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Get to grips with Beefy’s smart contract insurance provided by InsurAce

December 28, 2021

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If you’ve been using Beefy recently, you’ll likely have already seen the Insurance button in the website banner. To help the Cowmoonity understand how InsurAce’s smart contract insurance product works, we invited Dan Thomson, InsurAce’s Director of Business Development and Marketing, to a Discord AMA.

If you decide to insure your Beefy deposits via the Insurance tab on app.beefy.finance, you’ll also get a 10% discount on your premium. Let’s briefly recap the project and then dive into some of Dan’s insights.

What is InsurAce?

InsurAce.io is a multi-chain decentralized insurance protocol deployed on Ethereum, BSC, Avalanche, and Polygon. In total, the platform covers at least 14 different public chains.

InsurAce allows DeFi users to hedge their investments against hacks and vulnerabilities in smart contracts for a fee. The protocol is made of two parts: an insurance arm and an investment arm. The investment arm generates profits from fees collected to fund their insurance activities. Users pay a fee (2-5% APY) when using covered smart contracts and are reimbursed for their deposits if it fails.

When choosing smart contracts to cover, the team runs a risk assessment on the protocol in question. This allows them to calculate the risk of a hack, attack, or bug and determines the premium charged. When the smart contract is compromised, InsureAce’s claims department will accept or reject a report and then vote on its outcome via governance.

What kind of events does InsurAce cover?

Apart from hacks and bugs, InsurAce also covers custody insurance for funds kept on centralized exchanges, stablecoin de-peg events, and IDO events. In the future, InsurAce will cover rug-pulls, market volatility, and even NFT coverage.

What makes InsurAce different?

Out of the $250 billion currently in DeFi, less than $3bn is insured. There is a huge addressable market that no single insurance protocol can handle, and so we operate in a cooperative way instead of competitive.

  1. It’s the only insurance protocol deployed on ETH, BSC, Polygon, and Avalanche. InsurAce also supports Fantom, Solana, Arbitrum, Celo, and Harmony among others.
  2. InsurAce’s growth rate is around 60% month on month, compared to around 20-30% for other insurance protocols
  3. The protocol has no KYC.
  4. It has the lowest insurance premiums on the market at up to 60% cheaper than competitors.
  5. InsurAce’s governance protocol takes advice from insurance experts that help decide on claims.
  6. The protocol offers on-chain referrals and rewards.
  7. Users will soon be able to opt between high and low-risk investments for higher or lower yields. Compared to other protocols, InsurAce’s capital reserves will be used more efficiently and achieve higher gains to benefit stakers, insurers, and insurance customers.

What’s the relationship between Beefy and InsurAce?

When analyzing Beefy, InsurAce noted Beefy’s high level of security even while operating across multiple different blockchains. Their in-depth risk audit included looking at Beefy’s code, team, community, and reviews. This whole combination allows InsurAce to offer some of its lowest premiums ever for a yield optimizer.

What’s needed for the DeFi insurance industry to take off?

As DeFi has matured, investors no longer blindly accept audits and bug bounties. Insurance is already becoming more popular, but publicized claim payouts will improve adoption even more. More coverage of rug-pulls, NFTs, and market volatility will also help, as well as direct DApp integration.

With returns of 30% or more APY in DeFi, to protect against hacks for just 2-5% makes sense to a lot of smart investors.

What is InsurAce’s SCR Mining mechanism?

SCR (Solvency Capital Requirement) Mining is just one part of InsurAce’s insurance model. It retains the Capital Required to pay out claims fairly while ensuring there is still capital available after substantial payouts to invest and generate returns.

The mechanism consists of:

  1. Technical requirements (capital on hand for payouts)
  2. Minimum Capital Requirements (technical plus additional for fluctuations)
  3. SCR (additional capital to ensure the continued running of the business)
  4. Other available capital, which can be used for investments to generate higher returns for stakers or to reduce premiums for users

What role does the $INSUR token play in the protocol?

$INSUR is the protocol’s governance token, allowing users to vote on claims, participate in competitions, and earn rewards. With InsurAce’s upcoming V2, $INSUR will begin to provide holders benefits from insurance sales and profits generated.

Secure your deposits with our Beefy discount

Taking our insurance on your DeFi deposits is a useful way in reducing your portfolio’s risk. It’s actually even cheaper to do it through Beefy as we mentioned before. If you want to cover your deposits and get some peace of mind, make sure to click the Insurance tab and minimize your portfolio’s risk.

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