Bright Union is proud to announce the integration with the fourth risk platform, Ease Finance. With this latest integration, Bright Union further solidifies its position as the platform with the widest offering of insurance products against hacks and smart contract failures.
In 2022, there has already been billions lost to protocol exploits. The need for effective risk mitigation tools is more important than ever. The recent UST/Luna crash is proof of how reputation and high TVL don’t necessarily correlate to security in DeFi — nothing is too big to fail.
A Valuable Collaboration
With this integration, users will be presented with an additional choice to compare to the existing covers provided by Nexus Mutual, Bridge Mutual and InsurAce.
Ease finance is accelerating the DeFi insurance space with its innovative ‘UnInsurance’ (their words not ours!).
UnInsurance — Reciprocally Covered Assets
With Reciprocally-Covered Assets, or RCA coverage everyone is covering each other with no fees being paid and no capital in reserve. Payments are only made when a loss occurs in one of the vaults of the ecosystem, at which point a small percentage of every vault is liquidated to compensate for the affected vault. This method will be able to cover the TVL of the entire industry without locking away too much “idle” capital for the rare case hacks take place.
Ease finance has a completely different model compared to risk partners Nexus Mutual, Bridge Mutual and InsurAce. Nexus, Bridge and InsurAce follow the model of a traditional mutual. In essence, the cover buyer pays a premium for covering a certain risk (in this case hacks). On the other side, a cover provider locks their capital, which will be used to pay a claim if the event (hack) occurs. The premium is transferred to the cover provider as a reward for their risk.
Ease finance follows a risk sharing model One unique advantage of Ease’s RCA is that it solves the capacity issue which is currently plaguing DeFi insurance (too little supply for a high demand).
How does Ease Finance’s UnInsurance work?
Ease finance’s Uninsurance can be described as risk sharing. If you are a cover buyer, then you must also be a cover provider: the tokens you lock up to be covered are the same tokens used to pay out someone else’s claim. However, since it is so diversified the impact on an individual is minimal.
- Depositing into Ease Vault — Buying and Providing Coverage
There are multiple vaults each representing some risk. Here, each vault represents a pool within a DeFi protocol which is at risk of being hacked (for example, the DAI pool on yearn, USDC on compound or FRAX on Aave). Users deposit the relevant tokens (yvDAI, aFrax…) into the relevant Ease vault — this is comparable to buying the coverage.
In the picture you see that users will first need to search for and navigate to the Aave v2 coverage and then select the relevant pool.
In the situation that the DAI pool on Aave is hacked, the value of the corresponding Ease vault will decrease too. Individual users do not need to file a claim, as the vault will ‘submit a group claim’.
On the flipside, by locking your staked tokens into a vault, you are also allowing these funds to pay out a claim if a hack occurs which affects another vault. You will lose a minor percentage of your insured tokens.
- Making a claim in the event of a hack
If an event is considered within the scope of coverage (smart contract failure, oracle manipulation read more), the entire Ease ecosystem will temporarily lock to stop users attempting to pull their funds to avoid paying out a claim. Users will not need to submit a claim manually like they need to on InsurAce or other platforms. The Ease DAO (which is connected to the Armor DAO) will vote on the outcome of the entire vault. If the vault claim is accepted, the value lost from the hack will be remunerated with funds from the other vaults.
- Paying out the claim
Overall the entire Ease ecosystem will lose the capital proportional to the amount lost during the hack. However, since this is diversified across over 22 risk pools and even more individuals contributing to these pools, individual loss is significantly reduced.
It is challenging to quantify the risk of a pool being hacked. At the time of writing, Ease only offers insurance for relatively ‘safe’ protocols — ones which have existed for a long time and have a high TVL (like Aave, Convex and Yearn).
The trade-off of the RCA is that the likelihood of losing capital is high, but the impact is very low.
Due to this risk sharing model, users will never receive 100% of their capital lost in a hack. As shown in the diagram below, since the entire TVL of the vaults combined is reduced,
By providing Ease finance’s product on the Bright Union coverage aggregator, everybody wins. Users will have even more options to compare from, empowering them to make the most informed decisions about their investment strategy.
Bright Union is proud to be offering this new and innovative risk solution of ‘UnInsurance’. By allowing for this direct comparison, the risk market will remain competitive. Other risk parties will need to innovate to keep up.
Bright Union will take one more step closer to achieving its mission of helping investors safe-guard their digital assets to allow them to invest fearlessly within DeFi.
Ease wants to make DeFi as easy and safe as possible. We aim to cover every dollar in DeFi so that users can finally feel at ease.
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About Bright Union
Bright Union is the world-leading multi-chain decentralized finance cover marketplace. A platform to aggregate and match supply and demand, it also accelerates the industry by providing strongly needed insurance liquidity.
By aggregating & accelerating the entire web3.0 insurance landscape, Bright Union is uniquely placed to offer easy integration to any dApp, wallet, exchange or metaverse and provide their investors an extra layer of trust by offering the best insurance policies on point of need
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