The collapse of LUNA and UST marked a new low point for the crypto industry during the current bear market — but it wasn't all bad news.
In fact, 155 investors managed to survive the collapse unscathed after having the foresight to take out an insurance policy that protected them.
InsurAce offered a policy that would reimburse crypto enthusiasts if UST, an algorithmic stablecoin, lost its peg to the U.S. dollar.
It ended up doing so in spectacular fashion — falling to mere cents days after it first divorced from $1 in a meaningful way.
Overall, the crypto insurance protocol said it ended up paying $12 million to clients, and 98% of claims were approved.
By contrast, InsurAce claims some of its rivals have claimed to honor payouts — or failed to offer policies that would protect investors against a depeg in the first place.
The protocol says the sorry case of UST proves the need for DeFi insurance, which also covers matters including smart contract hacks and custodian risk.
A swift reaction
InsurAce says it has been able to win the confidence of crypto investors by having clear policies in place, and acting quickly in response to market movements.
Barely 48 hours after UST depegged, the insurance protocol set the process for claims in motion — and explained cover had officially been triggered because UST had fallen below $0.88. Payouts were finalized just one month later.
Chief marketing officer Dan Thomson said at the time that such incidents were a driving force in the establishment of InsurAce, which has the ambition of ensuring crypto is safer for everyone.
The protocol also has a decentralized feel, with claims being voted on by a community of claims assessors who hold and stake INSUR tokens.
InsurAce told Cointelegraph: "Insurance in crypto has never been properly tested until now. The UST depegging event was catastrophic for so many investors and we are so proud of our team for being able to help our customers through this crisis. The need for insurance has never been more apparent, and this successful case study will surely be the launchpad for huge growth in this sector."
Fresh from stepping up to the plate following the Terra debacle, InsurAce says it has covered $340 million worth of assets — with 140 protocols listed on its app. What's more, 20 public chains are now covered — and its mainnet has now been deployed to Ethereum, Binance Smart Chain, Avalanche and Polygon.
But the hard work doesn't end here. Right now, brand-new product features are being unveiled as part of version two of InsurAce — with further phases set to follow in the not-too-distant future, including an investment arm and insurance marketplace.
Figures suggest that a whopping $2.6 billion was lost due to smart contract vulnerabilities in 2021 alone, painfully underscoring the need for crypto-specific insurance policies that protect investors. InsurAce argues that lightning-fast growth means that everyday users deserve protection against risks that arise through no fault of their own.
V2 of InsurAce involves revising the tokenomics that underpin this cutting-edge insurance protocol, as well as releasing innovative new products and continuing to expand to other major blockchains. In time, it's hoped this infrastructure will further secure the Web3 space — a crucial milestone on the way to onboarding the next billion users in the future of the internet.
Everything from cell phones to your home is insured in today's economy, and it only makes sense that crypto investments would follow. But what really matters is ensuring that policies are effective and proactive — paying out speedily to protect investors when things go wrong.
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