Insurance is a contract with conditions to prevent further losses when the projected risks become real. Insurance is purposely designed to confuse users so that they can purchase the insurance to believe they are financially hedged and in reality, they are not. It is a magic spell to try to presumably resolve issues but it will make it worse. We need real insurances to protect people.
Traditional insurance is a word game to confuse customers to buy products and refuse to fulfill the contract. Crypto insurance may change the traditional practice and minimize risks for users but not insurers.
Here is a 1 min summary of the article if you want to skip the reading.
Why Defi Insurance
Cryptocurrencies are insurances of themselves. They are volatile in price but they can possibly hedge the future financial system risks. At least, that was a narrative when Bitcoin was introduced. Crypto insurance is an insurance of insurance that makes it possible to offer the real promise of insurance policies since crypto has the potential to gain more profits that cover insurers’ risks while providing services to users.
What Is Insurance
Insurance is a financial game. Insurers want money for their investments to generate profits through calculated risks that are lower than financial investment risks so that they can continue profiting from customers while hoping risks will not become true.
How Defi Insurance Can Change Industry
In traditional insurance companies, they are operating like hedge fund managers to take high risks and high rewards insurance products. While they composed complicated terms and conditions on contracts to make customers hope they can compensate from risks which they cannot in the most of the time. Because the profit margin is narrow for insurance companies, they fight to save every penny they can. Crypto insurance can erase such attention on penny counting business and help insurers to have large profits while providing customers with insurance they purchased.
The Trend of Defi Insurance Adoption
Raising hackers’ attacks on crypto protocol and Defi projects makes the industry realize how the importance of crypto insurance. It allows insurers to provide compensations for loss through hackers’ attacks while providing sustainable earning potentials for insurers and customers to secure their funds.
The Downside of Defi Insurance
Crypto frauds are raising along with crypto mainstream adoptions. Regulations will come to regulate the crypto industry which may make crypto-insurance harder to make profits while offering customers large sums of compensation.
Own Insurance Policies
Cryptocurrency exchange platforms offer their own insurance program for users to cover any losses by hackers. They develop collective funds to help users who lost from attacks. Individual investors can also build a crypto-insurance by distributing assets through multiple wallet addresses to avoid single massive losses.
Defi insurance offers a more flexible way to compensate and increases the chances to be compensated from losses. You can also create your own insurance without any policies through cryptocurrencies.
Stay tuned for the 2022 Prediction #7: NFTs-Based Communities - DAO 1.0
This article is also published in Cryptologist as parnership publication.
Photo by Tezos on Unsplash
Note: the post was shared on multiple platforms here.
You can refer my previous article lists here
Digital Commodities- the Unlimited Resources of Commodities Has Born
Universal Income in Crypto Way
DeFi 1.0 is Officially Dead - Welcome to DeFi 2.0
NFT Has a New Purpose
How Many Ads Are Too Much - Floki Inu Ads Got Backfire
Metaverse - Second Life Era
Bitcoin ATM Adoption and Its Potential Security Vulnerabilities
When Corporations Are Running By Everyone
The Fundamental Value Is Irrelevant
Coinbase At Huge Reputation Crisis
CBDCs' Flaw Design
Regulations Start Hitting Crypto Exchanges
From Bitcoin Standard To Zero-Knowledge Proofs - Decentralization 2.0
Shiba Hits 1 Million Users (Army) Milestone: What is Next?
How To Avoid Crypto Scammers
Shiba Game - When Meme Meets Metaverse
Twitter CEO Steps Down - A Full-Time Bitcoiner
Change of Macroeconomy Landscape
CBDC Is Losing The Game
Doge The Future
El Salvador's Bitcoin
Market Sentiment Has Changed
Brief History of Ethereum and How Ethereum 2.0 May Over Promise
Crypto Is Getting Real
Who Cares If Craig Wright Is The Real Satoshi
Institutional Investors vs. Whales
What Happened In BadgerDao
A Proposal To Move Bitcoin Mining PoW Away
IMF Keep Crying Out, Crypto Adoption Keep Accelerating
Dogecoin Is Back to Top 10 But The Moon Shot Is Looming
How to Avoid The New Wallet Scam
Defi Enters To Crypto Bond Phase
What Types of Metaverse You Want
Global Regulations Are Coming Or Can They
IMF Did Have A Plan to Run Global Regulations
Doge Starts Moving
A New Malware Will Steal From Telegram
Smart Money Is Out, Institutional Money Is In
Wait, Web3 or Web 3.0 or web3
Airdrop?! Not So Lucky Anymore!
2022 Prediction #1: L1 Scalability
2022 Prediction #2: L2 Bridges
2022 Prediction #3: Zero-Knowledge Proofs or ZKPs
2022 Prediction #4: Regulated Defi On-Chain KYC
2022 Prediction #5: Institutional Crypto Adoption
Disclosure: The article was written by a delusional author who is possibly a nut job without any questions whatsoever about expertise in the subject matters. You should not believe any words this author wrote or you may experience similar symptoms or even possibly become a nut job.