The Intelligent Insurer #1 — Why Digital Assets Need a Better Insurance Solution?
Unless you’ve been on a digital detox and refraining from interacting with humanity, you will have heard that the price of Bitcoin has been rapidly rising. With institutions scrambling to get exposure, the price rise is showing no signs of slowing down.
Sentiment indicators are showing that investors are as bullish as they have ever been and a long list of renowned investors have been securing a slice of the Bitcoin pie. Bitcoin is not the only digital asset which has been increasing in value.
Decentralized Finance (DeFi) has been innovating at breakneck speed this year. New protocols have spawned relentlessly while the value locked in such protocols has increased from roughly $700 million in January to over $15 billion in December.
However, this value remains exposed to the threat of hackers. As value rises, cybersecurity attacks become more frequent and holders of digital assets are firmly in the center of the crosshairs. The ability to secure insurance coverage for digital assets is reaching a new level of importance.
As it stands, incumbent insurance solutions remain extremely restricted. They are confined to a limited number of protocols on the Ethereum blockchain and only offer coverage on specific exploits. Insured Finance is building a platform which will change this.
Introducing Insured Finance — The Future of Digital Asset Insurance
Insured Finance is building the first decentralized insurance marketplace. Underpinned by the Polkadot blockchain, the marketplace allows users to secure customized insurance on their digital asset holdings.
Incumbent digital asset insurance solutions fail to provide coverage against exchange hacks, stablecoin failures, and “rug pulls” in DeFi projects. However, attacks on such assets have become ubiquitous over the past year with hundreds of millions in USD value being exploited by attackers.
Decentralized Insurance — An Over $100 Billion Market?
In 2020 alone, there have been several high-profile digital asset attacks which could have been covered. In September, those who kept their digital assets on the Kucoin exchange lost a total of $150 million.
Attacks are not limited to exchanges. With the growing value in DeFi, focus on exploiting such protocols has intensified. In October, attackers drained roughly $25 million from the DeFi protocol Harvest Finance.
However, the potential value that could be attacked is vastly greater and cumulatively comes to over $100 billion. With the recent price rises, the value of the combined BTC held on exchanges surpassed $64 billion.
(Source: Glassnode Studio)
The value of Ethereum held on exchanges is close to $12 billion. Add a stablecoin supply of over $25 billion and a total value locked (TVL) in DeFi of ~$16 billion and the potential value to be insured quickly grows.
The vast majority of this value cannot be insured with the current insurance solutions. For instance, coverage on Nexus Mutual is restricted to certain DeFi protocols and insures less than 1% of the DeFi TVL. Insured Finance makes it possible to secure insurance coverage for all of these holdings.
Moreover, those that secure coverage can access extremely competitive pricing. Instead of securing insurance from a single entity that wants you to overpay, Insured Finance users will place requests into a competitive marketplace where they will get market-based pricing.
Those that fulfill insurance requests earn premiums and can choose to have their capital invested in DeFi and CeFi products that are also covered. The decentralized Insured Finance marketplace will make it possible to insure customized portfolios of digital assets. Insured Finance will be the future of digital asset insurance and will bring the degree of insurance among digital assets to new echelons.
Introducing The Intelligent Insurer
As part of the efforts to shape the future of digital asset insurance, Insured Finance is launching a weekly newsletter — The Intelligent Insurer — to educate readers on DeFi and insurance for the digital asset industry. In the inaugural release, we provided an introduction to Insured Finance and detailed some key reasons why the market requires such a solution. In the future releases, we will further investigate incumbent insurance solutions and highlight their drawbacks. We will also regularly explore developments in the fast-paced DeFi industry.
About Insured Finance
Insured Finance is a decentralized, peer-to-peer insurance marketplace. Built on the Polkadot blockchain, Insured Finance users can request customized insurance on a wide variety of digital assets. Those that fulfill requests earn premiums and can earn a competitive return on their capital. Claims are fully collateralized and settled instantly.