Introducing PolkaInsure – Decentralized Insurance for Polkadot’s DeFi Community

The rise of decentralized finance in 2020 was nothing short of phenomenal. From reaching the $1 billion total value locked milestone in early February to over $25 billion a year later, DeFi has already proven itself as the biggest revolution in crypto since the ICO boom of 2017. 

However, it’s not always been a smooth ride. In crypto, hackers invariably follow the money, and as the money poured into DeFi, it started to become evident that protocols are only as good as their underlying code. Hackers quickly learned that many projects were launching with vulnerabilities that could easily be exploited. In February, lending platform bZx became the first high-profile victim with a double-whammy attack that lost nearly $1 million. It was to be only the first of many such incidents. 

Crypto tends to mirror the real world, and as a result of the continued risk to user funds, insurance protocols started to spring up. One of the first was Nexus Mutual, which works similarly to a traditional mutual fund. Policyholders pay their premiums into a pool. If a smart contract fails and results in a loss, they can claim from the pool to cover their losses. Profits are redistributed back to policyholders to incentivize them to continue participating. 

Other decentralized insurance protocols, such as Cover Protocol and NSure Network, also launched in 2020. Now, thanks to Ethereum’s ongoing scalability troubles and high transaction fees, developers are starting to look to other platforms to build their protocols. Polkadot, with its promise of high throughput, low fees, and interoperability with other platforms, is rapidly becoming a popular choice. So it was only a matter of time before an insurance protocol based on Polkadot was to emerge. 

Enter PolkaInsure. 

What is PolkaInsure? 

PolkaInsure is a decentralized peer-to-peer insurance marketplace based on the Polkadot blockchain. The core feature is its democratic access, enabling any user to request insurance for a supported protocol and anyone to provide coverage. There is no KYC, and the PolkaInsure smart contracts are deployed and verified on the Polkadot platform. The project has engaged Arcadia Group as an external auditing firm to help confirm the PolkaInsure smart contracts’ security. The audit results are available via the Arcadia Group website

If someone needs to make a claim, it will be handled by the PolkaInsure smart contract code, which ensures that reimbursements are instant and that insurance contracts are always collateralized to guarantee payments. 

Roadmap

PolkaInsure is currently on a development roadmap, which is closely tied to the availability of particular features on the Polkadot platform. In the last quarter of 2020, the project team developed the concept, the smart contract, and website and held a token sale for 30% of the PIS token supply. 

So far in 2021, the project has launched deflationary token mining and successfully passed the smart contract audit. Currently, the PolkaInsure smart contract is on the Moonbeam testnet. Moonbeam is an Ethereum-compatible parachain on the Polkadot network, and PolkaInsure will be based on the Moonbeam mainnet chain once it goes live. Therefore, it has an opportunity to interoperate with Ethereum-based DeFi protocols. 

Like other insurance protocols, PolkaInsure operates its own token under the ticker PIS. PIS acts as a governance token for the PolkaInsure platform and will be the payout currency for claimants. 

 Due to the current lack of operational DEX on Polkadot, PolkaInsure has proceeded with the initial step of issuing its token on Ethereum. This allows the project to bootstrap liquidity while DeFi development on Polkadot progresses. The project launched deflationary mining on Uniswap in early January (more on that below.) 

Finally, onboarding projects to the PolkaInsure protocol is also in the scope of the 2021 rollout over the coming months. Shield mining refers to the practice of allowing new protocols to offer their native tokens in yield to those who provide coverage on the decentralized insurance platform. 

PIS Token and Deflationary Farming

PolkaInsure has already launched Deflationary Farming of the PIS token on Uniswap. Deflationary Farming involves farming the PIS token without minting any new tokens by staking the PIS Uniswap liquidity pool token into the PolkaInsure farming protocol. Tokens are distributed from a fixed supply of 30% of total PIS tokens. The idea is that by fixing the token supply, there will be a positive upward movement in the token price. 

Under the Deflationary Farming model, users can earn rewards from two sources. The first is a share in transaction fees from users who trade the PIS token pairs on Uniswap. However, once the PolkaInsure protocol launches on mainnet, the project plans to migrate Deflationary Farming to Polkadot. Farmers will then be able to earn rewards through this program and the Shield Mining initiative once it is live. 

Conclusion

The Polkadot DeFi ecosystem is proliferating, with apps including Equilibrium, Acala, and Kylin due to go live this year. Given the inherent risk in DeFi, insurance will be an essential requirement for many users. Therefore, PolkaInsure has secured itself the critical first-mover advantage for providing decentralized insurance on the Polkadot platform. 

Angela Scott-Briggs: Editor, TechBullion.com | Interested in Innovations in Business, Finance, and Technology .
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