We’ve crunched the numbers. And unsurprisingly, the statistics show that nearly 60% of crypto users in the USA & UK say that their primary goal for holding crypto is to grow their Investment.
Yes, Crypto does offer exciting passive income opportunities. But here’s the catch —to access some of the most competitive returns on the market, Web3 users often have to interact with custodial centralized finance (CeFi) platforms to deposit their assets into some lending & yield-farming pool. And that comes with a different set of risks.
Read this article to discover why.
Image Credit: Image by Peggy und Marco Lachmann-Anke.
Why Crypto Depositors are Buying Custodian Risk Cover
One of the fundamental use cases of the Custodian Risk cover is to protect web3 users from the losses that may emanate from the temporary insolvency or terminal bankruptcy of the custodial CeFi lenders, exchanges and trading platforms.
The collapse of the TerraUSD (UST) stablecoin sent systemic shockwaves throughout the crypto ecosystem including the CeFi-based custodial lending & borrowing sectors.
Reports by Bloomberg showed that nearly 1 million customers worldwide were left red faced as prominent custodial lenders Celsius Network & Voyager abruptly froze withdrawals in June & August 2022 respectively.
Users lost access to digital assets worth over $10 billion held in custody as both CeFi lenders filed for bankruptcy. While court proceedings are still on-going, it is expected that most of the victim depositors will lose a significant portion of their funds.
This underlines the primary importance of InsurAce’s Custodian Risk cover product to the global Web3 Economy as users deposit their users on lending platforms to drive maximum capital efficiency.
InsurAce’s Custodian Risk cover product offers an extra-layer of protection that covers users against systemic risks posed by the insolvency of crypto exchanges and other designated custodians.
Here are a few other reasons why Cryptocurrency holders and depositors around the world are seeking Web3-native insurance cover products to
1. Protection against Off-chain losses
Although exploitation of Smart contract vulnerabilities by bad actors remains the highest cause of stolen funds in the DeFi world, off-chain losses of funds in custody of exchanges have also contributed a significant chunk of the $1.9billion theft that we have recorded in the web3 finance space so far.
2. Enhancing TradFi & DeFi Synergy
Insurance is a very crucial aspect of the TradFi economy. And Web3 insurance facilitates the utilization of Digital Assets in off-chain transactions.
By obtaining Custodian cover on their digital assets deposits, web3 users can then explore off-chain opportunities such as deploying their digital assets as collateral assets in transactions such as mortgages, real-estate transactions, long-term loans, etc where valid Insurance policies are required.
This potential Synergy between the TradFi & DeFi can be one of the key steps toward mainstream adoption of cryptocurrencies and the web3 economy at large.
3. Enhancing Systemic Resilience
Similar to Cross-chain bridges, Custodian crypto exchanges and trading platforms like Binance & FTX all typically handle billions of dollars’ worth of digital assets, owned by millions of users in over 150 countries across the world.
Uninsured losses & thefts of digital assets from any of these platforms poses serious systemic risk to the web3 economy at large.
InsurAce’s Custodian Risk cover provides a safety net for Web3 users to seek compensation for losses without having to burden the victim designated custodian with lawsuits that may trigger a death spiral & insolvency.
Frequently Asked Questions (FAQs):
- What Custodians are supported?
Only Binance is supported at the moment. We will communicate with the community as we continue to work towards enlisting more Custodians.
- What types of Tokens are excluded from the Custodian Risk cover product ?
Non-Fungible Tokens (NFTs) are excluded. You can find more details in the Cover terms.
- Can I purchase cover on behalf of someone else?
InsurAce does not collect any KYC or private data on users. However, each Cover purchase application must carry a unique User ID for each Designated Custodian.
- How does InsurAce carry out the Claims assessment
Upon notifying us, all Claims are subjected to a transparent review process by the InsurAce Advisory Board and a Public Vote by Risk Assessors.
- In the event of a Claimable Loss Event when will I receive Compensation?
If a positive verdict is reached, payouts are issued immediately. Typically, the review process is completed within a few weeks.
As a leading player in the Web3 space, InsurAce is determined to protect Web3 users worldwide from losing their savings and investments to unfortunate non-market incidents. Our newly relaunched Custodian risk cover signals the InsurAce protocol’s capacity and the team’s tenacity to keep building in defiance of the year-long turbulent crypto market landscape.
Thank you for using InsurAce’s products and services.
InsurAce.io is a leading decentralized multi-chain protocol that provides reliable, robust and secure risk protection services to users of Web3-based financial services, allowing them to protect their investment funds against various risks.
Web3 Cover products by offered by DeFi protocols have come into the global limelight following the devastating $40billion TerraUST crash where InsurAce’s $11.7m payouts played a major role in sustaining investor confidence and averting a systemic crash for the crypto industry.
With InsurAce.io, users can rely on:
- Competitve Cover Pricing
- Cross-chain Coverage
- Multi-chain Accessibility
- Sustainable Investment Returns
Since our debut in April 2021, InsurAce.io has built a full-spectrum cross-chain product line that covers 140+ protocols, 3 CEXs and 1 IDO platform running on Ethereum, as well as Solana, BNB Smart Chain, Polygon, Fantom, Gnosis, Arbitrum, Avalanche, Harmony, Celo, Cronos, Boba, ICON, Ontology, Moonriver, Moonbeam, Bifrost, Aurora, and Optimism. InsurAce.io currently has a live product deployed on Ethereum, BNB Smart Chain (BSC), Polygon, and Avalanche.
InsurAce is led by founders Oliver Xie, Sum Wu and Dan Thomson (@vagrantcrypto) with a globally distributed team of insurance and web3 experts.
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