Know Unslashed Finance – Your Crypto Insurer

Know Unslashed Finance – Your Crypto Insurer

By paragism | paragism | 3 Dec 2021


More than $110 billion is locked in DeFi or decentralized finance today. Permissionless and participatory DeFi protocols have caught the attention of people and the TVL (total value locked) has skyrocketed in recent times. Decentralized trading, derivatives, loans etc. are popular sectors of DeFi but decentralized insurance is one sector that has a high potential for adoption. DeFi is really a novel concept that differs significantly from traditional finance but the inherent dangers of it can’t be denied. The smart contracts managing DeFi are financial robots but there have been numerous smart contract hacks or financial exploits. There was a $611 million exploitation on Poly Network this year and it can be considered as the biggest crypto heist. The total value lost due to exploitations or hacks of DeFi protocols has surpassed $1 billion in this year with the exploitation of protocols like Popsicle Finance, Cream Finance, bzx etc. The astounding yield of DeFi is bringing a continuous flow of new investors and investment but as there is no regulation, the investors get exposed to various risks. Decentralized Insurance provides a much-needed security layer to the innovative DeFi protocols and can also protect investors from the irreversible transaction risks of blockchain.

About Unslashed Finance

Unslashed Finance is a decentralized insurance protocol built by a world-class development team that covers various risks associated with crypto assets. The protocol became live on Ethereum mainnet January 6, 2021. It was a private launch and invite-only platform initially to control the number of users and attract only the deeply interested individuals. The protocol became open for all later on and created a new success story! The insurance buyers can buy various coverages here and the claims get settled via an on-chain transparent process. The platform offers ‘pay as you go’ to the insured and the policy can be offloaded anytime.

Different layers of Unslashed

Unslashed Finance uses the power of smart contracts and blockchain technology to protect the users against wallet hacks, smart contract exploits, validator slashing, oracle failure, peg loss and many more. The platform covers a wide market range and products.

One protocol - many layers

Insurance: The protection cover is purchased by the insured and the cover is given by the participants of the protocol who supply the capital. The premium price is decided after assessing the risk. An underwriter is a party that is responsible to evaluate the risk.

Different covers offered

Capital Pool: You can supply your capital to the individual pools and earn a premium. The premium APR and ongoing claims are visible in the dashboard.

Capital Buckets: A Capital Bucket is a structured insurance product that enables insurers to diversify their risks. A capital bucket provides coverage for many insurance policies. Presently, the ‘Spartan Bucket’ is curated by the DAO and the capital suppliers can get high yield while being capital efficient. The Spartan Bucket contains loss of funds policy for 6 central exchanges (CEXs) – Coinbase, Binance, Kraken, Bitmax, Bitfinex and Deribit; wallet covers like Ledger and Gnosis SAFE; smart contract covers of some popular DAPPs like Uniswap, Compound, Kyber and some more; Oracle failure – Chainlink, validator slashing, cover for some custodians and some peg loss related protection. The bucket exposure to a particular policy is adjusted by a DAO vote.

The Spartan Bucket

Asset management: The capital provided to Unslashed Finance must be utilized properly for producing proper yield and the same is done by all traditional insurance companies also. For this purpose, Unslashed uses a native asset management layer through a bridge with Enzyme Finance, an on-chain asset management protocol. Enzyme is integrated into many DeFi protocols and supports 200+ assets and it provides the asset management infrastructure to Unslashed. The unique strategy of Unslashed helps the insurers to earn additional yield from the capital supplied. The bucket capital keeps on growing due to the yield and the protection coverage gets increased to build a superior insurance infrastructure.

Asset management overview

Pricing of premium: The insurance premium is the amount of money paid for the coverage. There are a lot of factors to decide the premium amount. The past claims, risk hypothesis and correlation between different policies play a role here. The premium price changes as per the utilization of the insurance capital.

Attractive yield: Providing capital on Unslashed is highly attractive as the capital provider earns 3 types of yields – USF (the governance token of Unslashed) capital mining, returns from Enzyme asset management and insurance premium. The capital buckets are designed to avoid the accumulation of risk from a particular policy. The APY of supplied capital gets boosted heavily due to all these.

Claim assessment and settlement: The claim assessment and settlement of decentralized insurance is very different from traditional insurance. Unslashed uses Kleros, a decentralized arbitration service, to assess all claims. The independent assessors and arbitrators review the validity of all claims after matching with policy documents and evidence of the incident provided by the claimant. All claims are judged in a fair process avoiding any biases. Kleros is an independent entity, so Unslashed delivers transparent assessment and on-chain settlement of the claims. Liquidity is very important for fast claim settlement. The capital pool of Unslashed provides instant liquidity as it maintains a high level of supplied capital.

Claim settlement process

Governance of the protocol: Unslashed is a decentralized protocol. USF is the governance token of the platform and the maximum supply is 86 million. USF token holders participate in the on-chain votes to decide important parameters of the protocol and future direction. Achieving true decentralization is not an easy task for a new protocol. Unslashed aims to achieve complete decentralization down the line by being managed totally by a DAO.

Use cases

Stablecoins are very popular in DeFi. The stablecoins like USDT, USDC or DAI are pegged to the U.S dollar. The price stability is achieved via collateralization but as they get traded in the open market, sometimes the fluctuation range remains high. Unslashed currently supports 2 stablecoin pegs - USDT and UST. It gives you cover against stablecoin losing its peg and trading below a TWAP (Time Weighted Average Price) for a time frame. The custodian policy of Unslashed covers you against loss/hack of funds held by a custodian like Coinbase Custody. Generally, these custodians have their own insurance policy but often that may not be sufficient to cover your loss. Unslashed covers your loss over and above the insurance policy of the custodian. Exchange hacks are also a common incident in crypto. Unslashed offers exchange fund protection cover for some exchanges like Binance, Kraken, Coinbase at a reasonable rate. The popular DeFi DAPPs like Uniswap, Maker DAO etc. are smart contract systems that are designed to provide secure, accurate and cost-effective transactions but these smart contracts can become vulnerable to exploits due to the presence of bugs. Unslashed provides smart contract insurance for many popular smart contracts. Proof-of-stake blockchains have gained popularity nowadays and the validators verify transactions and secure such networks. The normal stakers delegate their stakes to the validators for getting staking rewards. The staked asset gets slashed if the validator misbehaves. Unslashed has an insurance policy to cover validator slashing. Blockchain oracles are part of all DeFi platforms and they provide real-time price data. A price oracle malfunction can cause fund loss and Unslashed has protection cover for that also.

Before buying insurance from Unslashed, please go through the policy document properly. If you are a capital supplier, check the premium APR positively before supplying capital and understand the terms. Be assured to experience a world-class decentralized insurance protocol. 

Unslashed has got your back!


Note: The cover image source is here. The article was first published here

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Cypherpunk. Writing content which I love. Creeping on the blockchain. Twitter - @paragism


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