Providing liquidity to Uniswap v2 forks on L2s (like SushiSwap on Arbitrum or PancakeSwap on Base) is a straightforward airdrop farming method. You deposit paired assets into a pool and receive LP tokens. Holding these tokens demonstrates active liquidity provision within that specific ecosystem. This is a fundamental, high-value action that is almost always tracked. The depth and duration of your liquidity are key factors, with long-term providers often receiving significantly larger allocations in ecosystem airdrops.
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Practically, coverage above 90% is economically challenging due to moral hazard concerns. Full coverage would eliminate operator skin-in-the-game, undermining network security. Most sustainable insurance models cap coverage at 70-80% of potential losses, ensuring operators retain meaningful financial responsibility for their performance and risk management.
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Are collateral requirements for full coverage economically viable? The collateral requirements for an insurer to offer full, uncapped coverage are likely not economically viable. To credibly backstop the simultaneous slashing of a significant portion of the total staked value in the ecosystem—a "black swan" event—an insurance protocol would need to hold an immense amount of idle capital. The cost of locking up this capital would be passed on to operators in the form of premiums so high that they would negate the profit from staking. The more viable model is a mutualized risk pool, like those in traditional DeFi insurance, where the capital pool is funded by the collective premiums of all covered operators. This pool can cover a certain level of losses, but it is not designed for a total system collapse. Full coverage is therefore a theoretical ideal, but partial coverage and caps are the practical and economically sustainable compromise.
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