Lido and Unslashed create a new standard: insurance as an integrated solution
Lido and Unslashed are making history with the first DAO to DAO insurance transaction!
The Lido DAO has made the decision to purchase bulk insurance for its own protocol instead of passing the buck to its users. In doing so, Lido demonstrates how important insurance can (and will be) in protocol competitiveness and sets a higher standard of service to its users. Huge!
What led Lido DAO to this unique decision ?
Lido is a liquid staking solution for ETH 2.0 backed by industry-leading validators. Lido allows users to stake their ETH without locking assets while maintaining infrastructure and participating in on-chain activities like lending. Lido attempts to solve some of the problems associated with initial ETH 2.0 such as staking illiquidity, immovability and accessibility — making staked ETH liquid and allowing for participation with any amount of ETH to improve security of the Ethereum 2.0 network.
While staking ETH, users receive staking rewards, but it also comes with a risk: slashing.
Slashing refers to the forfeiting of rewards and subsequent losses for an Ethereum validator due to a multitude of factors. These factors include breaking network consensus, node downtime or double-signing. It represents a penalty for ineffective validation and results in a loss of funds for validators and, subsequently, for entities staking with these validators.
Currently, if a slashing event were to occur involving one or several validators, the balance of the slashed validator would decrease. This decrease would have an impact on stETH price which could lead to it losing its peg against ETH. Lido users would then suffer a loss.
On February 14th, Lido DAO purchased insurance for almost 200,000 stETH through Unslashed Finance in order to insulate itself from slashing events.
Should a slashing event occur, the claim on their policy will cover them from any potential losses.
Insurance as a competitive advantage?
The status quo within the DeFi insurance industry has been to allow users to buy and handle their own coverage. Historically, protocols have put the burden on their users to insure themselves. When this happens, it is the user who ends up footing the bill, not the protocol.
The purchase of bulk insurance for its users by Lido is monumental.
It offers significant benefits to Lido DAO in several ways:
- It provides a smoother experience for users and fosters inclusivity
- It builds trust between Lido and its users and demonstrates how important protecting its users really is
- It sets the precedent that insurance is a must-have
It is our hope that other projects will follow Lido’s lead in taking the initiative to purchase coverage for its users and helping to transform the current insurance landscape into one that offers inclusion and safety for users across the board.
This partnership is just a step towards that goal. It is our priority to stay at the forefront of the insurance market and make sure that projects have access to the tools they need in order to protect both themselves and their users.
LEARN MORE ABOUT UNSLASHED FINANCE
We are Unslashed and we’ve got your back!
Website: https://unslashed.finance
Manifesto: https://link.medium.com/q2MoVm0WWdb
Team: https://unslashed.finance
Capital Mining: https://link.medium.com/buZvUyy9Vcb
Twitter : @UNSLASHEDF
Telegram: @UnslashedFinance
Discord: https://discord.gg/jQFxqTpbYC
Contact : @marouaneh
