While the DeFi ecosystem has witnessed noteworthy developments and a growing interest thanks to the advantages it provides, DeFi users are still faced with various limitations and risks, which makes it all the more necessary to build robust decentralized insurance protocols.
Several projects have been built to address these issues, yet their foundation is based on capital adequacy and consolidation. Here is where InsurAce comes in.
InsurAce is a decentralized insurance protocol that has embraced a portfolio-based approach to maximize value creation for end-users, free up the limitations, and generate better capital utilization. The project’s aim is to provide an infrastructure-level DeFi insurance protocol in order to empower the risk protection infrastructure for the DeFi community.
DeFi Insurance – Current Challenges and InsurAce’s Solutions
DeFi makes it possible for ordinary people to use smart contracts to create a novel finance ecosystem that provides them with quicker access to financial services, such as payments, borrowing, lending, investing, and funding.
However, while DeFi is blooming, insurance projects arrive at a slower pace. Moreover, there still are several issues that need to be addressed:
- Deficient Product Accessibility – existing products come with limited accessibility, and some of the issues concerning these drawbacks are related to their high premiums, KYC membership, limited cover capacity, and lack of product diversity, cross-chain coverage, and support for the latest protocols;
- Underlying Risks – current DeFi insurance products still call for improvement regarding their risk control capabilities. One such example is the evaluation of operational/credit/market risks, which is not properly considered for the platforms’ design and operations;
- Capital Inefficiency – other drawbacks of current DeFi insurance protocols include low capital efficiency, low reserve utilization, and unsustainable investment return.
Launched in October 2020, InsurAce protocol aims to address these challenges through the following unique value creations:
- “0” Premium – InsurAce brings unique pricing models and portfolio-centric products to optimize cover cost, significantly reducing the premium, which is close to “0” at its best.
- Enriched Product Line – the project aims to provide easily accessible and flexible insurance protection to end-users and make its products accessible to a broader audience by enabling coverage of a variety of DeFi protocols and removing the KYC process.
- Liquidity Mining – InsurAce makes it possible for investors, insurers, and the insured to earn InsurAce token (INSUR) by staking into the insurance and investment pools. This will significantly increase the capital pool, cover capacity, and investable capital, and will also reduce the insurance premium even further.
- Sustainable Return – InsurAce users will have the possibility to gain returns by investing in the investment products offered by InsurAce based on their risk appetite, staking in the mutual pool to earn INSUR tokens as rewards, and getting shares of the premium income.
Besides the project’s core competencies mentioned above, InsurAce is continuously improving and refining its processes in order to address the customers’ needs better. The project thus handles claim assessment quantitatively as opposed to the simple “Accept/Reject” approach of the other existing DeFi insurance protocols.
Moreover, in order to provide cross insurance, insurance syndication, and other such features, the protocol collaborates with other DeFi protocols.
InsurAce currently covers the following risk types:
- Smart contract vulnerability risk
- Centralized exchange risk
- IDO event risk
It also aims to cover more risk types, including asset volatility, oracle malfunction, and flight delay, to name a few.
InsurAce currently provides portfolio-based cover contracts with a user-defined period, contracts that offer protection against loss from smart contracts and smart contract system failure. The protocol and smart contract system types covered include:
- Lending Protocol (such as Aave and Maker)
- Decentralized Exchange (such as Uniswap and Curve)
- Derivative (such as Nexus Mutual and Synthetix)
- Asset (such as RenVM and Badger).
InsurAce Business Model & Architecture
The project’s business model features two interoperable function arms:
- Insurance Arm
This portal maintains the Low-Risk Reserve Pool and the High-Risk Reserve Pool, which maintain the solvency for claim coverage based on risk exposure.
- Investment Arm
This portal maintains the Low-Risk Investment Pools and the High-Risk Investment Pool that produce carry to subsidize claims and attracts investors with risk appetite.
Since these arms are interoperable, the free capital in the insurance capital pools can be placed into the investment pools in order to gain a higher yield, while the insurance portal provides investment activity protection. What’s more, the yield generated by the investment arm will complement the premium on the insurance side and lower the cover cost for customers.
It’s this sustainable business model the one that makes it possible for the platform to provide “0” premium insurance as well as a significant investment return. The revenues generated from the insurance premium will be used in development and operation costs, community incentives, and token buybacks, to name a few directions.
The architecture design of the InsurAce platform will feature four layers:
- User Layer – this layer is designed to provide user access functions for cover buyers, risk assessors, investors, and other platform users.
- Operation Layer – the second layer is built to cover different user or business operation scenarios interacting with the core functions of the platform.
- Products Layer – this is the layer featured for the core functions of the InsurAce platform, including investment, product offering, governance, and pricing models, to name a few.
- Infrastructure Layer – the layer is designed to set up the interactions with the Ethereum network as a base, as well as to provide interoperability with cross-chain utilities and external oracles.
InsurAce Use Cases
InsurAce is designed in such a way as to cover a variety of use cases. Ordinary InsurAce users can benefit from the interactions of the platform’s two arms as investors, insurers, and insured.
For example, investors have the possibility to choose the investment portfolio they would like to invest in via the investment portal and do so based on different risk and return appetites. The investment is covered by an almost “0” cost insurance, and investors will gain both investment returns and INSUR tokens.
Insurers can stake assets into the mutual insurance pool and gain INSUR tokens. Insurance customers have the possibility to purchase insurance covers through the insurance portal and get INSUR tokens as incentives. Plus, they can request claims whenever the insurance policy is triggered.
INSUR Tokenomics & Distribution
The platform’s governance token is INSUR, a standard ERC20 token that is used to incentivize the InsurAce participants. It is currently used for:
- Governance – claim assessment, proposal voting, etc.
- Mining incentives
- Community & ecosystem incentives
As the project develops, more use scenarios for INSUR will be included through community governance.
The total supply is 100 million INSUR tokens, and the circulating supply is around 11 million INSUR tokens. The initial token distribution event took place via the Liquidity Bootstrapping Pool (LBP) on Balancer and started on March 25th, 2021, lasting for 48 hours.
According to the token distribution plan, 45% is allocated to mining reserves, 18% to the DAO reserves, and 15% to the InsurAce team and advisors, with the rest of INSUR being distributed as shown below:
Team & Community
The team behind InsurAce consists of professionals with experience in technical fields and marketing. Oliver Xie is the founder and CEO of InsurAce and the former CTO, founding member, and Head of Digital Asset at Asia Pacific Exchange (APEX).
Sum Wei is the Tech Lead, having over 10 years of working experience in tech roles and being an IBM Blockchain senior research engineer and lead security architect. Dan Thomson is the Marketing Lead at InsurAce and a former Goldman Sachs and Cambridge graduate.
The project also benefits from the technical experience of advisors Kenneth Oh and Dennis Song.
As far as the project’s community is concerned, InsurAce has an active community on Twitter (13k followers), Telegram (14k members), and 6k members on Discord.
InsurAce Partners & Investors
InsurAce has already entered a few noteworthy partnerships as part of its continued growth and the development of the DeFI insurance sector. It has a strategic partnership with Bella Protocol whose users have the possibility to insure their staked assets against risks of smart contract hacks and bugs with InsurAce.
InsurAce has recently announced plans to work with Elrond (EGLD) in order to build insurance services for various projects that are built on the Elrond DeFi ecosystem.
Another strategic partnership InsurAce has recently entered is with Dora Factory. This partnership aims to offer the industry’s first IDO (Initial DEX Offering) insurance product on PentaLaunch, which is a Dora Factory-owned IDO platform.
InsurAce is backed by several investors, including DeFiance Capital, Huobi DeFi Labs, Signum Capital, LuneX Ventures, and BlockArk, to name a few.
With the blooming of the DeFi ecosystem, the need for insurance protocols and reliable insurance services grows as well. The mission of InsurAce is to provide DeFi users with protection, convenient product access, as well as investment efficiency.
InsurAce evaluates risks in order to make it easier to manage losses. It provides DeFi assets with flexible and reliable coverage, and it claims to do so while ensuring low insurance premiums, cross-chain coverage, high return on investment, and wallet availability. What’s more, unlike other existing DeFi insurance protocols, it enables users to remain anonymous by removing the KYC process.
Given the fact that it challenges the issues of existing similar protocols by bringing novel features and benefits like the ones mentioned above, such an approach is worthy of attention. Plus, considering that it has received $1 million in backing from notable funds and another $3 million in a strategic round, we’re hopeful that the project will deliver as promised.