Victor Ugochukwu · Dec 14, 2020 . 5min read
YFI’s yinsure.finance launches insurance for DeFi primitives
With no KYC/AML required, the insurance policies are tokenized in the form of an NFT which wil further drive the utility higher.
By Victor Ugochukwu · Sep 1, 2020 . 6min read
Popular DeFi yield aggregator – YFI, is set to roll out with its decentralized insurance platform yinsure.finance for DeFi primitives as it finalizes tests and practical walkthroughs.
DeFi platform, yinsure.finance is a prototype for a new kind of tokenized insurance designed in such a way that any asset that has financial primitives can be insured. Whether it’s a base asset such as DAI, or a composite asset such as aDAI or yDAI, anyone without usual rigour of traditional insurance can simply insure their assets.
As expected for core DeFi protocols, yinsure.finance will require no KYC/AML submissions from users. Also, the insurance policies are tokenized in the form of an NFT, which further driving utility higher. With policies tokenized as an NFT on yinsure.finance, anyone seeking insurance for any asset on financial primitives after insuring, can transfer, sell and later rebuy their unique NFT. As Gabby Dizon, one of the DeFi OGs on Twitter puts it,
The insurance policy is tokenized as an NFT. This has huge implications – It can be transferred, bought or sold. You can buy a basket of insurance policies, and in the future create an NAV as ERC20 token against a basket of insurance policies in a wallet.
How will yinsure.finance insurance platform for DeFi primitives work?
According to a Medium post by Andre Cronje, yinsure.finance platform will have three core components. These are
- Insurer Vaults,
- Insured Vaults
- Claim Governance
Firstly, the insurers are Liquidity Providers (LPs) providing insurance. LPs provide USDC and earn initiation and weekly fees paid by insurees. The LPs are also the ones to approve claims triggering USDC deduction from the Vault and paid out to the claimant.
Next is the Insured Vaults. This helps to hold the tokenized asset that is insured. For instance, anyone insuring USDT must provide USDT to the Vault to start generating yiUSDT. Insured are charged 0.1% initiation fee and gets 0.01% fee each week. At any time you can withdraw USDT or deposit more USDT.
Lastly is the Claim Governance. This allows the insured to create a claim by staking their yiUSDT. Typically, LPs vote with their yiUSDC. Once LPs vote to approve a claim, the distribution of yiUSDT to the yiUSDC LPs takes place. Subsequently, yinsure.finance protocol pays out USDC to the insured.
The most interesting part is that insurees are free to move their funds anytime. This is especially important if LPs largely decline valid claims. Consequently, if this happens, LPs will no longer be in the position of profits. Thus LPs must always align with incentives.
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