19/07/2021 What is Decentralized Insurance and Why Do You Need It

The DeFi Innovation That is Most Often Overlooked

Insurance dates back millennia. Early human societies realized the importance of insurance as a way of protecting trade investments. In fact the use of insurance as a means of financial protection goes all the way back to the First Babylonian Empire in modern day Iraq and Syria in the BCE 1700s.

To put that in context, the first alphabet was created around the same time in the Eastern part of the Mediterranean.

Simply put, it is and has always been of incredible importance to protect your finances in case of the malicious, destructive or clumsy interference of external forces.

While insurance has been an imperative aspect of finance throughout vast spans of human history, the import of insurance often gets lost among more exciting financial developments.

For example, in the world of blockchain and decentralized finance, the advancements being made in decentralized insurance have often been overlooked in favor of crypto loans and futures trading.

What is Decentralized Insurance?

Increasingly more users are locking away their money in Decentralized Finance vaults, engaging in Yield Farming and borrowing and lending using DeFi. As such, there is more money than ever locked up in DeFi protocols. The risk of these protocols being hacked and compromised is also rising with their growth.

Additionally, the sector, as a young industry with constantly evolving technology, is slightly more open to being attacked. As the maturation of the technology and the regulations that surround DeFi grow, attacks from hackers have become less prominent, though that’s not to say that frequent attacks are not currently happening.

With that being said, decentralized insurance is a way for users to protect their crypto assets in a borderless, trusted and secure manner, ensuring that they have protection even when engaging with the often dangerous world of decentralized finance.

Why Do You Need It?

As of the beginning of May earlier this year, DeFi has grown into a 100 billion USD industry. As a new industry that is borderless, permissionless, and trustless, decentralized finance is gradually introducing financial tools that help consumers to maximize their use of the DeFi protocols. Again, these include borrowing and loaning, future trading, and decentralized insurance.

Consider that in May of this year, a DeFi protocol was hacked and 14 million USD was drained. Also consider that the month prior to this attack, another DeFi protocol, EasyFi, lost over 80 million USD after it was hacked. The proliferation of DeFi hacks is so bad that there are articles compiling the “worst DeFi hacks of 2021.”

So, how does a person protect themselves against these losses?

Decentralized insurance with companies like INS3, which uses a DeFi plus NFT plus Oracle Machine and Cross-Chain, is a means of protection against the huge losses that the unregulated world of Decentralized Finance can incur.

Again, as the world of finance continues to change, there are certain constants that remain universally accepted.

The idea of insurance, or protection against losses, against acts of nature or acts that are beyond our control, continues to be an imperative form of finance, even now, 4000 years after it was first thought up.

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