Understand the design highlights of the insurance newcomer InsurAce in one article
InsurAce is not a single platform that provides insurance services, but a comprehensive platform that also features investment and financial management functions.This article was published on ChainNews, author: A Poplar Tree.
Since the "DeFi Summer" of 2020, the development of DeFi covering decentralized trading, lending, derivatives, fixed income, algorithmic stablecoins, asset synthesis, aggregators, and other sectors has become increasingly diversified. The total locked value in the DeFi market has surged 30 times over the past year, reaching a level of 50 billion USD.
However, behind the prosperity, security issues related to smart contracts in projects like bZx and Harvest have become increasingly frequent. According to incomplete statistics from SlowMist Technology, there were 54 security incidents involving smart contracts and tokens throughout 2020, resulting in losses often amounting to hundreds of thousands of dollars, with total losses exceeding 250 million USD. Security issues remain a sword of Damocles hanging over the development of DeFi.
Therefore, the necessity and demand for DeFi insurance have gradually become prominent. However, compared to insurance in mainstream financial markets, DeFi insurance is still in a very early stage of development— the total amount of policies from the two leading projects, NXM and Cover, is only 30 million USD, and the insured funds as of early March were only 1 billion USD, which is less than 2% of the entire DeFi market size.
Everything is just beginning; the DeFi world needs strong insurance services to safeguard its development. InsurAce, the first DeFi insurance product designed by a professional insurance and financial team, is one of the potential competitors in this space.
What is InsurAce?
InsurAce is a decentralized DeFi insurance protocol aimed at providing reliable, robust, and worry-free DeFi insurance services for DeFi users. Its unique advantages include extremely low premiums, stable returns, a rich product line, and low entry barriers, enabling it to offer insured and profitable insurance services to DeFi users.
As a community-driven decentralized open insurance platform, InsurAce fully mobilizes three parties: policyholders, insurers, and investors— all of whom can obtain platform governance tokens by providing liquidity (participating in SCR liquidity mining, explained below), thereby maximizing capital utilization.
At the same time, InsurAce refers to the business model of traditional insurance companies, building a DeFi investment sector based on insurance, using insurance to safeguard investments, and using investment returns to supplement insurance services, ultimately creating a dual-driven model of insurance + investment, establishing a safe entry point into DeFi, and continuously generating returns for users.
Thus, InsurAce is not just a single platform providing insurance services but a comprehensive platform with investment and financial management functions.
Innovative Highlights and Unique Advantages of InsurAce
Portfolio-based "bundled" insurance products
The biggest feature of InsurAce is its Portfolio-based approach. Unlike traditional single insurance products, InsurAce can support "bundled" insurance products, allowing users to purchase comprehensive coverage in one go instead of buying multiple individual insurance products.
Because, unlike the relative independence of insured objects in traditional insurance, the various protocol products in the DeFi world often share risks and returns due to their composability. For example, the "flash loan" security incident of bZx in February 2020 directly involved contract calls among five DeFi products (dYdX, Compound, bZx, Uniswap, Kyber).
Therefore, this "bundled" insurance product better meets the actual insurance needs of the DeFi world— users can flexibly purchase "bundled" priced insurance products based on their risk exposure across multiple DeFi protocols, which is especially suitable for users farming various protocol assets.
This innovative design not only greatly enriches the product line and enhances user experience but also effectively reduces insurance costs, improves capital efficiency, expands DeFi insurance coverage, and achieves sustainable investment returns.
SCR (Solvency Capital Requirement) mining model
In addition, InsurAce has pioneered the SCR (Solvency Capital Requirement) mining model: policyholders, underwriters, and investors can all participate in SCR liquidity mining to obtain platform governance tokens by engaging in InsurAce's insurance and investment businesses.
In other words, users can inject sufficient liquidity into the insurance fund pool by staking assets and receive platform tokens as rewards, thereby providing greater insurance capacity and higher returns.
Thus, this innovative SCR mining model will significantly increase the fund pool, underwriting capacity, and investable fund pool while simultaneously lowering premiums.
Insurance + Investment, Dual-Driven
In addition to providing insurance products, users can also choose investment products on InsurAce, which are divided into low-risk and high-risk investments:
- Low-risk investments utilize the idle portion of insurance funds for some stable investments;
- High-risk investments allow users to choose investment products themselves;
The returns from both types of investment products will be used to subsidize users' premiums, and all investment products are secured by insurance, creating a dynamic relationship where the insurance and investment sectors are interconnected and mutually supportive:
- The low-risk safe funds in the insurance fund pool can enter the investment fund pool for higher returns, while the insurance sector provides safety guarantees for users' investment activities. Investment products have insurance as protection, and investment returns subsidize users' premiums;
- InsurAce will conduct strict risk assessments and classifications on the provided investment and insurance funds, improving capital utilization while ensuring risk control;
- The InsurAce platform generates a stable and sustainable revenue model through premiums and investment returns, which will be used for operational/development expenses, token buybacks, community incentives, ecosystem construction, etc., thus forming a virtuous cycle dynamic economic model and ecosystem;
Moreover, compared to peer-to-peer insurance models (such as the binary option designs of COVER), InsurAce eliminates the financial security risks posed by the "betting" model, truly returning DeFi insurance to its essence. It is currently the only DeFi insurance platform that can effectively lower premiums and allow users to insure with "0" premium.
InsurAce Compensation and Governance Mechanism
The pioneer of DeFi insurance, Nexus Mutual (NXM), represents the "blockchainization" of traditional insurance— adopting a co-insurance model where actuaries comprehensively consider various project indicators as parameters to set a premium rate (based on the security of the project's own contracts), collecting funds from policyholders, and forming a community to share risks and premium revenues.
As a community-driven insurance project, InsurAce also adopts the concept of a mutual insurance fund pool, but through its innovative linkage model between the insurance and investment sectors, it has made professional-level innovations and optimizations— as the business continues to grow, the scale of InsurAce's insurance fund pool will continuously increase, fundamentally solving the issue of compensation capacity for users.
On this basis, InsurAce's insurance compensation and governance mechanism truly achieves community democratization, with the compensation process highly reliant on community governance— when InsurAce receives a compensation request, the InsurAce claims advisory team will investigate and verify the request and initiate a reference proposal to the community.
Once the proposal is submitted to the community, the process is as follows:
- Community members can stake INSUR tokens to become claim assessors. Based on the reference proposal from the claims advisory team, they will vote on whether to compensate, with a voting period of 36 hours. If no effective result is formed within 36 hours, the period will be extended to 72 hours;
- If the voting reaches the minimum quorum and has a clear result, it enters a feedback period (24 hours). If any community user disputes the compensation during this period, they can appeal. At this point, a third-party independent arbitration agency will intervene to form a final compensation decision;
- If there is no feedback from community users regarding the compensation result during the feedback period, the compensation will be processed according to the voting result;
- Claim assessors who participate in the voting will receive INSUR tokens as incentives;
Furthermore, InsurAce's governance mechanism will adopt the DAO governance mechanism widely used in current DeFi projects, with the INSUR token serving as the governance token for voting and incentives. The principles of InsurAce's governance mechanism include:
- Ensuring the safety of user funds is the highest principle of the platform. Any use, transfer, or investment of user funds will be decided by the community;
- Maximizing community participation in major issues such as business design, product launch/removal, feature addition/removal, technological evolution, and version updates;
- If community governance fails, the platform will initiate emergency measures to ensure normal operations and safeguard user funds.
INSUR Token Economic Model
The InsurAce platform will issue a standard ERC20 token, INSUR, as a governance token to incentivize participants in the ecosystem.
The main current uses of INSUR include representing voting rights in community governance, such as participating in claims assessment, proposal voting, and strategic decision-making, as well as voting mining incentives to support liquidity for insurance risk underwriting, capital reserves for insurance asset pools, and investment products. Additionally, INSUR holders are eligible to share in the revenues generated by the InsurAce protocol through participation in project development, community contributions, and governance.
In the future, the value of the INSUR token will be further enriched as the InsurAce protocol develops.
The official economic model for the INSUR token has been publicly disclosed, as follows:
- Total supply of INSUR: 100 million tokens
- Seed round sale: 10,750,000 tokens, initial unlock 15%;
- Private sale: 9,250,000 tokens, initial unlock 25%;
- Public sale (Balancer LBP): 2,000,000 tokens, fully released;
- Team reserve: 15,000,000 tokens, initial unlock 5%;
- DAO reserve: 15,000,000 tokens, temporarily zero release;
- Mining reserve: 48,000,000 tokens, temporarily zero release.
InsurAce plans to launch its token public sale on Balancer through a liquidity bootstrapping pool (LBP) at 10 PM Beijing time on March 15, lasting for 48 hours, with 2% (2 million INSUR) of the total supply available for sale. The starting price of INSUR is set at 4.50 USD, with an initial weight of 90:10 for INSUR to USDC, and an ending ratio of 50:50.
Development Team, Investment Background, and Roadmap
Professional matters should be handled by professionals. The InsurAce team includes senior professionals from the insurance industry (Aviva, Cigna), former McKinsey partners, IBM blockchain experts, exchange CTOs, and corporate security experts, marking the emergence of the first DeFi insurance product designed and structured by a professional insurance and financial team in the crypto market.
At the same time, in terms of investment background, InsurAce has also garnered significant interest from institutions. Upon its launch, well-known investment institutions such as DeFiance Capital, ParaFi Capital, Huobi DeFiLabs, #Hashed, Signum, and LuneX have all "voted with their feet."
On March 4, in the latest round of financing announced by InsurAce, which raised 3 million USD, it also received substantial investments from Alameda Research and Hashkey Capital, with seed round investors DeFiance Capital, ParaFi Capital, Hashed, and Signum Capital continuing to follow on.
Other participating well-known investment institutions include IOSG Ventures, ImToken Ventures, LongHash Ventures, Hash Global, Tembusu Partners, BlockArk, Factorial Ventures, and angel investors Maple Leaf Capital, Wang Qiao, Kerman Kohli, among others.
Following this financing, according to disclosures from official social platforms, InsurAce is set to publicly sell tokens, and its insurance products will be launched, providing insurance and investment services to DeFi users, with plans to achieve cross-chain coverage of insurance services in upcoming product iterations.
As of now, in the DeFi world, where the total locked value has long surpassed 50 billion USD, the DeFi insurance sector is primarily represented by mutual insurance models like NXM and binary option models like Cover. Neither in terms of service types nor coverage volume can they meet the current and future development needs of DeFi.
The complex and multi-layered decentralized financial market with a volume of 50 billion USD increasingly requires rich corresponding insurance services to safeguard its development. InsurAce's revolutionary and original design is a beneficial supplement to the innovation and improvement of the DeFi insurance sector.
