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When insurance meets blockchain, read DeFi insurance in one article



In the traditional financial industry, insurance is one of the most important cornerstones. In relatively developed financial markets, the total insurance assets usually account for about 25%-35% of the total financial assets. Compared with traditional insurance, DeFi insurance is also a very broad market. At present, DeFi is in the initial stage of development, with an overall market value of nearly 100 billion U.S. dollars, which means that the DeFi insurance market scale is at the tens of billions level, and will grow with the growth of DeFi. So how does DeFi combine with insurance, what advantages does it have over traditional insurance, what are the pain points and difficulties in the development process, and how can DeFi insurance break the circle to protect off-chain events? When insurance meets blockchain "Blockchain technology is essentially a decentralized, distributed bookkeeping, and consensus mechanism database. The best combination scenario with insurance is the blockchain alliance chain, that is, the upstream and downstream Several long-term stakeholders participate in the management of the blockchain, and each organization runs one or more nodes, and the data in it only allows different organizations in the alliance system to read, write, trade, and smart contracts." Ji'an Yan An, the person in charge of the life mutual insurance company (preparation) and the secretary-general of the China Mutual Insurance and Mutual Insurance Forum, told Lianxin. The combination of blockchain and the insurance industry seems to have natural advantages. First of all, the information on the chain cannot be tampered with, and the characteristics of openness and transparency can effectively avoid the risk premium generated by the insurance industry due to information asymmetry; secondly, the application of smart contracts can reduce operating costs and other expenses, and provide policyholders with more competitive insurance rate. Foreign media disclosed that NBA star Cade Cunningham signed a cooperation agreement with BlockFi last year: November 16 news, according to foreign media reports, last year, NBA top draft star Cade Cunningham (Cade Cunningham) of the Detroit Pistons Cunningham) signed an agreement with BlockFi, 100% of the signing bonus will be in Bitcoin. According to previous media reports, as part of the agreement, Cunningham will work with BlockFi to produce educational videos, while participating in promotional giveaways and exclusive interviews. Cunningham earns about $10 million a year, but it's not clear how much he will earn in cryptocurrency through his partnership with BlockFi. Prior to the news on November 11, BlockFi announced that due to the FTX incident, the company could not operate as usual and suspended withdrawal services. Earlier today, the Wall Street Journal reported that BlockFi plans to file for bankruptcy protection. (Front Office Sports) [2022/11/16 13:12:04] It is particularly noteworthy that in the decentralized and trustless environment of DeFi, the implementation of insurance will be very different from the mainstream financial market. The full name of DeFi is Decentralized Finance, that is, "decentralized finance" or "distributed finance". As the name suggests, DeFi insurance is "decentralized insurance". It actually refers to a decentralized protocol used to build an open insurance system, aiming to allow everyone to carry out insurance activities anytime, anywhere. The Turkish Financial Crimes Investigation Agency is investigating FTX: Jinse Finance reported that according to an official notice issued on Monday, the Turkish Financial Crimes Investigation Agency is investigating FTX. business. That could include local subsidiary FTX Turkey, one of 134 entities linked to Sam Bankman-Fried's that are currently seeking bankruptcy protection in the United States. [2022/11/15 13:05:00]In the mainstream financial market, there are two ways to implement insurance, namely joint-stock insurance companies and mutual insurance organizations. Among them, mutual insurance organizations have more obvious characteristics of decentralization, which embodies the characteristics of "shared benefits and shared risks". Specifically, a mutual insurance organization is an organization jointly formed by policyholders who have protection needs for the same risk, and has no shareholders or share capital. Like the mutual insurance organization, it is the network mutual aid that has emerged in recent years. It should be noted that online mutual aid is not a licensed insurance business organization, but is organized by an online mutual aid platform, which uses the information matching function of the Internet to realize an innovative mutual aid model in which members bear each other's risk losses. There is an obvious color of community autonomy in compensation. U.S. lawmakers call on EPA and DOE to require crypto mining companies to provide energy use and emissions reports: Golden Financial News, in a letter to the U.S. Environmental Protection Agency (EPA) and the Department of Energy (DOE), by California Democratic Representative Jared Huffman Elizabeth Warren, D-Mass., and a small congressional group are seeking the two agencies to demand more reporting on emissions and energy use from the crypto mining industry. In a statement, the lawmakers said, “Our findings are troubling and show that crypto mining companies are large energy consumers and that they account for a significant and rapidly growing share of carbon emissions.” They added: "Our investigation shows that the entire U.S. crypto mining industry is likely to have problems with energy and emissions." The lawmakers said that the seven largest U.S. crypto mining companies have currently developed more than 1,045 megawatts of power for their mining operations. Energy capacity, sufficient to provide electricity to all residents of Houston. Lawmakers were further concerned by plans by the miners to increase capacity by nearly 230%, enough to power an additional 1.9 million homes. They also noted that much remains unknown about the full extent of mining activity, and called on the two agencies to work together to require reporting on energy use and emissions from crypto miners. The group has given EPA and DOE until Aug. 15 to respond. (CoinDesk) [2022/7/16 2:16:59] On September 8, 2020, the China Banking and Insurance Regulatory Commission issued the "Analysis of Illegal Commercial Insurance Activities and Research on Countermeasures and Suggestions", which clearly defined the online mutual assistance platform as an illegal business that operates without a license. commercial insurance activities. The China Banking and Insurance Regulatory Commission defines the mutual aid platform as the "four noes" state of no supervisor, no supervision, no standard, and no regulation. It also proposed to insist on strict access and licensed operation for all insurance activities, and severely crack down on all kinds of illegal commercial insurance activities. Subsequently, multiple online mutual aid platforms were shut down. GameFi agreement YAY Games announced that it will reorganize and rebrand: On July 6th, GameFi agreement YAY Games announced that it will reorganize and reshape the brand, and develop B2B business through cooperation with well-known encryption companies. A restructuring process is currently underway to expand YAY Games into new areas of the crypto industry. In addition, Zeus, the core product of YAY Games, will cease to operate, but the team has not given up on the idea of using Launchpad as a core product. Details regarding the transfer of YAY tokens staked on Zeus will be announced shortly. While YAY Games aims to continue growing within the Avalanche blockchain, the team plans to explore multi-chain integration and alternative business areas. (BeInCrypto) [2022/7/6 1:54:55] "In the era of central bank digital currency and stable currency, mainstream mutual insurance organizations and network mutual aid will achieve better development." Zou Chuanwei, Chief Economist of Wanxiang Blockchain It is believed that the group contracts involved in these two types of insurance activities can be expressed in the form of smart contracts. Actuarial calculation and insurance loss assessment have high professional requirements, so a relatively centralized + community autonomy (such as jury) approach can be adopted, especially when the insurance subject is an off-chain risk. Insurance premium payment can directly use smart contracts to execute central bank digital currency and stable currency transfers, which can significantly improve transparency and credibility. Peck Shield: Hackers bought 3 NFTs worth about 1 ETH on Wolf Game for $0: Golden Finance reported that Peck Shield Alert tweeted that we detected hackers buying $0 on the blockchain game Wolf Game Buy 3 NFTs worth about 1 ETH at the price. [2022/3/4 13:37:22] However, in Yan An’s view, DeFi insurance is also subject to the “Insurance Law”, and the blockchain is only a technological innovation and technical means, so logically there is no “extralegal” insurance policy. "place", and DeFi insurance is currently in a stage of no supervisor, no supervision, no standards, and no regulations. Huge opportunities and risks still exist "Compared with traditional financial insurance, DeFi insurance has many advantages. For example, DeFi insurance has strong innovation in improving privacy, fairness, asset security, reducing financial costs, and de-trusting. However, at present, Defi insurance is mainly concentrated in the encrypted asset industry. If the blockchain technology can be better coupled with the traditional financial industry and use Defi insurance to solve the problems in the traditional insurance industry, its potential and effectiveness will be huge .” Zhou Xinjian, a senior researcher at Wichain Technology, told Lianxin. "The financial nature of blockchain technology has always been one of the topics that everyone is most concerned about. The popularity of DeFi-related industries has once again confirmed this point. The auditing, settlement, mortgage, etc. of traditional financial services can be implemented in decentralized technology. Improve security and operational efficiency. The credit system based on blockchain smart contracts penetrates the financial market through layers, and promoting its reform may be one of the future trends." Zhou Ziheng, Chief Scientist of VeChain, said to "Chain New". However, as a profit-seeking investment, DeFi insurance is different from common applications such as over-collateralized lending and spot trading, and requires a more stable credit market and interest rate market. Ecologically it is a challenge. Zhou Ziheng believes that the starting point for technology to change the format of business is "business data is on the chain", and the design of financial products and ecological frameworks is more suitable for professional institutions to lead, including financial institutions, government agencies, consulting and auditing institutions, etc. "At present, this starting point is not stable, so the timing may also be discussed." Zou Chuanwei believes that a key to the future development of DeFi insurance lies in whether the target of DeFi insurance is the risk outside the chain or the risk inside the chain. When the target of DeFi insurance is off-chain risk, DeFi insurance needs to solve two basic problems: one is that the off-chain risk is denominated in legal currency, but insurance compensation is paid with digital assets inside the chain, which causes currency mismatch problems; The actuarial calculation and insurance loss determination of external risks can only be carried out outside the chain, so it is necessary to write the relevant results into the chain through the oracle machine. When the subject of DeFi insurance is the risk within the chain, it is necessary to expand the scope of risk coverage. In addition, although DeFi actuarial calculation and insurance loss determination are technical issues, they will significantly affect the implementation of DeFi insurance because of the high requirements for professional ability. "DeFi insurance is still in a very early stage of development, and its system construction and product innovation have just started. Excellent projects in the blockchain industry have never lacked capital to follow." Zhou Xinjian believes that the current restrictions on the development of DeFi insurance are on the one hand Technical factors, on the other hand, are policy factors. The technical factor is mainly that the openness of the DeFi contract makes the agreement easy to be hacked; the policy factor is mainly that the current DeFi insurance is still mainly limited to the assets in the digital asset chain, and the combination with traditional financial assets requires the dual support of policy and technology. DeFi insurance set off a boom With the continuous upgrading and iteration of the DeFi protocol, the DeFi insurance market is undergoing rapid changes and gradually taking shape in terms of code quality and business model, supporting the growth of DeFi lock-up volume. At the same time, incidents of DeFi protocols being attacked and causing property losses occur frequently. "Flash loan attack arbitrage, protocol attacks, etc. are affecting the stability of the market and the security of market participants' assets. While the project side is constantly improving the security of the protocol and mechanism, the insurance sector also urgently needs to participate in the construction of the DeFi LEGO ecosystem , to provide users with a guarantee method that they can choose independently." Drey Ng, co-founder and product manager of the cross-chain synthetic asset protocol Linear Finance, told "Lianxin". The past year was also a year of various security incidents. Origin Protocol lost RMB 45 million due to reentrancy attacks, and Balancer lost RMB 3 million due to flash loan attacks. In the face of endless attacks on smart contracts, the importance of insurance becomes even more prominent. With the popularity of DeFi and the continuous participation of investors and speculators, the market competition has become more and more fierce, and the test for projects and teams has become more severe. "In the DeFi insurance ecological chain, the DeFi project side actually occupies a lot of weight. A good insurance platform will eventually win the favor of most DeFi projects, access and establish corresponding insurance policies, and even actively update some codes Relevant (such as audit update) information. This is also the overall improvement and positive feedback of the industry level." Wu Zhouyu believes that a fair claim settlement method is also a very important point, and some old-fashioned projects (such as NXM) have been criticized for this reason It is their claim settlement mechanism that is too "centralized". "The future development of DeFi insurance must have the ability to break the circle and expand the coverage from virtual assets to real assets." Kevin Tseng, founder of NAOS Finance, told Lianxin that NAOS Finance is building a DeFi lending ecosystem based on real assets. And DeFi insurance will play the core role in this ecology. "In this DeFi insurance track, the players who can finally run out must be players who can perfectly connect insurance services with virtual and real assets." "For a project, if it wants to stand out from many DeFi projects, it must first be safe enough from a technical point of view It is innovative and can be differentiated from other projects and can solve industry pain points; followed by the quality, diversity and activity of the ecology, high-quality and rich ecology is the key factor for the virtuous circle of any project.” Zhou Xinjian, senior researcher of Wichain Technology Express to "Lianxin". Zhou Xinjian believes that a forward-looking leader is the key to whether a project can be at the forefront of the industry, an excellent technical development team is the support for achieving technical feasibility, and the financing and operation team is the blood of the long-term development of the project. "Only A team with the above qualities can gain a firm foothold in the fierce competition.


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