**The information contained in this blog post is correct as of 4:00am UTC 13th May 2022, but is subject to changes. As new information comes to light from TFL (Terraform Labs) or other industry sources, updates may be released that change elements of this process. Some changes may be subject to a community vote. Please contact our team on Telegram or Discord for further clarification on any questions. Community feedback will enable us to improve this guide.**
UST De-Peg Information
The purpose of this blog is to illustrate the terms and conditions of the UST De-Peg Cover offered by InsurAce.io and to keep all of our users updated about the current situation.
Firstly, we’re going to give an overview of the Terra and UST situation. We want to ensure that everyone is clear about the event that began on May 10th, 2022.
What is Terra?
Terra is a public blockchain protocol aiming to build a decentralized financial infrastructure that enables money innovation. With its stablecoin protocol, oracle system, smart contracts, and mass-user adoption plan, it aims to lay the groundwork for a new digital economy. The major tokens on Terra relevant to this situation are LUNA and UST.
What is UST?
UST is a decentralized stablecoin running on Terra that attempts to maintain the same value as $1 USD. As UST is not backed by US dollars held in a bank account, it operates differently from centralized stablecoins.
For UST to maintain a peg of $1 USD, a smart contract-based algorithm has been coded to keep the price stable by burning LUNA tokens to mint new UST tokens.
In principle, this should ensure that traders may always exchange $1 worth of UST for $1 worth of Luna. Luna has a floating price and is intended to act as a shock absorber for the price of UST.
What may cause a UST de-peg event?
There have been rumors circulating that suggest a potential coordinated attack on the Terra Ecosystem. We are not here to jump to conclusions but rather explain in simpler terms what led to a de-peg event. There are various factors at play. Let’s take a look below:
- Huge sell pressure of both LUNA & UST
- LUNA tokens have to be burnt in order to stabalize UST prices. Due to the huge selling pressure of both LUNA & UST, it has resulted in a larger supply of both LUNA & UST available on open markets which has, in turn, affected the price peg.
- High volume of transactions with high-gas requests causing network congestions on Terra
- UST relies heavily on Anchor Protocol as it’s main utility. When borrowers on Anchor Protocol were unable to repay their loans due to congestions, this resulted in mass liquidations of the collateral.
- Bearish market outlook
- As UST is backed by Bitcoin, the Luna Foundation Guard (LFG) started selling BTC to restore UST peg. This massive selling coupled with BTC shorts caused a greater panic within the market and people started panic selling more UST.
Below is a detailed explainer thread by @Route2FI via Twitter:
UST De-Peg & 10-day TWAP price… What’s the trigger condition for the de-peg claim?
The trigger condition for the UST De-Peg coverage is when the Time–Weighted Average Price (TWAP) 10-day average drops below $0.88. If this occurs, we will provide the breakdown of our calculations via our announcement channel.
Alternatively, you can look at this data from a 10-day average on the OHLC prices of UST via the website of our partner CoinGecko as this is the source of where we collect the data.
UST De-Peg Information and Claim Guide
The UST De-Peg cover has officially been triggered by InsurAce.io as of 5:00am UTC on 13th May 2022 following a TWAP of UST below $0.88 as per our terms and conditions of cover.
Below is a full information guide which includes our User Guide for Eligibility and our Claims Process regarding this case.
The information in this guide is correct as of 4:00am UTC on 13th May 2022. As new information comes to light from TFL (TerraForm Labs) or other industry sources, updates may be released that change elements of this process. Some changes may be subject to a community vote. Please contact our team on Telegram or Discord for clarification on any questions.
The De-Peg Cover was triggered at 5:00am UTC on 13th May 2022. This means the 10-day period used to calculate this TWAP is from the 3rd May 2022 5:00am UTC – 13th May 2022 5:00am UTC.
Step 1 – Determination of Eligibility
Cover Owners who meet all criteria below are eligible to file a claim:
- Criterion 1: holding UST or any UST liquid derivative tokens (e.g. aUST) in their wallets or in accounts with any custodians (e.g. centralized exchange, asset management providers, etc.) at the time of Cover purchase; and
- Criterion 2: holding active UST De-peg Cover at the time the de-peg event is triggered*; and
(* For Cover Owners whose cover has not been activated yet at the time the de-peg event is triggered, you will still be eligible to file a claim further down the line if the 10-day TWAP is still below $0.88 on that later date.)
- Criterion 3: holding UST or any UST liquid derivative tokens (e.g. aUST) at the time the de-peg event is triggered; and
Additional information for Criterion 1: Cover Owners who did not hold UST at the time of Cover Purchase, but held UST in their wallet at least 10 days before the De-Peg trigger period should email us with the required evidence for a claim explaining their case. Whilst not explicitly covered by the policy, we aim to keep open communication with this issue, particularly due to the complex nature of the event.
Exclusion: Cover Owners who are no longer holding UST or any UST liquid derivative tokens (e.g. aUST) in their wallets or in accounts with any custodians at any time during the cover period will be disqualified from making a claim. (e.g. User A had 100 UST, sold 100 UST, and buys back 100 UST. The cover terminated when User A sold their 100 UST. Hence, any amount bought thereafter will not be claimable. If User A sold 30UST and 70UST remained, the 70UST would still be claimable.) This includes but is not limited to users who sold their UST for arbitration purposes. It also includes funds lost through liquidations whilst staked in third party protocols like abracadabra.money.
For more details, kindly refer to the T&C: UST de-peg cover wording.
Step 2 – Claimable Amount
After confirming that you are an eligible Cover Owner, the next step in our process is to calculate the Claimable Amount.
InsurAce.io will compensate Cover Owners for the value (value = UST quantity x $1 USD) of the quantity of the UST the Cover Owner is holding at the start of the de-peg trigger event period where:
- the value is subject to a maximum of the Cover Amount; and
- the quantity claimable should be no more than the quantity of UST the Cover Owner held 10 days before the de-peg event is triggered.
Any funds received by the insured as compensation for their losses from the UST token issuer and/or Terra ecosystem will be excluded from the claim payments.
Step 3 – Claim Request Submission
The claim request together with Proof of Loss must be submitted during the Cover Period or within 15 days after the Cover expires.
Given the uncertain and complex nature of this situation, we are taking proactive and expedited measures to process all claims as soon as possible. All eligible cover holders are required to submit their claim request by May 20th, 2022 23:59:59 UTC.
Claims request without sufficient Proof of Loss will be considered as invalid and rejected without proceeding to the next phase of community voting.
Here are the guides for the three main UST holding groups.
For cover owners who have UST in wallets different from the wallet you use to purchase Cover, kindly follow the steps below to submit your claim:
- Calculate the claimable amount following the above “Claimable Amount” guidelines
- Submit the claim and indicate the claim amount through our dApp. Refer to this doc on How to Make a Claim (https://docs.insurace.io/landing-page/documentation-1/user-guide/insurance/how-to-claim)
- A screenshot showing your UST holdings at 5am UTC on the 3rd May AND 13th May at 5am UTC and any transactions in between.
- Withdraw any staked UST or xUST assets (e.g. aUST), and convert to UST.
- Transfer the UST (less than or equal to the Claimable Amount) to the wallet you used to purchase the cover as a way to prove ownership of the wallet. You can use Terra Bridge to bridge the UST to Ethereum, BSC, Polygon or Avalanche. Please select Wormhole when you bridge UST.
- Send an email to claims@insurace.io with the following:
– Claim ID which you can find under Insurance –> My Claims
– List of impacted wallet address and transaction hash/ID of transferring the UST from these wallets
– A screenshot showing your UST holdings at 5am UTC on the 3rd May AND 13th May at 5am UTC and any transactions in between.
– Evidence to prove the holding amount of UST or any UST liquid derivative tokens (e.g. aUST) in the wallet before purchasing the cover (eg. Transaction hash/ID of purchasing UST)
– Description of transaction history related to UST or any UST liquid derivative tokens between the time you submit the claim and 10 days before the de-peg was triggered. (e.g. buy/sell X amount of UST, withdraw X amount UST from Mirror, etc.)
– Other evidence to prove the holding amount of UST or any UST liquid derivative tokens (eg. aUST) in the wallet at the time the de-peg is triggered.
IF YOU ARE UNABLE TO TRANSFER YOUR UST FROM TERRA, PLEASE BE PATIENT AND AWAIT FROM UPDATES FROM THE INSURACE TEAM AS WE REVIEW PUBLIC INFORMATION FROM TFL. This is a Force Majeure event that is out of our control, we ask for your patience and understanding.
Transferring to an EVM wallet is not essential for claim submission, so there will be time to complete this step before a payout is awarded.
However, it is required for proof of ownership, and so users must send an email referencing the claim number with the attached transfer when they are able to do so.
For Cover holders who have UST in accounts with any custodians (e.g. centralized exchange, asset management providers, etc.), kindly follow steps below to submit your claim:
- Calculate the claimable amount following the above “Claimable Amount” guidelines
- Submit the claim and indicate the claim amount through our dApp. Refer to this doc on How to Make a Claim
- A screenshot showing your holdings at 5am UTC on the 3rd May AND 13th May at 5am UTC and any transactions in between. Cover holders will need to submit a video of themselves logging into your CEX account showing transaction history, deposits and withdrawals. The video should be taken from a separate device and not directly from a screen recording.
- Transfer the UST (less or equal the Claimable Amount) to your Terra wallet and then to the wallet you use to purchase the cover as a way to prove ownership of the account. You can use Terra Bridge to bridge the UST to Ethereum, BSC, Polygon or Avalanche. Please select Wormhole when you bridge UST.
- Send an email with the following docs to claims@insurace.io using the email address you used to register your account with the custodian:
– Claim ID which you can find under Insurance –> My Claims
– Transaction hash/ID of transferring the UST both from custodian to Terra wallet and from Terra wallet to the wallet you use to purchase cover
– Withdrawal verification email from the custodian
– A screenshot showing your UST holdings at 5am UTC on the 3rd May AND 13th May at 5am UTC and any transactions in between.
– The video or a link to the video uploaded to wetransfer.com showing transaction history
– Evidence to prove the holding amount of UST in the account before purchasing the cover (e.g. trade records of purchasing UST)
– Screenshot of trade history related to UST between the time you submit the claim and 10 days before the de-peg is triggered.
For Cover holders who locked UST for the long-term, please follow these steps
- Calculate the claimable amount following the above “Claimable Amount” guidelines
- Submit the claim and indicate the claim amount through our dApp. Refer to this doc on How to Make a Claim
- A screenshot showing your UST holdings at 5am UTC on the 3rd May AND 13th May at 5am UTC and any transactions in between.
- Take a screenshot of staked assets
- Send an email to claims@insurace.io with the following:
- – Claim ID which you can find under Insurance –> My Claims
- – List of impacted wallet address and transaction hash/ID of transferring the UST from these wallets
- – The screenshot showing your current holding amount of UST
- – Evidence to prove the holding amount of UST or any UST liquid derivative tokens (e.g. aUST) in the wallet before purchasing the cover (eg. Transaction hash/ID of purchasing UST)
- – Description of transaction history related to UST or any UST liquid derivative tokens between the time you submit the claim and 10 days before the de-peg was triggered. (e.g. buy/sell X amount of UST, withdraw X amount UST from Mirror, etc.)
- – Other evidence to prove the holding amount of UST or any UST
- – Proof that you cannot unstake, and the date unstake is possible.
Claims for locked funds may be voted on separately by the community vote.
Details of payouts for these cases will be on a case-by-case basis with details to follow at a later date.
If you do not think any of these three options apply to you, please write to us on Telegram or Discord immediately for clarification.
IF YOU ARE UNABLE TO TRANSFER YOUR UST FROM TERRA, PLEASE BE PATIENT AND AWAIT FROM UPDATES FROM THE INSURACE TEAM AS WE REVIEW PUBLIC INFORMATION FROM TFL. This is a Force Majeure event that is out of our control, we ask for your patience and understanding.
Step 4 – Claim Assessment Process
The claim will be processed following our Group Claim assessment process.
A Group Claim plan will be proposed, assessed and voted on by our Claim Assessors, and staked token holders following our process. If the Group Claim plan is approved, all individual covers will be processed according to the Group Claim plan on a case-by-case basis. Should you have any objections, you can make an appeal after the voting during the complaint stage.
The Group Claim plan for this UST de-peg incident will be provided accordingly after the claim condition is triggered.
For details, you can refer to Group Claim Assessment Process
Here is an example of a Group Claim based on the recent Elephant.Money exploit.
Step 5 – Claim Payout Process
Upon claim approval, cover owners are required to swap the approved amount of UST to us
within 15 days. InsurAce.io will send the equivalent amount of Payout Tokens to the insured based on a payout ratio of 1 UST = 1 USD. The details of the swap process will be announced later.
To speed this process along, we encourage any policy holders to transfer their UST holdings to the EVM wallet used to purchase their De-Peg Cover. This includes from Terra Network, any CEX, or unlocking from stakes and withdrawing so that the tokens can be bridged to the EVM wallet.
If the Terra Network is halted/frozen/down, please be patient, and ask for the latest solutions in official InsurAce groups. Actions will be based on the latest available information from TFL. Meanwhile, we seek your understanding that this is a force majeure out of our control.
InsurAce.io is not responsible for differences in the market value of the Payout Token from the time of pay out to the time the insured receives the claim payout.
* Payout Token refers to the same token that the insured used to make the premium payment. The Payout Tokens may not principally be USDT or USDC wholly, but rather a combination of the assets in the underwriting pool to alleviate operational hazards and selling in a high volatility environment.
The value of the Payout Tokens will be calculated according to the USDC value posted to CoinGecko at the time of the payout.
Users with locked funds will be given specific payout details related to their claim.
Community Feedback
Please join our Discord channel where we have a ust-de-peg-discussion group. Feedback given to @vagrantcrypto in this channel will be raised to the team to help us improve our services either for this event or future events.
Alternatively, you can send emails to claims@insurace.io for further communications.
Additional Resources:
Please see our original blog post on Stablecoin De-Peg Cover here:
https://blog.insurace.io/new-product-launch-stablecoin-de-peg-cover-and-bundled-covers-59f19ca16161
Review our cover wording for UST De-Peg here:
https://files.insurace.io/public/en/cover/USTDepegCover.pdf
Here is the latest info from the Terra team
How UST & Luna works?
https://www.coindesk.com/learn/what-is-luna-and-ust-a-guide-to-the-terra-ecosystem/
UST & Luna crash
https://www.coindesk.com/layer2/2022/05/11/the-luna-and-ust-crash-explained-in-5-charts/
