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Blockchain and the insurance sector

A lot of people take out insurance to safeguard their lives, family, health, vehicles, pets or travels, just in the scenario that stuff goes awry. However, a majority of individuals are unaware of, or do not focus on the insurance sector leveraging Blockchain, and the ability to develop trust in a trustless ecosystem through the leveraging of public ledgers and cybersecurity protocols. 

Insurance could additionally provide us with the security we require to make investments in or trade, as it safeguards us against losses. Trade of bitcoins, specifically in DeFi, is a profitable activity that also requires insurance. 

In this blog article by AICorespot, we will demystify DeFi insurance with a summarized explanation for this trending term. 

What is insurance? 

Insurance is an activity via which a person or group of persons are entitled to a right of protection by virtue of an account contribution for himself or a third person in the scenario that risk should rear its ugly head. This is supported via an organization, entity, a middleman, which is responsible for all risks and compensations going by the methods and strategies of systematic statistics. 

What is DeFi? 

DeFi is a short form of Decentralized Finance. This is a term leveraged to refer to financial applications developed on the Blockchain platform. DeFi has the following traits: 

  • Permissionless: open to everybody, for any area. 
  • Transparencies: all activities are public. 
  • Trustless: Is not dependent on the beliefs of the parties involved. 

What is Decentralized Insurance? 

While all services surrounding Decentralized Finance (DeFi) like Lending, Derivatives, Commodity Futures Trading (Futures), etc. have turned into a trending topic, there is one sphere that is typically not spoken about but holds great criticality, which is decentralized insurance. In the domain of general risk accounts, it is critical to have a mechanism to safeguard risks and threats. A decentralized insurance centre is one of the concepts that can function as a safeguard for DeFi sectors. 

There are several cases of exchanges being a victim of hacking: Binance, Okex, Mtgox, or lately Kucoin. Or the Dapps as service hack that impacted the Ethereum community in 2017 that caused the HardFork call for ETH & ETC. All of the above inflicts damage not just to users but also to exchanges. The damages are in the tunes of millions of dollars. 

A decentralized insurance centre will assist in risk reduction in such scenarios. 

What types of Decentralized Insurance are There? 

Crypto Wallet Insurance: 

This format is really simple. You might also receive compensation when your electronic wallet is hacked.  

Leading cryptocurrency insurance:  

In the scenario, when you borrow DAI cryptocurrency and collateralize it with ETH or Compound. If the collateral furnished by the borrower is destroyed or marked, the loan will be repaid leveraging the policy security. 

Etherisc, combined with various other enterprises like Sweetbridge, Celsius, Nexo, Libra Credit, and various others has formed a consortium that safeguards and secures crypto-collateralized loans, a great application.  

Smart Contract Cover: 

Coverage will encompass failure components if the address smart contract is identified and leveraged for manipulation, like loss of funds from an investor’s accounts or if funds are transferred to an address, other, not belonging to the original investor. 

It also consists of details where the money is forever lost and can no more be recovered. As an outcome, investors and lenders can lend cryptocurrency on the exchange without too much concern regarding payment or losses. Nexus Mutual is one of the organizations that developed the Smart Contract Cover. 

Advantages of Decentralized Insurance 

Decentralized insurance products provide comprehensive protection with DeFi deposits. Hedging against crypto fluctuations and crashes in price escalations and reduces aggressively in addition to furnishing security against the risk of upgrades and attacks on crypto wallets. It insures users against any potential DeFi risks, safeguarding technical and financial risks, therefore developing a sense of security within investors. 

Not just that, but the platforms also make the total submission, claim, and processing, and payment procedure really secure, reliant, and transparent. 

Here are ten advantages of DeFi insurance: 

  • DeFi Deposits Protection (DeFi Deposits) 
  • Safeguard against crypto volatility and flash crash (sudden devaluation e.g. when BTC drops 1-2k$, other altcoins lose 80-90%.) 
  • Obtain crypto assets instantly. 
  • Safeguard from theft and attacks on crypto wallets. 
  • Safeguard funds from being hacked on exchanges. 
  • Technical and financial hedging. 
  • Instant payment when you request. 
  • Trust and transparency. 

Present Insurance Platforms 

Nexus Mutual, a decentralized insurance platform developed on top of Ethereum. A pioneer in smart contract insurance. Users who have lent money on exchanges such as Compound or Dharma can opt for an insurance policy. 

Etheisc, as we read above, has developed some amazing crypto wallet insurance products in addition to collateral crypto loans. 

CDx is a platform that furnishes insurance against loss of funds that happens owing to exchange hacks. 

Conclusion: The Outlook For Decentralized Insurance 

Decentralized insurance is a promising region owing to the transparency and security it provides investors. 

There are just a few products available at the moment but it specifically has the prospect to grow and broaden in the future. DeFi and its applications such as Decentralized Finance will go on to dominate the market in the upcoming years to come. 

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