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DeFi Insurance Is The Most Effective Way To Invest In The DeFi Space - Interview With Oliver Xie

·9 min read

InsurAce.io is a young but advanced defi insurance protocol that became the first project of this kind to launch on both Ethereum and Binance Smart Chain. However, the project did not stop there, as it also expanded its services to include Solana, Polygon, Fantom, and Heco

The protocol offers reliable, secure, and robust insurance services to DeFi users, which is highly desirable among those who wish to secure their funds against many different risks associated with the crypto space.Thanks to the fact that it offers cross-chain portfolio based covers, InsurAce.io can afford to offer extremely low premiums, as well as the ability to earn rewards through mining, and even sustainable investment returns via the project’s investment portal.

1) What inspired you to start an insurance protocol in the crypto industry?

It all started from the DeFi summer 2020 when I was yield farming happily with a few friends, unfortunately one of them got hacked in the protocol farming and there was no good way to recover his loss, which made us start to think how we could better safeguard our DeFi assets. After some exploration and research, we found that insurance might be the most effective way to hedge such cyber security risk in DeFi space.

However, at that time the existing insurance protocol was scarce and had many problems such as KYC, lack of capacity, high cost, and etc., and eventually we decided to design and build a new protocol that works better, which is how InsurAce.io came about.

We aim to provide reliable, robust and affordable insurance service to the DeFi users and make our contributions to make DeFi a safer place.

2) What kinds of risks do the investors and traders face in the sector?

Broadly speaking, there are 3 major risks facing users and traders in the DeFi space:

  • Cyber Security Risk;

  • Price Volatility Risk;

  • Regulatory Uncertainty Risk;

The price volatility risk is what everyone has to face in any financial activity, and there are financial derivatives, insurance included to hedge such risk, whereas the regulatory risk is rising with the continuous growth of DeFi, however it is still not a prevailing risk as of now. The only killing risk is the cyber security one endangering DeFi since its inception.

There were more than 15 hacks in 2020 alone that caused more than $150M loss, and this keeps happening in 2021 every now and then. Recent hacks in DeFi alone caused over $260M loss to the users (Easyfi Network, Pancake Bunny). Such risk events not only cause substantial loss to the DeFi users, but also sabotage the growing DeFi ecosystem as a whole. This is why insurance protocols like us are so pivotal to the whole DeFi space.

3) How does InsurAce.io help?

Following up with the aforementioned risk, InsurAce.io has proven to be able to play a pivotal role in managing such cyber security risk. We have offered the “smart contract vulnerability” insurance in our product to cover such risk. As of writing, there are over $30M DeFi assets being covered for over 50 protocols.

Let’s explain further on how this will benefit different DeFi participants.

For the new protocols who are moving towards mainnet to seize the market opportunities but unable to get audited in time, buying insurances to cover their initial risk is an effective approach for product launch and protect user funds.

For the established protocols who have operation history and audits, insurance is also essential to counter the potential cyber attack. We have seen security breaches to a few big protocols such as Yearn, Alpha Homora, SushiSwap, and etc., which could undermine their reputation and user trust, whereas coverage from insurance protocols can help their users to get the exposure covered and get compensated in the event of unfortunate hacks.

For DeFi users who are farming on the vast land of DeFi, it is hard to predict where the mines are. A good practice is to buy insurance for the platforms they are farming on, and it is reasonable as long the cost of insurance is lower than the farming yields at desirable levels.

For these different types of DeFi stakeholders to adopt our insurance products, it is vital that the product is accessible, cost is reasonable, capacity is sufficient, and the claim process is fair. These are what InsurAce has been working hard to offer. Our multi-chain full-spectrum insurance product line aims to provide the widest product matrix, the portfolio-based pricing strategy works to optimize the cost, aggregated capital pool creates well allocated capacity and the semi-decentralized (advisory board + risk assessor voting) claim process ensures a fair claim verdict on a best effort basis. As our product continues to develop, we will be able to provide more diverse, but always robust, reliable and secure insurance products and services to make DeFi a safer place.

4) Do you plan to include other types of risks in the future?

Yes, apart from the smart contract risk, we’re also exploring a few other types of risks based on feedback from community as well as the new problems arising in the space, such as:

  • Stable coin de-peg risk;

  • Cross-chain bridge security risk;

  • NFT security risk;

Overall, we’ll build a comprehensive product line to cover the broadest spectrum of different risks that may endanger crypto assets. When hack happens, InsurAce.io helps.

5) What makes InsurAce.io stand out from other insurance projects?

We respect all the other players in this space, and are working together to build this vertical and make DeFi a safer place. Nevertheless, we do have some unique competitive edges here.

(i) Team

We have a highly professional core team consisting of actuary scientists, blockchain technology experts, security veteran, and legal advisors to build this project with high standard and professional capabilities. More importantly, the whole is very passionate about DeFi and dedicated to build InsurAce.io into a leading DeFi project.

(ii) Product

We have our unique product designs such as the portfolio-based coverage, aggregated underwriting pool, multi-chain insurance, and etc., which makes us the first of its kind to offer and create values to our users and token holders.

(iii) Credibility

Credibility is the foundation to the success of insurance business, which we always put as our top priority. We design, build and operate this platform with maximum transparency and security. We have dedicated security experts and invest a lot into security. Our long-term goal is to be fully decentralized and create a risk hedging harbor where everyone can rest their DeFi journey safely.

(iv) Investor and community support

Apart from the team, we are also backed by a strong investor lineup, including DeFiance Capital, ParaFi Capital, Alameda Research, Hashkey Group, Huobi Ventures, Hashed and other top funds. These investors provide us with solid endorsement and development advice. More importantly, we have a united community that keeps supporting the project, providing feedback and expanding the project network. All these provide us with a strong driving force to stand out among other competitors.

6) Tell us a bit about your INSUR token, what are its use cases?

As a DeFi governance token, utility is one hand, the other hand is its value capture. INSUR token’s utility and value capture include:

  • First of all, INSUR is a governance token, used for our community governance scenarios such as claim process, proposal voting, etc..

  • Second, it can also be used to pay for some fees on the platform such as the cross-chain bridge fees.

  • Thirdly, it also represents the rights for the token holders to be eligible for claim to the income generated on the platform.

Overall, INSUR token is the medium to capture the values that InsurAce.io protocol has created and accrued back to the token holders.

7) What do the users need to do to earn rewards?

There are a few ways that users can earn rewards or yields from the protocol, including:

  • Provide capital to underwrite the insurance risk and earn yields, average APY is 10% - 15%;

  • Participate in the governance process, such as voting on claims and earn incentives;

  • Support the project by being an ambassador, to help test the products, write articles, make videos, etc. to earn rewards;

  • Participate in the community events from time to time to earn airdrop rewards.

Overall, we aim to create an ecosystem where all participants can enjoy benefits and create sustainable business growth together.

8) Is it necessary for users to be token holders to use InsurAce.io’s services?

No, anyone with a wallet can connect to the protocol and use the services, such as risk underwriting and earn, buy covers, cross-bridge transfer, etc. Holding of INSUR tokens doesn’t constitute a prerequisite of being the user, however, the benefits of the platform will mostly be distributed to the token holders. In this sense, to be a token holder will be able to enjoy the benefits in the long run.

9) Do you plan to expand the project to even more blockchains in the future?

That’s for sure. Multi-chain has always been one of our core strategies.

We have been deployed to Ethereum and BSC at the moment, and ready to be deployed on polygon and HECO, meanwhile we’re also targeting Solana as well.

With the insurance services available on these different ecosystems, we will also build an aggregator to provide a unified layer of liquidity and service in a multi-chain context, with which users will be able to have a more compact experience and our expansion to new chains will be more cost effective and scalable.

10) What can the community expect next from InsurAce.io?

We are pretty aligned with our roadmap so far, and some of the key milestones to be delivered next are:

  • Insurance-as-a-service API to integrate with DeFi protocols, which will further expand our sales network.

  • Multi-chain expansion to more chains, including polygon, Solana and more.

  • B2B and institutional-grade insurance service.

  • Investment vehicle v1.0 to boost user yields.

  • More partnerships and collaborations to be announced.

With these efforts, we target to create more value to users and token holders, and lead the DeFi insurance to the next level.

Image by Chaitawat Pawapoowadon from Pixabay

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