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Have you heard about Cove?
Given that the protocol didn’t have a testnet, you might not have, or you might have seen its $3 million pre-seed raise led by Electric Capital, with participation from Accomplice, Daedalus, and Robot Ventures.
Cove is launching its mainnet today, the team exclusively told Blockworks. They’re also launching coveUSD, which lets folks earn yield on Ethereum.
But let’s back up: The Cove protocol aims to deliver “risk-adjusted yield” through curated DeFi vaults. It came about as a solution for Cove founder Sunil Srivatsa.
“I’m just spending a lot of time onchain, monitoring different returns and trying to earn the most money. And I got sick of it, and I was like, ‘There’s got to be a better way to do this,’” he said. “This is how I would yield farm if I wasn’t lazy.”
So Srivatsa built the protocol and partnered with Gauntlet so that the two can bring their strengths together.
“[Gauntlet’s] actually done a very comprehensive methodology that’s kind of underpinning all the strategies that we’re launching, where they’re doing all the data and model, the data modeling, offline, off-chain, using their existing systems,” Srivatsa said. Cove has written “Python Silverback bots that are able to basically take [the] off-chain intelligence and use that to run the protocol in the most optimized fashion.”
Right now, Cove is only on Ethereum, but Srivatsa teased that it plans to expand later on. However, the focus is on executing “safely and in a controlled fashion.”
“We’re working very closely with Gauntlet to make sure that we’re optimizing and monitoring everything as we roll this out,” he said. Cove is set up to rebalance once a day, which should take roughly 15 minutes. But if it has to retry, then it could take up to 45 minutes.
Srivatsa designed Cove to be noncustodial. Basically, he wants to automate the features for ease of access. That also went into the thought process behind the UX, he said.
To protect both the users and the protocol, Cove’s already undergone three audits with Zellic and Pashov Audit Group. Quantstamp and Trail of Bits are also auditors, per the website.
You could have probably already guessed this, but Cove won’t initially be available in the US. Srivatsa is hoping for a day with more regulatory clarity where they can remove the geoblock, especially since the team is US-based, but we’re just not there yet.
Clearly, this isn’t Srivatsa’s first rodeo. He previously was the CEO of Saddle Finance, which wound down in 2023. He then founded Storm Labs, which raised the pre-seed round for Cove.
His experience in the space has led him to realize that “DeFi doesn’t really need automated market making. It needs automated investing.”
Notably, this has been a concept tried by other projects in the past, such as Sommelier.
I asked Srivatsa how he plans to build out the user base since the protocol’s going straight to mainnet. For him, it’s simple: Make DeFi as easy to use as running water. It’s something that comes from his past experience at Uber.
“Anybody should be able — with one click — to access a safe rate and noncustodial[ly],” Srivatsa said. “You shouldn’t have to deal with banks or wire transfers or any of this stuff; you should have full control over [your] finances.”
As for another venture round, Srivatsa told me to “keep your eyes posted.” He also teased that the Apple v. Epic Games ruling from earlier this year may have sparked some interest.
“I think a native mobile application that makes it as simple as you can to go from Apple Pay to earning with coveUSD, and then taking your money out again is something that would be cool. So, [we] might be working on something in that avenue as well,” he said.
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