Decentralized Insurance protocol aims to protect investors’ digital assets Setting up cryptocurrency insurance to do
The decentralized finance (DeFi) space has lost about $2 billion in capital this year. This is a great opportunity for providers Crypto insurance Creates.
According to one crypto insurance executive, despite chain insurance activity since 2017, only 1% of all crypto investments are covered by insurance. Some experts refer to the field of cryptocurrency insurance as a “sleeping giant”.
Read more: The future of digital currencies in 2022
Setting up cryptocurrency insurance
Speaking to Cointelegraph, Dan Thomson, chief marketing officer of decentralized coverage protocol InsurAce, stated that there is a big difference between the total value locked (TVL) in crypto and decentralized finance (DeFi) protocols and the TVL percentage with insurance coverage. Dan added in this regard:
DeFi insurance is a sleeping giant. This domain accounts for only 1% of all cryptocurrencies covered and less than 3% of the DeFi domain. There is still a huge opportunity in the market.
Setting up cryptocurrency insurance A suitable method for Protection of digital assets Are. On-chain insurance protects assets when a smart contract is abused or in the event that the front end of the Web 3 protocol is compromised.
DeFi’s $2.6 billion loss
The renaming of Luna to Luna Classic (LUNC) after the collapse of this network, as well as DPEG Terra USD are examples of how crypto insurance protects investors. InsurACE has paid out about $11.7 million to UST’s 155 injured victims, Thompson noted.
According to Thomson, the actions of fraudsters in 2021 resulted in a loss of about $2.6 billion to the DeFi sector. Thomson, emphasizing the need to launch crypto insurance for Digital assets He added: “About 10 billion dollars of fraud has been committed in the vast space of digital currencies.”
Thomson believes that traditional insurance companies will eventually offer crypto-based products. This issue has attracted the attention of traditional companies, but they have not yet entered this space due to their corporate rules and regulations. Thomson further added:
I don’t believe that the larger traditional insurance companies will develop their own native programs for this space. These companies prefer to use reinsurance. On-chain insurance protocols have also suffered from problems. These problems stop the growth capacity of protocols.
The capacity of the protocol is limited by subscription. This issue is done in the field of DeFi through shareholders. TVL makes creating liquidity difficult for most protocols.
The main problem for foreign exchange insurance providers is trying to provide attractive investment returns for users. This issue causes disruption in liquidity provision. Thomson pointed out that his company is now looking to solve the problems Capital efficiency It is by using reinsurance.
InsurACE is one of the first protocols that has the ability to create a connection between shareholders’ assets and traditional reinsurance. Some cryptocurrency exchanges now Insurance services but few crypto protocols specialize in crypto insurance.
In addition, the conditions for setting up crypto insurance in one protocol are different from another. Most protocols require users to specify the address of their desired smart contract along with the amount, currency name, and time period for generating the transaction. Many protocols use decentralized autonomous organizations (DAOs) along with a token.
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