CDIS – The future of centralized cryptocurrency custody, a way forward after the FTX crash

The Web3 industry just witnessed the worst event in its decade-long history: the collapse of the FTX, devastating the confidence of our industry inside and out. This isn’t the first time something like this has happened, the previous series of LUNA and 3AC debacles were simply the beginning of these catastrophes, and it is reminiscent of the collapse of Mount Gox. It has been labeled as the Lehman event of cryptocurrencies. It wasn’t the first case, and it certainly won’t be the last.

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

  • Restore trust and confidence

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

  • Better protect the most vulnerable users

Of all these serious events, small and medium-sized users are always the ones who suffer the most; many of their life savings were wiped out by these disasters. Is there a way to build a safety net for these small to medium users in particular?

Assuming you have FDIC

FDIC (Federal Deposit Insurance Corporation) is the US insurance organization in the traditional financial sector to protect depositors in case an institution goes bankrupt and each depositor is insured up to US$25K. The FDIC was created in the 1920s to address the situation where many depositors’ savings were wiped out due to the financial crisis. Since then, it has functioned as a key financial infrastructure for stability and public confidence in the national financial system.

“Since the FDIC’s inception in 1934, no depositor has lost a single cent of insured funds due to bank failures.”

  • Quoted from the 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, introduced our industry’s Deposit Insurance Scheme – Crypto Deposit Insurance Scheme (CDIS), designed to protect end users, enhance market stability and restore public trust. When the next storm hits, there will be an umbrella for everyone.

InsurAce has the professional backing of a global risk and insurance advisory institute and a leading compliance and legal firm to support.

How will it work?

  1. This Scheme will be initiated by the InsurAce team, with the participation of leading exchanges and custodial service providers in the industry as Founding Partners of the DI Scheme. They will inject the initial funds into the DI fund pool.
  2. The CDIS will be established as a mutual insurance structure. KYC clients of these founding partner exchanges will purchase coverage from exchange platforms or directly from the CDIS application and the premium will flow into the DI Fund pool. The coverage will aim to protect only small to medium-sized users, insuring up to a limit of $10,000 per user.
  3. In the event of an institution going bankrupt, the CDIS will make claims and payments to affected users to secure their savings from the DI Fund pool based on actual loss, up to the insured limit.
  4. The InsurAce team will function as the insurance executive of this insurance scheme and manage all operations under the supervision of the members of the mutual society and the regulatory authorities. This will be implemented through a governance framework.

Main features

This CDIS solution will combine the best practices of FDIC, SDIC, etc., as well as Web3 technologies to meet the needs of the cryptocurrency industry, maximizing transparency and efficiency. In the meantime, we will also be looking for a regulated path to safely bring it to global crypto users.

  1. Transparency

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

  1. User protection

InsurAce will focus on protecting small and medium-sized depositors. Every KYC user will automatically be 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, business risk management, data management and claims infrastructure.

  1. Regulatory compliance

The InsurAce team is already looking into a regulatory framework for crypto insurance and can bring DCIS into a regulated environment.

Who is InsurAce?

InsurAce Protocol is an early pioneer in Web3 risk protection since 2020, with a dedicated and professional team working at the intersection of Web3 and risk management. To date the team has gained a deep understanding of Web3 native risks and are committed to building for the long term in the Web3 risk management vertical.

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

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

Our products cover smart contract hacks, custody risk, stablecoin de-peg events and more. This includes FTX’s user protection coverage.

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

It paid $11.7 million in claims to UST De-Peg policyholders caused by the Terra crash in May 2022, the single largest settlement in cryptocurrency 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 roll out the DCIS in the coming months. The team is working closely with industry experts from both web3 and insurance to bring the DCIS to users immediately.

They encourage any crypto institutions like exchanges, custody service providers etc. To participate in this insurance program and to contact the team via contact@insurace.io

About InsurAce

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

InsurAce offers portfolio-based insurance products with optimized pricing models to substantially reduce costs (up to 80% less than other insurance protocols). InsurAce offers Smart Contract Hedging, IDO Hedging, Custodian Hedging and Stablecoin De-Peg Hedging.

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

To date, InsurAce has covered more than $350 million worth of assets across 140 different protocols across 20 public chains. InsurAce famously paid nearly $12 million to $UST de peg victims in May 2022.

The project manager for InsurAce is Oliver Xie. Oliver started working on the InsurAce project in September 2020 and prior to that, worked as a CTO at one of the three largest licensed derivatives exchanges and clearinghouses based in Singapore. Oliver entered the crypto space in 2017, where he led a team researching cryptographic derivatives and

blockchain technology and has gravitated towards blockchain-based Open Finance in recent years. He identified an opportunity for a one-of-a-kind approach to providing insurance for DeFi smart contracts and users, and InsurAce was created.

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

Branding 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/insurance

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

Leave a Reply

%d bloggers like this: