The collapse of LUNA and UST marked a new low for the crypto industry during the current bear market – but it wasn’t all bad news.
In fact, 155 investors managed to survive the collapse unscathed after having the foresight to take out insurance that protected them.
InsurAce offered a policy that would compensate crypto enthusiasts if UST, an algorithmically stable coin, lost its link to the US dollar.
It ended up doing so in spectacular fashion – falling to mere cents days after it first separated from $1 in a meaningful way.
Overall, the crypto insurance protocol said it ended up paying out $12 million to clients, and 98% of claims were approved.
In contrast, InsurAce claims that some of its rivals have claimed to honor payouts – or failed to offer policies that protect investors against a depeg in the first place.
The protocol says that the unfortunate case of UST proves the need for DeFi insurance, which also covers issues including smart contract hacking and custodian risk.
A quick reaction
InsurAce says it has been able to gain the trust of crypto investors by having clear policies in place, and acting quickly in response to market movements.
Barely 48 hours after the UST was depegged, the insurance protocol kicked off the claims process – explaining that coverage had officially been triggered because the UST had fallen below $0.88. The payouts were completed just one month later.
Marketing manager Dan Thomson said at the time that such events were a driving force behind the creation of InsurAce, which aims to make crypto safer for everyone.
The protocol also has a decentralized feel, with requirements voted on by a community of claim assessors who hold and stake INSUR tokens.
InsurAce told Cointelegraph: “Insurance in crypto has never been properly tested until now. The UST depegging incident was catastrophic for so many investors and we are so proud of our team for being able to help our clients through this crisis. The need for insurance has never been more evident and this successful case study will surely be the starting point for huge growth in this sector.”
Fresh from stepping up to the plate after the Terra debacle, InsurAce says it has covered $340 million worth of assets — with 140 protocols listed on the app. Also, 20 public chains are now covered – and the mainnet has now been distributed to Ethereum, Binance Smart Chain, Avalanche and Polygon.
But the hard work does not end here. Right now, brand new product features are being unveiled as part of version two of InsurAce – with further phases to follow in the not-too-distant future, including an investment arm and an insurance marketplace.
Figures suggest that as much as $2.6 billion was lost due to vulnerabilities in smart contracts in 2021 alone, painfully underscoring the need for crypto-specific insurance policies that protect investors. InsurAce claims that lightning-fast growth means that everyday consumers deserve protection against risks that arise through no fault of their own.
V2 of InsurAce involves revising the tokenomics underlying this ground-breaking insurance protocol, as well as releasing innovative new products and continuing to expand to other major blockchains. In time, it is hoped that this infrastructure will further secure the Web3 space – an important milestone on the way to bringing the next billion users of the future to the Internet.
Everything from cell phones to your home is insured in today’s economy, and it only makes sense that crypto investments follow suit. But what really matters is ensuring policies are effective and proactive – paying out quickly to protect investors when things go wrong.
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