TI Research Report — 2021 Q1 DeFi Insurance

TI Research Report — 2021 Q1 DeFi Insurance

Since the DeFi boom last summer, the industry has continued to develop rapidly. According to the data from TokenInsight, as of April 30, 2021, the TVL in DeFi has exceeded $70B. The various sectors and functions of the traditional financial market have been continuously enriched on the blockchain, and the entire financial network on the chain has continued to improve.

MARKET OVERVIEW

Since the DeFi boom last summer, the industry has continued to develop rapidly, with the total lock-up volume repeatedly reaching new highs. According to TokenInsight, as of April 22, 2021, the total lock-up volume exceeds $58 billion. Various sectors and functions of the traditional financial market have been continuously enriched on blockchain, and the entire financial network on the chain has improved.

As a risk management for transferring and apportioning risks in traditional financial markets, insurance has developed relatively slowly on blockchain. Taking Nexus Mutual, Cover Protocol, and Opyn of DeFi insurance as an example, as of April 22, 2021, the total lock-up amount exceeds $400 million, which only covers 0.69% of the total lock-up value of DeFi. The average insurance coverage rate in the past year is 0.68%. However, with the overall rapid development of DeFi, the coverage rate has not shown a significant growth trend.

TI Research Report — 2021 Q1 DeFi Insurance
TI Research Report — 2021 Q1 DeFi Insurance

Main Insurance Project TVL / DeFi TVL Source: DeFiPulse, TokenInsight

There are certain differences between DeFi insurance and the traditional insurance market. Except for some projects that provide traditional insurance products only seek on-chain solutions, they do not make major modifications to the logic of the products. Some projects, such as Nexus Mutual and Nsure, are modified based on the co-insurance model of traditional insurance companies and the joint-stock company model to adapt to the chain ecology. Pricing is also based on insurance actuarial models, comprehensive risk costs, and product market supply and demand, etc. There are also projects such as Cover Protocol and Union, which are rooted in the on-chain ecological logic and regulate the insurance model through token economic model.

DeFi insurance is mostly property insurance, which is used to compensate for the economic losses of the insured. It is committed to the decentralization of the whole process of insurance product sales and payment determination. However, due to the difficulty of determining some payment, the involvement of committees and audit institutions, it makes the entire process far from fully decentralized.

However, it is undeniable that DeFi insurance continues to develop and improve, and projects continue to emerge, gradually from traditional insurance put on chain to risks fully covered in the crypto industry. As the price feeding of oracles matures and the demand for insurance from all parties increases, DeFi insurance projects have also begun to seek more efficient and personalized solutions.

  • On-chain traditional insurance projects take advantage of their own products and channels, and cooperate with traditional insurance companies to expand product types and products covering commerce, agriculture and other industries; but product transparency has not improved much;
  • Nexus Mutual and Cover Protocol, the insurance projects for smart contracts, continue to maintain a relatively high lock-up volume, to expand product coverage, and have successfully completed several claims;
  • With the growth of overall amount of funds in the crypto asset, the types of insurance against other risks in the crypto industry have been continuously improved. For example, Nexus Mutual launched custodial fund insurance, against centralized exchange fund hacks or withdrawal suspension; Helmet.insure launched Cover 50% Off, Cover Miss Out to deal with asset price fluctuations, etc.; however, most emerging projects are still in testing stage or even no detailed white papers, and in high homogeneity;
  • DeFi insurance project began to explore customized solutions for the Business-side, such as UnoRe providing reinsurance products for the Business-side DeFi insurance project;
  • Against the background of the high fees of Ethereum and the continuous enrichment of other public chain ecology, some DeFi insurance projects begin to explore the development models of other public chains, such as BSC, Polkadot, etc., and provide insurance products for these on-chain DeFi projects. At the same time, some DeFi insurance projects on Ethereum also begin to seek integration with other public chains.

In the future, the continuous enrichment of DeFi insurance product types and the improvement of the capital efficiency of the insurance market are inevitable trends. With the improvement of other public chain ecology and the increase in asset volume, the growth of risk protection demand promotes the development of DeFi insurance projects on each chain. It is more difficult to raise the risk control awareness of Customer-side investors, and they are more inclined to be the insurer. The solutions for Business- side may effectively promote the overall development.

TRADITIONAL INSURANCE PRODUCT

The insurance products of traditional insurance companies face widely criticized problems such as opaque pricing, single insurance products, and long claim procedures. With the development of blockchain and decentralized technology, some insurance product suppliers have begun to seek on-chain solutions which are to achieve transparency and rapid simplification of the entire process through insurance product purchases, claims applications, and compensation payments, etc. put on chain.

The development of traditional on-chain insurance products, such as flight delay insurance and weather insurance, benefits from the price feeding of the oracle and the continuous improvement of the data types provided. The insurance provider cooperates with the oracle project, and the payment determination of some insurance types can be directly completed based on the real-time data provided by the oracle.

However, most of the projects that provide traditional insurance products do not serve as insurance providers and only provide insurance sales platforms. Therefore, cooperation with traditional insurance companies is particularly important. Traditional insurance companies provide insurance products and sales channels, and insurance projects provide on-chain solutions for them. For example, in order to solve the problem of payment delay of agricultural insurance, ACRE Africa (an agricultural micro-insurance provider for smallholder farmers across East Africa) and Etherisc cooperated to launch the weather index insurance Bima Pima. Extreme weather data will automatically trigger the payment which will arrive in the insured’s account in time. ACRE Africa estimates that this will reduce the cost of policy issuance by 40% and premiums by 30%.

TI Research Report — 2021 Q1 DeFi Insurance
TI Research Report — 2021 Q1 DeFi Insurance

Traditional On-Chain Insurance,Source: TokenInsight

2.1 Etherisc

‘ Provide compliant Flight Delay Insurance and allow to create insurance products by one’s own

Etherisc is a platform for collectively building insurance products, allowing anyone to create their own insurance products by providing a common infrastructure and product templates. Etherisc cooperates with oracle projects Provable, ChainLink and BandProtocol to provide flight and agriculture-related insurance services, which will expand to crypto assets in the future.

  • Insurance type: Mainly traditional insurance products;
  • Token function: Use DIP as stakings, purchase insurance products, interact with other participants to build decentralized insurance products, pay necessary fees and capitalize to obtain insurance licenses, incentivize effective and appropriate behaviors, distribute income and profits among participants, reward customers and participants for providing data, pay for oracles and predict the market to resolve claims;
  • Development stage: Flight Delay Insurance has been launched on xDAI, Hurricane Protection has been deployed on the Ethereum test net, Collateral Protection for Crypto-backed Loans and smart contract insurance are under design, and Bima Pima, a collaboration between Etherisc and ACRE Africa, will be launched soon to protect small farmers in Kenya from climate changes.

2.2 Arbol

‘ Arbol determines weather insurance compensation based on weather parameters

Arbol provides weather insurance for farms, energy businesses, maritime transport fleets, and holiday customers to deal with the risk of loss of income or damage to the supply chain, covering weather conditions including rainfall, temperature and humidity, wind speed and direction, crop yield, snowfall, etc. Arbol cooperates with the oracle project Chainlink. There is no claim process. According to several parameters: positioning, risk parameters and coverage, compensation will be automatically paid or expired.

  • Insurance type: Traditional insurance product (weather insurance);
  • Development stage: Weather insurance covering rainfall, temperature and humidity, wind speed and direction, crop yield, snowfall and other weather conditions has been launched for farms, energy companies, marine transportation fleets, and holiday customers.

2.3 INSUREUM

‘ Provide weather protection products and network security products

Insureum is developed by Zikto Inc., an IoT device integration platform in South Korea, and is committed to using smart contracts to hedge emerging risks that cannot be covered by traditional insurance. Insureum provides a decentralized platform to connect policyholders, insurers, and third parties. At the same time, Insureum provides companies with more customizable contract terms. It requires users to register and complete KYC.

  • Insurance type: Weather insurance, network security insurance;
  • Token function: ISR is used for insurance purchase;
  • Development stage: Weather protection products and network security products have been launched, providing hedging products covering weather risks such as snow, rain and dust.

‘ VouchForMe provides Team-insurance solutions

VouchForMe provides team-based P2P insurance services. A group of insureds centralize their funds to manage and underwrite their own insurance. At the same time, they can prove their risk levels through Social Proof. VouchForMe provides Fleets and Individual Drivers insurance solutions, reduces the overall insurance cost of the fleet through calculation models, and provides customized solutions. At the same time, VouchForMe provides Income Protection insurance, an alternative insurance product for a group of people engaged in the same occupation, which can make up for up to two years of income loss, in case one of them loses the ability to work and cannot work for a long time.

VouchForMe itself is not a licensed insurance provider, and any insurance activities will be carried out in cooperation with licensed insurance companies in the local market.

  • Insurance type: Traditional insurance products (Fleets and Individual Drivers insurance, Income Protection insurance);
  • Development stage: Fleets insurance, Individual Drivers insurance and Income Protection insurance have been launched.

3. Smart contract vulnerability

The type of insurance for smart contract risks is still the most widely used category. The frequent hacking incidents caused by bugs or vulnerabilities in the underlying DeFi protocol smart contracts, flash loan arbitrage, protocol vulnerability attacks, and oracle operation attacks, all affect the stability of market and security of market participants’ assets.

Insurance projects that mainly target smart contract risks, represented by Nexus Mutual and Cover Protocol, have covered more than 70 DeFi projects and have completed multiple claims. As of April 22, 2021, Nexus Mutual’s total lock-up volume exceeds $400M, and Cover Protocol’s total lock-up volume exceeds $10M. However, due to the stringent claim conditions and complicated compensation evaluation process, users who wish to reduce risks through insurance projects are faced with narrow coverage, difficulty in identifying the source of loss, and high difficulty in claiming and high costs.

TI Research Report — 2021 Q1 DeFi Insurance
TI Research Report — 2021 Q1 DeFi Insurance

Smart Contract Insurance TVL,Source: DeFiPulse,TokenInsight

3.1 Nexus Mutual

‘ TVL’s highest insurance platform, requires KYC/AML

Nexus Mutual adopts a co-insurance model, which is similar to traditional co-insurance companies. It collects funds from policy holders and members to form a community to share risks and premium income. Users purchase Nexus Mutual token NXM and becomes its Member to have the right to vote in governance and participate in the assessment of claims through staking of NXM; the funds purchased from NXM are injected into the fund pool for insurance compensation. On the one hand, the funds in the fund pool come from the direct injection of the insured’s purchase of NXM funds, and on the other hand, 50% of the premium income will be injected into the fund pool. Due to the requirements of the entity company, users need to fill in the standard KYC/AML (Know Your Customer/Anti-Money Laundering) process.

  • Insurance type: Smart contract insurance (fund loss caused by bugs in smart contract code), custodial fund insurance (fund hacks or withdrawal suspension for more than 90 days);
  • Token function: NXM is used to purchase insurance and participate in claim evaluation, underwriting and governance;
  • Development stage: As of April 20, 2021, the total underwriting amount is $55.09 million, and 3,929 insurances have been sold; 79 insurance products are provided, including 65 smart contract insurance products and 14 custodial fund insurance products; 89 claims were initiated and 17 were successfully compensated.
TI Research Report — 2021 Q1 DeFi Insurance
TI Research Report — 2021 Q1 DeFi Insurance

Nexus Mutual Claims,Source: Nexus Mutual,2021–04–20

3.2 Cover Protocol

‘ Market maker participation, three kinds of token exchange

The Cover protocol operates based on a formula. For each DAI staking, the user gets two tokens: one CLAIM and one NOCLAIM:

1 CLAIM token + 1 NOCLAIM token ≈ 1 staking (currently only DAI is supported)

There are three types of participants in the Cover protocol market, depending on their currency holdings, CLAIM and NOCLAIM can be obtained by staking DAI or directly purchased in the market:

  • Market Makers: Hold CLAIM and NOCLAIM tokens and provide liquidity in the 80/20 CLAIM/DAI and 98/2 NOCLAIM/DAI fund pools;
  • Coverage Providers: Only hold NOCLAIM tokens and provide liquidity for them;
  • Coverage Seeker: Only hold CLAIM tokens and provide liquidity for them.

If an insurance is paid within the insurance period, the value of NOCLAIM corresponding to the staked DAI is zero, and the value of CLAIM is about 1 DAI which can be used to redeem the staking; if there is no claim or the claim fails, the value of CLAIM is zero and NOCLAIM is used to redeem the staking.

TI Research Report — 2021 Q1 DeFi Insurance
TI Research Report — 2021 Q1 DeFi Insurance

3.3 Nsure Network

‘ Committed to building a joint-stock decentralized Lloyd’s

Nsure is committed to building a decentralized Lloyd’s of London. It adopts a shareholding system, where users stake Nsure’s tokens NSURE to become insurers, similar to shareholders of traditional joint-stock insurance company, and enjoy the profit distribution after insurance compensation. The insured can set the insurance period and the insured amount by himself. Nsure has established three core mechanisms: a dynamic pricing model, which sets prices for insurance products under different DeFi protocols according to the scale of demand, staking scale and risk level; capital model, where fund providers can obtain Nsure tokens as rewards; three-phase voting mechanism .

  • Insurance type: Smart contract insurance (smart contract under attack);
  • Claim process: Voting by policyholders, audit institutions, referendum;
  • Token function: NSURE is used for governance, voting, underwriting and capital mining;
  • Development stage: The main net will be launched on March 31. As of 21:50 (UTC+8) on April 20, 2021, the total lock-up amount of the fund pool is $7,416,248; insurance products for 20 projects are provided.
TI Research Report — 2021 Q1 DeFi Insurance
TI Research Report — 2021 Q1 DeFi Insurance

Nsure Network Process,Source: Nsure Network, TokenInsight

4. Other risks

DeFi insurance has also begun to cover other risks in crypto industry to provide more comprehensive security protection, including crypto asset price fluctuations, exchange hacks, withdrawal suspension, oracle feeding errors, etc. Compared with smart contract insurance, which requires multiple rounds of voting, the payment determination of these insurances is simpler, and can even be completed by smart contracts with oracles.

4.1 PolkaCover

‘ B2C platform connecting large traditional insurance companies

PolkaCover is committed to becoming a B2C market that connects users and multinational insurance providers for insurance purchases and insurance policies to provide global insurance products, including crypto asset-related, health, life, education, and family insurance plans. PolkaCover will cover more risks, even including project bankruptcy, asset losses caused by damage to mobile phones and computers, and losses caused by information leakage. The insurance products on the platform will be provided and underwritten by large traditional insurance companies. In the future, it will establish its own P2P insurance platform (Insurance DAO).

  • Insurance type: Initial products aimed at users of crypto assets (exchange hacks, phishing attacks, project termination, permanent losses of NFT assets);
  • Token function: Staking, purchase insurance, policy discount, claim payment, claim management, etc.;
  • Development stage: Crypto asset insurance trading platform plans to launch the Beta version on Ropsten in Q2.

4.2 inSure

‘ SURE tokens in the wallet for 7 days are considered as insured

The purpose of inSure is to solve the agency problem and allow anyone to issue insurance for holders of decentralized protocols and crypto asset portfolios. The inSure ecosystem can protect traders and investors from scams and threats to the fierce devaluation of the cryptocurrency portfolio. The inSure ecosystem plans to use ChainLink and Google Integration to obtain timely updated smart contract data. If users want to purchase insurance for crypto asset portfolio, they only need to hold SURE tokens, and the insurance will automatically take effect seven days after the SURE tokens are placed in the wallet.

There are two fund pools in the inSure ecosystem, Capital Pool and Surplus Pool. Capital Pool is used to support business development, and fund providers will receive inSure tokens in return. Surplus Pool is used to store insurance premiums. When paying the claim, Surplus Pool will pay first. When the funds in Surplus Pool cannot meet the Minimum Capital Requirement, the fund withdrawal transaction in the Capital Pool will be frozen; and when the funds in Surplus Pool cannot pay for all claims, Capital Pool will pay the rest.

  • Insurance type: Fraud, substantial depreciation of assets or fund hacks (exchange closed);
  • Token function: Guarantee, voting, claim evaluation, etc.;
  • Development stage: It is planned to go online in 2021 Q3.

4.3 Bridge Mutual

‘ Bridge Mutual is a peer-to-peer insurance protocol and trading platform

Bridge is a decentralized and autonomous insurance application based on Ethereum. It allows users to provide insurance for smart contracts, stable coins and exchanges they consider safe in exchange for revenue and profit sharing. Likewise, it allows users to purchase insurance for stable coins, centralized exchanges, and smart contracts. Its platform allows users to provide insurance coverage, determine the amount of claims, and obtain compensation for participating in the ecosystem. Claim assessment and capital investment are both on the chain, and the public can audit. All claims go through a three-stage voting process, supplemented by rewards and punishments, to ensure that each claim has a thorough process.

In addition, Bridge is more efficient than traditional insurance companies and does not require branches, claims specialists or agents. The turnaround time for claims and voting is predictable, always within 6 weeks, regardless of the size of the claim.

  • Insurance type: Smart contracts, exchanges, stable coins;
  • Token function: Stake to obtain rewards, governance, voting, etc.;
  • Development stage: The white paper has not yet been released, and the project has not yet been launched.

4.4 Union

‘ Union adopts a multi-token model for protection and governance

UNION is a technical platform that combines with bundled protection and is a liquid secondary market with multiple tokens. DeFi participants can manage their multi-layered risks across smart contracts and protocols in a scalable system. UNION reduces the barriers to entry for retail users and lays the foundation for institutional investors.

  • Insurance type: Bundled protection;
  • Token function: UNN-governance, uUNN\pUNN-protection;
  • Development stage: The project has not yet been launched.

4.5 UnoRe

‘ Provide reinsurance for Business-side crypto insurance protocol customers

UnoRe is a B2C reinsurance platform on Polkadot. It provides insurance to insurers. The insured is the Business-side user-crypto insurance protocol. The Customer user is divided into three roles. UnoRe will gradually realize the functional improvement of the three roles:

① Investors (Risk Taker): Investors bear the risks of the UnoRe platform and enjoy the benefits;

② Traders: Allow users to conduct risky transactions on the platform through a model similar to that of an exchange;

③ Innovators: Allow users to build insurance products by themselves.

  • Insurance type: Reinsurance
  • Development stage: The functions will be gradually launched in Q3.

4.6 cryptoProtector

‘ cryptoProtector protects the value of mainstream crypto assets

cryptoProtector provides protection for the value of mainstream crypto assets, and automatically settles claims through smart contracts. Insurance can pay 15% to 20% of the protected price immediately after triggering the claim price (even if it is only slightly lower than the claim trigger price).

  • Insurance type: Mainstream asset value protection;
  • Token function: Staking reward;
  • Development stage: Currently, 60-day property value insurance for BTC is provided. When BTC has a short-term plunge and falls below 50% of the guaranteed price, the contract will automatically pay 20% of the guaranteed price; as of April 21, 2021, the cumulative underwriting amount is $3,526,262.

4.7 Squirrel Finance

‘ Squirrel Finance provides insurance services for mining

Squirrel Finance aims to provide insurance for decentralized mining. If the mine fails to refund the miner’s deposit, the miner who purchases the insurance will automatically receive NUTS compensation. In return, the miners pay 20% of their output to the NUTS staking pool.

  • Insurance type: Decentralized mining;
  • Token function: Mining rewards, insurance compensation;
  • Development stage: v1 was issued on Ethereum in 2020; v2 was issued on Binance.

4.8 PolkaInsure

‘ PolkaInsure is the P2P insurance trading platform of Polkadot

PolkaInsure is the decentralized P2P insurance trading platform of Polkadot, providing insurance solutions for DeFi projects in Polkadot. Any user can initiate an insurance proposal and can provide underwriting. The claim will be processed by the PolkaInsure smart contract code, which ensures immediate payment.

  • Insurance type: Unknown;
  • Token function: PIS is used for governance, mining and claims;
  • Development stage: It has been launched on the Polkadot parachain Moonbeam testnet, and is waiting for migration to the Binance Smart Chain while the Moonbeam’s upgrade of the main net.

4.9 Insured Finance

‘ Decentralized insurance and credit derivatives issuance platform

The INS3 platform is a decentralized insurance protocol and tail risk derivatives platform. It can not only provide various insurance services for crypto assets, but also meet the hedging needs of tail risks. At the same time, INS3 has its own oracle, which judges whether the payment conditions are established through a model that anyone can verify the results.

  • Insurance type: Centralized exchanges cannot read market conditions and withdraw coins, DeFi project losses, stable coin fluctuations;
  • Token function: ITF is used as oracle mining reward and staking reward;
  • Development stage: The project is currently in the beta version, and insurance products for centralized exchanges, DeFi smart contracts, and stable coins have been launched.

5. Portfolio Insurance

Compared with DeFi projects such as decentralized exchanges and lending, the insurance mechanism has caused problems such as poor liquidity of funds and low capital efficiency. Some new insurance projects allow users to choose Basket of Smart Contract for underwriting or insuring through portfolio insurance, and adding leverage to improve asset efficiency based on original underwriting and insuring. On the other hand, option insurance products focus more on protecting the stability of crypto asset prices, and provide more flexible asset protection through options.

5.1 Tidal Finance

‘ Can choose multiple contracts for underwriting

Tidal Finance is a decentralized insurance product trading platform built on Polkadot, mainly against smart contract hacks. Participants include insurance product sellers (LP), buyers and guarantors. In order to solve the low capital utilization caused by single smart contract underwriting and insuring, Tidal Finance provides a mixed insurance pool with different risk levels, which contains multiple smart contracts. When LP stakes stable coins for underwriting, a single or multiple contracts in the pool can be chosen, and the investment portfolio will affect the rate of return. Buyers of insurance products only need to select the smart contract to be insured and the amount of the insurance policy.

  • Insurance type: Smart contract insurance;
  • Token function: TIDAL is used for governance, claim evaluation and as an emergency reserve fund;
  • Development stage: In April 2021, the testnet was launched on Ropsten, and the test incentive activities began.

5.2 Armor

‘ Provides insurance aggregation through Nexus Mutual

Armor is an insurance broker company that provides insurance products based on Nexus Mutual, but users do not need KYC and can conduct secondary market transactions of insurance policies. Armor provides full insurance coverage by aggregating various DeFi protocols, and can adjust coverage in a timely manner according to the movement of user funds.

  • Insurance type: Smart contract vulnerability (part of Nexus Mutual insurance products);
  • Token function: ARMOR is used for staking and governance;
  • Development stage: V1 version was launched on Ethereum in March. According to Dune Analytics, as of April 20, 2021, users have received over $1.3 billion in insurance and over $6.5 million in premium income.

5.3 Unslashed Finance

‘ Committed to covering all risks and providing structured insurance products

Unslashed Finance is committed to covering all risks and providing more comprehensive insurance products, including exchanges, smart contract hacks, stable coin price fluctuations, and oracles price feeding errors. Unslashed Finance hopes to improve the utilization of funds by providing structured insurance products. Each Bucket contains multiple Pools, and users can choose Buckets with different risk characteristics. The category and structure of the items in the Bucket are voted by DAO.

Spartan Bucket is the first structured insurance product listed on Unslashed. Spartan Bucket contains:

  • 6 centralized exchanges: Coinbase, Binance, Kraken, Bitfinex, Bitmex and Deribit
  • 8 DAPPs: Uniswap, Compound, Melonport, Kyber, Deversifi, dYdX, MakerDAO and Paraswap
  • 1 oracle: Chainlink
  • 1 validator on ETH 2.0: Lido Finance
  • 3 custodians: Ledger Vault, Coinbase Custody and Bitgo
  • 4 stable coins: wBTC, USDT, DAI and USDC
  • Development stage: January 7, 2021, released for invitation code users.

5.4 InsurAce Protocol

‘ Platform currency is an excellent investment target, and ETF is an excellent investment tool

InsurAce Protocol provides a Basket of insurance products and investment and financial management functions. The initial coverage is mainly based on security issues caused by smart contract vulnerabilities. After that, it is planned to expand to centralized exchange hacks, wallet risks, oracle risks, flight delays, etc. The assessment of the claim is determined by the committee’s investigation and community voting.

There are three types of roles in InsurAce Protocol:

  • Investor: Through the “Investment” module, select a portfolio to invest, and get investment income and INSUR rewards;
  • Insurer: Stake ETH, DAI and other assets to the aggregate fund pool to obtain investment income and INSUR rewards;
  • Insured: Purchase single or compound insurance products (lower premiums), get INSUR rewards and claim rights

There are two modules in InsurAce Protocol:

  • The insurance module is underwritten with funds provided by the insurer, and the insured purchases insurance products and enjoys the right to claim;
  • The investment module funds come from free funds other than the Investor’s direct investment and the insurance fund pool SCR (Solvency Capital Requirement), and will be invested in DeFi protocols with different risk levels.

At the same time, the insurance module will provide protection for investment activities, and investment income will not only be distributed to Investor, but also to Insurer.

  • Insurance type: Smart contract insurance;
  • Token function: INSUR is used for staking rewards, community governance, and community incentives;
  • Development stage: In February 2021, the test version of the insurance interface was launched on Rinkeby. The listed contracts and premium calculations are for illustration only; the investment interface is still under development. The main net was launched on April 26.

5.5 Umbrella Protocol

‘ The insurer can choose to underwrite multiple projects at the same time, and can initiate proposals independently

Yam Finance’s insurance products. Umbrella Protocol has two types of pools. The first type of pool is “MetaPool”, which is accessed and funded by Protection Providers. A large pool contains many small pools “Coverage Pool”, and each Coverage Pool corresponds to a smart contract, which is individually accessed by Protection Seekers. That is, each MetaPool is composed of multiple Coverage Pools, covering multiple smart contracts. The benefit of the Protection Provider comes from premiums. If any of the protocols in MetaPool is deemed to be an effective attack, the funds staked by the Protection Provider will be used to pay for the attacked protocol. After paying the premium, the Protection Seekers will receive an NFT that records the cost of the protection and the term of the policy.

Anyone can propose a proposal to establish a MetaPool, but once it is created, it cannot be changed. The creator can design by himself the included Coverage Pool, arbitration rate, creator’s rate of return, premium rate, insurance period, total insured amount, etc.

  • Insurance type: Smart contract insurance;
  • Development stage: Alpha version development is underway.

6. Option Insurance

6.1 Helmet.insure

‘ Provide crypto asset price insurance through option trading

Helmet uses option trading as the underlying logic to provide C2C model crypto asset price insurance, such as Cover 50% Off, Cover Miss Out, Cover Issue Prices, etc. Any individual or contract can issue insurance products on the platform . There are two roles in the Helmet contract: the insurer and the insured. The insurer can independently initiate the insurance name, and set the insurance premium rate and price. If the policy is successfully issued, the SHORT Token will be received, and the SHORT Token can be staked for mining to obtain Helmet’s governance token HELMET. The insured is the buyer of the policy, and will get LONG Token (not available for mining) after purchasing the policy. Since currency price fluctuations are objective, insurance compensation does not need to be voted by the community or committee, but can be automatically executed.

  • Insurance type: Price fluctuation of crypto assets;
  • Token function: HELMET is used to purchase insurance policies, governance and staking to provide liquidity;
  • Development stage: Cover 50% Off, Cover Miss Out, and Cover Issue Prices for 10 currencies have been launched. As of April 21, 2021, the total value of LONG is $31,076,304.85.

6.2 Opyn

‘ Allow DeFi users to create Put and Call options

Opyn allows users to protect themselves from the unique risks faced in DeFi. Opyn is built using the Convexity protocol (Convexity. Opyn.co), which is a general European option protocol that allows DeFi users to create Put and Call options.

Since it is essentially an option, the Opyn protocol allows the process without the front-end of traditional insurance: risk assessment pricing; or the back-end: evaluation of the validity of post-guarantee claims.

TI Research Report — 2021 Q1 DeFi Insurance
TI Research Report — 2021 Q1 DeFi Insurance

Opyn TVL,Source: DeFiPulse,TokenInsight

  • Insurance type: Smart contract risk: deposits in Compound; crypto asset price fluctuation risk: hedging insurance for stable coins such as Dai, USDC.
  • Token function: Anyone can buy options (otoken) to protect themselves from DeFi risks. Users can also deposit staking in the vault to mint coins and sell otoken, thereby gaining additional benefits by protecting others.

Development stage: Already online; the types of crypto assets that can be purchased for put options for asset price insurance are still limited, and WBTC-USDC options was launched on April 1, 2021. The current expansion direction is the increase of categories, and there is no information related to the changes in the model. The bottle-neck for the increase in categories, according to the project’s disclosure, comes from the scale of the oracle, which in a deeper level is the effectiveness of the oracle.

6.3 Opium Finance

‘ The policyholder obtains a tokenized insurance policy after paying the premium

Opium Network is based on Ethereum and is a part of Opium Network. In addition to insurance business, its main project is an earlier decentralized derivatives exchange.

The insured pays premiums to the fund pool after purchasing the insurance, and then obtains a tokenized insurance policy. The policy can be traded on the secondary market. The insurer obtains LP tokens by staking to the fund pool.

  • Feature: “Insurance policy” can be traded; a fund pool is constructed. Pool to customer;
  • Insurance type: Its claims include smart contract risk, crypto asset price fluctuation risk, and credit default event risk. As of April 21, 2021, only USDT price change insurance policies have been seen, and besides that the staked fund pool also has cDAI;
  • Token function: As an insurance policy. (The token issued by its decentralized exchange is OPIUM);
  • Development stage: Already online. Currently, it is mainly pushing liquidity staking to realize AMM.

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