DeFi insurance interpretation: on-chain insurance investment

“Insurance is also an investment.” You must have heard this sentence from an insurance salesman. Nowadays, decentralized insurance deployed on the blockchain in the form of smart contracts fully embodies the “investment”.

Using NFT to tokenize insurance policies, traditional insurance models have been moved to the chain, and decentralized insurance that is still in the early stages of exploration has developed a variety of insurance types, not only for security incidents, but also for market risks; in addition to targeting Risk, the development perspective is also focused on the development of the DeFi protocol and the user’s habits of using DeFi.

In the previous issue of DeFi Cellular, we introduced two insurance applications, CoverProtocol and ArmorFi, developed based on the classic decentralized insurance Nexus Mutual. In this issue, we will introduce the evolving insurance applications. They have developed diversely based on user needs. New insurance forms and methods of insurance.

“Basket” insurance platform InsurAce

Introduction

InsurAce (INSURE) was originally built on Ethereum. It is now a decentralized multi-chain insurance platform. It mainly provides insurance services for DeFi users. The feature is that insurance is packaged into a “basket” of products. Users can purchase it at a time. Covering insurance premiums to multiple agreements reduces insurance premiums and also improves capital utilization.

DeFi insurance interpretation: on-chain insurance investment

InsurAce official website

Why is there such a design? Because of the characteristics of the DeFi protocol-each protocol application does not operate in isolation like most Internet products. They often have protocol interactions, combinations, contract calls and other behaviors, which may lead to a security incident that may be transmitted to multiple protocols.

In addition, user behavior is also the reason why InsurAce has made insurance “a basket”, because users often use DeFi applications to maximize revenue, and they will distribute funds in different protocols, or even on different chains. However, the current insurance products on the chain provide a single insurance policy for different protocols and assets, and usually only provide services for the mainstream DeFi protocol on one chain, and cannot provide cross-chain DeFi insurance, which causes users to pay multiple premiums. The scope of insurance is also limited.

InsurAce’s “basket” insurance products are more in line with the actual insurance needs of the DeFi world. For users who hold multiple agreement assets or hold assets on different chains, InsurAce supports users to control multiple DeFi agreements on the platform. Capital position, one-time purchase of “basket” priced insurance products.

Operating mechanism

InsurAce adopts the form of combined insurance, so that the underwriting fund pool does not target a single agreement, but supports a basket of DeFi agreements to reduce the premium cost of insured users and diversify the risk of the insurer.

In InsurAce, there are two business lines, insurance and investment, to support the liquidity and sustainability of funds. The insurance business line is responsible for maintaining the insurance fund pool and guaranteeing the solvency of the insured amount; the investment business line is responsible for maintaining the investment pool, and the proceeds generated by the funds can be used to subsidize insurance premiums or repay claims. The insurance fund pool will also provide insurance for the investment fund pool and increase premium income. There is a mutually supportive relationship between insurance and investment.

Therefore, on InsurAce, there are not only traditional insurance policyholders, underwriters, but also investors, who will benefit from the mutual assistance relationship between investment and insurance business on the platform. For example, investment user A can invest in assets such as DAI/ETH on the platform InsurAce, and his investment will be underwritten by InsurAce almost “0” insurance, and he will receive investment income and INSUR rewards. Underwriter B pledges assets DAI/ETH to the underwriting pool to provide funds for the insurance pool, and will also receive investment income and INSUR rewards. When a claim event occurs, B needs to provide a certain amount of funds to compensate the claiming user; the single or multiple insurances purchased by the insured user A on the platform can also allow him to receive INSUR rewards and premium subsidies.

Insurance method

Users do not need KYC to apply for insurance on the InsurAce platform. They only need to enter the agreement that they want to insure in the agreement, fill in the amount and time of insurance, and the agreement will give a premium quotation and purchase.

There are multiple selection dimensions when users choose insurance for applications. For example, DeFi applications under the same public chain, or selected according to the track category, such as DEX, lending applications, synthetic asset applications, etc., can also be freely combined to choose. Purchasing insurance on the InsurAce platform is very similar to buying things on Taobao. You only need to put the A, B, C, and D insurance you want to buy into the shopping cart and check out.

Business data

According to InsurAce official website data, the insurable capital capacity of the platform is 18.73 million U.S. dollars, and the insured capital is 4.76 million U.S. dollars. Currently, the platform supports nearly 60 DeFi applications on 8 public chains including ETH, BSC, Fantom, and Terra. The governance pass INSURE has also been issued, with a total issuance of 100 million, and the number of currency holding addresses is 4,811.

Helmet, a comprehensive insurance platform under the option model

Introduction

Helmet (HELMET) is an insurance comprehensive trading platform on the Binance Smart Chain BSC. It provides a forward payment price contract for on-chain assets through the logic of option products, which is executed by a smart agreement to help on-chain DeFi users avoid some emerging issues. The financial risks brought about by the sharp rise and fall of assets, such as the “double risk” or the 50% “cut risk” of CAKE, are particularly suitable for the impermanent losses caused by LP mining.

DeFi insurance interpretation: on-chain insurance investment

Helmet official website

Unlike other insurance products, Helmet does not address the security issues of smart contracts, but rather addresses the financial risks caused by asset price fluctuations faced by DeFi users.

Operating mechanism

Helmet also tokenizes insurance policies to realize the circulation of insurance policies or underwriting policies on the chain. The core function of the insurance application is supported by two Tokens, LONG (claimable token) & SHORT (non-claimable token). The insurance provider uses mortgaged assets to cast two kinds of tokens at a ratio of 1:1. The insured needs to purchase LONG, while SHORT is held by the insurer. Users obtain the corresponding rights by holding these two different tokens. Each token contains four data: valuation assets, underlying assets, policy price, and insurance period.

To put it simply, the Helmet project team itself or the holder of the governance token HELMET is the insurance provider. Users can decide whether to buy SHORT or LONG according to the trend of the platform’s support for each DeFi asset.

For example, a user holding BNB wants to participate in LP liquidity mining of the BNB-HELMET fund pair. If he is worried that HELMET will fall in the future and cause impermanent losses, he can purchase a “50% cut risk” at Helmet.insure.

Assuming 1 HELMET=5 BNB, then he can use 0.1 BNB to buy 5 BNB of “50% cut risk” LONG. Before the expiration date of the insurance, when he withdrew HELMET from the liquidity pool, he found that the price of 1 HELMET fell to 3 BNB At this time, he can exercise his right and exchange LONG for 5 BNB; if he finds that the price of 1 HELMET is higher than 5 BNB when withdrawing, then he will lose 0.1 BNB premium. In the whole process, the user only needs to pay a premium of 0.1 BNB, which can avoid the loss of 2 BNB.

Insurance method

On the Helmet platform, users have two ways to apply for insurance. One is to purchase LONG tokens of a certain underlying DeFi asset on the Helmet insurance trading platform, and the other is to mint LONG and SHORT tokens at 1:1 through mortgage-denominated assets (usually BNB). You can insure by selling SHORT tokens. Users who hold LONG tokens, if the payment conditions are met at maturity, the wallet will automatically call LONG tokens, deduct the insured subject assets, and send the denominated assets corresponding to the insurance policy.

In addition, the insurance provider can also participate in liquidity mining on the Helmet platform by holding SHORT tokens, and obtain the platform token HELMET reward. It should be noted that the current liquidity mining does not support LONG tokens.

Business data

At present, the Helmet platform supports insuring the rise and fall of 10 assets such as HELMET, ETH, CAKE, WBNB, and the total issuance of the governance token HELMET is 100 million.

Open the insurance market Nsure Network

Introduction

Nsure (NSURE) is an open insurance platform on Ethereum. It mainly provides insurance for DeFi smart contracts. If the insured loses funds due to the smart contract issue of the DeFi project invested, Nsure will compensate the user with funds.

DeFi insurance interpretation: on-chain insurance investment

Nsure official network

Nsure draws on the operating model of “Lloyd’s of England”-not directly operating insurance business, only providing trading venues and insurance-related services to members-to provide insurance demanders who wish to transfer risks and capital suppliers who are willing to take risks The place of transaction can be regarded as a decentralized “Lloyd’s”.

On the Nsure platform, the demand side of insurance is users who want to protect the security of DeFi application assets, and the supplier of insurance is people who are willing to provide assets to take risks and gain benefits. The Nsure platform hopes that anyone can become an insurance issuer of DeFi applications to address the diverse insurance needs of the DeFi ecosystem.

Operating mechanism

In the entire ecosystem of Nsure, there are three main roles, namely the policyholder, the underwriter and the fund provider, that is, the “capitalist”.

The insured is the insurance demander who wants to transfer the risk.

The insurer is an insurance provider who is willing to take on risks. It is necessary to pledge NSURE tokens to the underwritten project to earn profits and bear risks. If the underwritten project has no problems during the guarantee period, the insurer can get 50 % Of premium income.

“Capitalist”-refers to the user who puts assets such as ETH, USDT, USDC and NSURE into the Nsure capital pool. The funds provided by the capitalist are the ultimate payment guarantee of the Nsure platform. The capitalist earns NSURE token revenue by staking the tokens in the capital pool. This process is also referred to as “fund pool” mining. The capitalist holding Nsure tokens can pledge Nsure tokens to participate in project underwriting and obtain premiums. Income, but also can participate in community governance.

In addition, the funds on the Nsure platform mainly use three major capital pools to ensure the normal operation of the entire system. The three major capital pools are: reserve pool, reserved pool and capital pool.

Reserve pool-mainly used for compensation. After the claim is confirmed, the funds in the reserve pool must be ranked first for compensation. Only when the reserve pool is insufficient to pay the compensation, the system will withdraw funds from other pools. The funds of the reserve pool mainly come from the expenses of the policyholders, and the system will put 40% of the premiums into this pool.

Reserved pool-mainly used to reward users who participate in voting governance during the claim phase. If no claim occurs on the insurance expiration date, this part of the reserved funds will flow into the reserve pool. The funds in the reserved pool also come from premiums, and the system will put 10% of the premiums into this pool.

Capital pool-The size of the funds in the capital pool represents the solvency of the Nsure platform, and it is the last link in the guarantee of the source of funds in the settlement of claims. As mentioned earlier, in the compensation process, when the reserve pool has insufficient funds to pay compensation, it is necessary to withdraw funds from the capital pool to pay compensation. The funds in the capital pool come from ETH, USDT, USDC and other pledged mining tokens invested by the “capitalist”.

Insurance method

When insuring Nsure, users do not need KYC, they can enter through the wallet under the Ethereum standard, and then select the DeFi application, the insured amount, and the guarantee time that they want to insure, and pay the premium through tokens such as ETH, USDT, USDC, NSURE, etc. buy insurance.

In addition, Nsure premiums depend on the supply and demand in the insurance market, not fixed rates. The higher the demand for insurance, the higher the premium, that is, the more Nsure tokens pledged in the insured project, and the more insurers who provide insurance, the cheaper the premium.

Business data

According to data from Nsure’s official website, the platform has a capital pool of 3.96 million U.S. dollars, regular insured policies valued at 670,000 U.S. dollars, and 9.59 million U.S. dollars worth of insurance policies have been sold, and 36 insurance policies have been sold. The total number of NSURE tokens issued is 100 million, and the number of currency holding addresses is 2,576.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/defi-insurance-interpretation-on-chain-insurance-investment/
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