Introducing “InsureDAO stablecoin DePeg risk protection”
InsureDAO stablecoin DePeg cover will be the second major product on InsureDAO. In this article, we will discuss the product’s features and roadmap.
1 - Background
Recently, we have seen a lot of De-Pegged stablecoins. Particularly UST De-peg let many users recognize the risk of stablecoin De-Peg.
Some of DeFi insurance protocols already provide stablecoin De-Peg cover, but there’s still a huge payout and slow claim assessment when DePeg happens.
Therefore, we developed a new type of stablecoin De-Peg cover combining Insurance, Options, and Hedge strategy.
2 - Features
1. Paid instantly, within 2 days 👟
We assess De-Peg cover claims automatically and instantly based on Chainlink’s Oracle. Buyers can get paid within 2 days after stablecoin is depegged.
2. No Proof of Loss ✍️
Buyers don’t need to submit proof of loss for claims. Since buyers only have to send the USDC for the cover amount, buyers can claim the full amount regardless of their status.
3. Hedging strategy for liquidity providers 📈
Using third-party Dapps, we can short the target stablecoin and hedge the DePeg risk, preventing a payout.
In the case of DePeg, we close the short position of DePegged stablecoin and compensate for the loss with profit. So liquidity providers will not lose money even if DePeg occurs.
4. High APY by loop function 🔁
Liquidity providers’ rewards are derived from supply yield in the lending protocol used to short the target stablecoin. By looping “supply & borrow” in the lending protocol, liquidity providers can leverage money up to 5 times. Furthermore, liquidity providers can earn more revenue by borrowing from the lending protocol than by providing money to it directly.
3 - USD/USDT DePeg cover
We will release sUSD and USDT DePeg covers at launch.
These are the assumed conditions of the DePeg covers.
*Grace Period: within this period, users can redeem even after expiry
*TWAP Threshold: upper price threshold of contract termination from TWAP
*Spot threshold: upper price threshold of contract termination
*Volatility allowance: volatility beyond this threshold, one cannot buy cover
4 - Roadmap
We will increase the number of target stablecoins once we confirm the stable effects of the DePeg cover.
1. Expand the De-pegged cover list
2. Offer lending protocols to bid us provide liquidity on their platform
3. Increasing the leverage rate
4. Multi-chain expansion to cover algorithmic stable coins’ risks
5. Increase the number of dApps to use for swap
6. Add aggregating functions so that users can select the most appropriate insurance depending on their risk tolerance
7. Package purchase discount (buyers who purchase both DePeg cover and smart contract hacking cover will get a discount of premiums to pay)
This document explains the features and roadmap of InsureDAO’s stablecoin DePeg risk cover. Meanwhile, join our discord server for updates and announcements.
Twitter: https://twitter.com/insuredao
Discord: https://discord.gg/jVqPfxWC
