DEFI

CDIS – The Future of Centralized Cryptocurrency Custodianship, a Way Forward Following the Collapse of FTX

The Web3 industry has just witnessed the worst event in its decade-long history – the FTX collapse, devastating the confidence of our industry in and out. This is not the first time something like this has happened, the previous LUNA and 3AC series of debacles were simply the starts of these catastrophes, and it is reminiscent of the Mt Gox collapse. It has been labeled as the Lehman event of crypto. This was not the first case, and it surely will not be the last one either.   

These events make us think about what we can do to make things better in our industry.

  • Restore Confidence and Trust 

How can we build up a system that can restore the confidence and trust of our industry so  that users, regulators and developers of this industry feel secure in times of adverse events?

  • Better Protect the most vulnerable users

Among all these severe events, the small and medium users are always the ones suffering  the most; many of their life savings have been wiped out through these disasters. Is there a way to build a safety net for these small and medium users in particular? 

Assuming we have FDIC

FDIC (Federal Deposit Insurance Corporation) is the U.S. insurance organization in the traditional financial industry to protect depositors in the event an institution fails, and each depositor is insured up to US$25K. FDIC was created in the 1920s to address the situation where many depositors’ savings were wiped out because of the financial crisis. Since then,  it has been functioning as a key financial infrastructure for stability and public confidence in the national financial system.   

“Since the commencement of FDIC in 1934, no depositor has lost a single penny of  insured funds due to bank failures.” 

  • Quoted from FDIC website.  

There are similar insurance organizations in Singapore, Europe, etc. as well. For example,  the SDIC (Singapore DIC) insures up to S$75K per depositor.   

InsurAce, the DeFi insurance protocol, has introduced the Deposit Insurance  Scheme of our industry – Crypto Deposit Insurance Scheme (CDIS), designed to protect the end users, enhance market stability, and restore public confidence. When the next storm comes, there will be an umbrella for everyone.   

InsurAce has professional support from a global insurance and risk advisory institution, and a leading legal & compliance firm to support.  

How will it work? 

  1. This Scheme will be initiated by the InsurAce team, with participation from major exchanges and custodian providers in the industry as the DI Scheme Founding Partners. They will inject initial funds into the DI Fund pool.  
  2. The CDIS will be set up as mutual insurance structure. KYC-ed customers of these founding partner exchanges will purchase cover from the exchange platforms or directly from CDIS application, and the premium will be flowing into the DI Fund pool. The coverage will be aiming to protect the small/medium users only, insuring to a limit such as $10K per user.  
  3. In the event of any institution fails, the CDIS will perform claims and pay-outs to the affected users to secure their savings from the DI Fund pool based on the actual loss, up to the insured limit.   
  4. The InsurAce team will function as the insurance manager of this insurance scheme and handle all operations while supervised by the members of the mutual and regulators. This will be implemented via a governance framework.   

Core Features 

This CDIS solution will combine the best practices from FDIC, SDIC, etc., and also the  Web3 technologies to cater to the needs of the crypto industry, maximizing transparency and efficiency. Meanwhile, we will also seek a regulated path for it going forward to bring it safely to global crypto users.  

  1. Transparency

InsurAce will use Web3 technology (DLT, tokenization, etc.) to bring full transparency to the operations of the mutual.   

  1. User Protection

InsurAce will focus on protecting small and medium depositors. Each KYC-ed user will be automatically insured up to a certain limit.    

  1. Established (re)Insurance Best Practices

InsurAce will follow existing best practices in the (re)insurance industry to manage risks,  such as mutual insurance, enterprise risk management, data management, and claims infrastructure.   

  1. Compliance with regulations

The InsurAce team is already in the process of seeking a regulatory framework for crypto-insurance and can bring CDIS to a regulated environment. 

Who is InsurAce? 

InsurAce Protocol is an early pioneer in Web3 risk protection since 2020, with a dedicated and professional team that works at the intersection of Web3 and risk management. The team has built up a deep understanding of Web3-native risks thus far and is committed to building for the long-term in the Web3 risk management vertical.   

InsurAce is the leading multi-chain decentralized cover protocol, providing protection to  Web3 users for their digital assets.   

The InsurAce dApp is the only protocol live on Ethereum, BNB Chain, Polygon and  Avalanche, protecting $350M of digital assets for 130+ DeFi protocols on 20 public blockchains.   

Our products cover smart contract hacks, custodian risks, Stablecoin De-Peg events and more. This includes covering protecting users of FTX.   

Mutual insurance model with DAO governance, leveraging the Web3 tech stack (DLT,  smart contracts, DeFi, etc.).   

Paid $11.7M of claims to UST De-Peg policyholders caused by the collapse of Terra in  May 2022 – the single largest claim payout in crypto insurance history.   https://cointelegraph.com/news/how-one-crypto-insurer-came-to-the-rescue when-ust-depegged 

How can new partners get involved? 

InsurAce aims to launch the CDIS in the coming months. The team is working closely with industry experts from both web3 and insurance to bring the CDIS to users immediately. 

They encourage any crypto institutions such as exchanges, custodian providers etc. to  participate in this insurance scheme and reach out to the team via contact@insurace.io 

About InsurAce

InsurAce Protocol is a leading DeFi Insurance protocol that has quickly become the second largest protocol in DeFi insurance. 

InsurAce offers portfolio-based insurance products with optimized pricing models to substantially lower the cost (up to 80% lower than other insurance protocols). InsurAce offers Smart Contract risk cover, IDO cover, Custodian cover and Stablecoin De-Peg risk cover.  

InsurAce is backed by DeFiance Capital, Parafi Capital, Hashkey group, Huobi DeFiLabs,  Hashed, IOSG, LuneX, Blockarc and Signum Capital.  

To date, InsurAce has covered over $350m worth of assets across 140 different protocols  on 20 public chains. InsurAce famously paid out nearly $12m to victims of the $UST de peg in May 2022.  

The project lead for InsurAce is Oliver Xie. Oliver started to work on InsurAce project in September 2020, and prior to that, he worked as the CTO in one of the three largest  Singapore-based licensed derivative Exchanges and Clearing Houses. Oliver entered the crypto space back in 2017 where he led a team to research crypto derivatives and 

blockchain technology, and has gravitated towards blockchain-based Open Finance for the past few years. He identified an opportunity for a unique approach to providing insurance for DeFi smart contracts and users, and InsurAce was created.  

For press inquiries and assets please contact: dan@insurace.io  

Brand assets can be found here: https://docs.insurace.io/landing-page/marketing/ branding-and-media-kit 

Links: 

www.InsurAce.io 

twitter.com/InsurAce_io 

docs.InsurAce.io 

InsurAce.io/blog 

app.InsurAce.io 

Linktr.ee/insurace

 

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.




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Traciwininger
Author: Traciwininger

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