually checking claims but with game theory.

Audits & Exploits

• Bug bounty program can be found [insert here].
• From the mainnet announcement (31-12-2021):

"Risk Harbor Ozone V1 has been audited by well-reputed industry auditing firms Oak Security and Certik."

Governance

Treasury

• From the governance forum post (3-5-2021):

"What is the use of the Ozone Community Pool? → Anything that the $OZ token holders decide, but i imagine it would be things like 1) paying for risk assessment of new protocols (protocol audits etc) 2) funding development of new ozone friendly features and products, 3) mitigating some unforseen failure of the system etc"

Token

Token Allocation

• From the governance forum post (3-5-2021):

"Supply: 10B, no max supply. Distribution:

1. 15% - Luna airdrops (5% genesis, 10% over 1 year)
2. 20% - OZ-UST LP incentives over 4 years
3. 20% - Community pool
4. 45% - Insurer incentives over 4 years (divided in weekly installments to insurers)"

Utility

• From their Telegram

"OZ token is emitted to cover losses that exceed contributions to the vault, not healing"

• From the governance forum post (3-5-2021):

"Functions:

1. Protocol governance
2. Backstops protocol solvency through new emissions
3. Captures yield from the farms the protocol is insuring through a buyback & distribute scheme to stakers"

Technology

• Whitepaper can be found [insert here].
• Code can be viewed [insert here]. From the mainnet announcement (31-12-2021):

"Risk Harbor plans to open-source the platform’s core protocol code soon."

Implementations

• Built on: Terra

How it works

• Risk Harbor Ozone V1 offers a decentralized marketplace to protect against smart contract risk only on Anchor, to begin with (31-12-2021).

• From the governance forum post (3-5-2021):

"Ozone is an insurance mutual protocol that facilitates levered coverage of technical failure risks in the Terra DeFi ecosystem. Insurers can deposit X UST and provide coverage up to N * X UST to cover various TeFi contracts, N being the leverage constant set by governance. When Ozone is “overleveraged”, the system calibrates itself to its target leverage ratio by increasing the emission of the $OZ governance token to insurers. The system has three actors:

1. The insurer
2. The insuree
3. The $OZ staker

System components:

1. oUST: Ozone UST - a virtual balance of UST that insurers can allocate to Covered Vaults to provide coverage. The insurer gets target_leverage_ratio * deposit size # of oUST when he makes the deposit.
2. Covered vault: A Covered Vault (CV) is a smart contract that wraps a TeFi contract that takes in UST and offers users yield. The CV deposits UST on behalf of the insuree to the yield contract, say Anchor, and takes the cut of the resultant yield. Should technical failure of the yield contract occur, the CV claims UST against the underlying insurance pool.
3. Global insurance pool: the global pool of UST deposited by insurers.

Provide coverage: The insurer can provide leveraged insurance through ozone, which locks up UST for varying periods of time, and earns yield from various TeFi contracts.

1. The insurer deposits X UST into Ozone, which mints X * target_leverage_ratio oUST. The deposited UST has a 1 year lockup period. This mechanism can be edited such that there are varying lockup periods with varying leverage ratios, similar to a Curve.fi bonding curve.
2. V2.1 Addition: The cover_fee is a function of the utilization ratio of the CV. cover_fee = min(cover_fee_max, 1 / u(CV)), where u(CV) = val(UST deposit in the CV) / val(oUST in CV), and cover_fee_max is some global gov determined var in [0,1], say 0.5.
3. The insurer then funds oUST into various Covered Vaults of his choice, and starts to earn a yield on each of them pro-rata to his portion of oUST staked to the overall pool. The cover_fee * (1 - climate_tax ) is collected by the CV is passed onto the insurers.

Buy coverage: Depositing into a covered vault allows the user to purchase ozone coverage for TeFi yield farming in exchange for paying a cut of the resultant yield.

1. The insuree may deposit UST into the covered vault - the CV deposits the UST on behalf of the insuree, and allows the insuree to claim 1 - cover_fee from the yield.
2. The insuree may only deposit UST when:
   • u(CV) < 1, that is, the oUST in the CV’s pool is greater than the amount of UST deposited by insurees.
   • size(CV AUM) < size (global insurance pool)
3. The insuree may claim his deposit from the CV.
   • The CV first attempt to call claim_underlying(), withdrawing the the deposit from the yield source. If the call fails or returns less than the size of the deposit, a global claim_delay period is triggered, after which claim_insurance() is called, provided that the claim is not successfully challenged by governance.
   • V2.1 Addition: Let L(CV) be the size of the CV funds impacted, and O(CV) size of the oUST deposits in the CV, which obviously observes the invariant that L(CV) < O(CV). First, the funds are paid out from the stakes of oUST depositors in the CV, pro-rata to their oUST deposits in the CV. If there are any remaining losses, they are withdrawn from the remaining insurance pool, “slashed”, with insurers being compensated in new emission of $OZ tokens vested over [1 year].

Challenge coverage

1. A challenge coverage proposal is a governance proposal to halt all claims for a CV, or for a particular {CV, claim address} tuple.
2. A resume coverage proposal is a governance proposal to resume all claims for a CV, or for a particular {CV, claim address} tuple previously blocked by a challenge coverage proposal.

Recover target leverage: As claims are made against the insurance pool, the real_leverage_ratio is going to at times climb higher than the target_leverage_ratio . The protocol aims to return the real_leverage_ratio to the target over time, by: Waiting : As new insurers enter and mint oUST at the target_leverage ratio, the real_leverage_ratio will organically converge to the target."

Staking

• From the governance forum post (3-5-2021):

"What will prevent $O3 stakers (now $OZ) from denying all claims to prevent dilution? → I believe $OZ stakers through long lockups will be incentivised to vote honorably, as Ozone’s loss of credibility will lead to discontinued utility for the protocol. Furthermore, keep in mind that claims governance isn’t approval-based, but denial-based - we could simply set the threshold to deny claims high to favor approval in cases where decisions are controversial."

Roadmap

• Can be found [Insert link here].

Usage

• From The Generalist (21-11-2021):

"One of Ozone's first big customers is early Terra investor Michael Arrington. His Arrington Anchor Fund will deploy institutional capital into the Anchor Protocol, withholdings secured by Ozone."

Competition

• Loads of insurance protocols on Ethereum, but as of 12-2021, not yet many on Terra.

Team, Funding, Partners

Team

• Full team can be found [here].
• Terra announced (11-2021) that Ozone would be managed by an external party. Risk Harbor, a provider of insurance for DeFi protocols, is assuming control.

(:

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