In Risk Harbor, underwriters will compete to provide the best insurance rates, and insurance purchasers can transparently find and trade insurance plans that are most suitable for them.
Original link: ” DeFi Risk Management “
Original Author: Paul Veradittakit, Founding Partner of Pantera Capital Translator: Lu Jiangfei
At this stage, the use of DeFi vulnerabilities to carry out attacks is becoming more and more serious. In the past year alone, the scale of funds stolen in the DeFi ecosystem due to attacks has reached as high as 400 million U.S. dollars , including some mature and audited projects. For example, Year.Finance and THORChain.
There is no doubt that hackers have become a serious pain point for pledgers, liquidity providers and other DeFi participants, but some hedging tools in the industry are still limited to auditing, on-chain monitoring, and original insurance, such as The current insurance agreement Nexus Mutual (some DeFi insurance platforms have been introduced in detail before, for details, please refer to the article “Decentralized Insurance “) and so on.
And on June 24th, Risk Harbor, a rookie player on the DeFi insurance circuit, just announced the completion of a $3.25 million seed round of financing. Framework Ventures and Pantera Capital jointly led the investment, and Coinbase Ventures, CoinDesk’s parent company Digital Currency Group, etc. participated in the investment. , Aims to provide a new choice for protecting DeFi user assets.
What is Risk Harbor?
Risk Harbor, which has just launched its mainnet in June this year, is based on an automated and transparent insurance claim process. Now its underwriting services have covered multiple head DeFi agreements such as Year.Finance, PoolTogether, Aave, Compound, Pickle, Harvest Finance, and BarnBridge. Of selected assets.
In addition, Risk Harbor has launched a comprehensive software development kit (SDK), which plans to quickly expand and achieve integration with other DeFi protocols on different blockchains. At the same time, Risk Harbor, as a rookie player on the insurance circuit, has two important advantages:
1. Parametric Insurance . Risk Harbor processes claims through algorithms, while Nexus Mutual uses governance methods to determine whether to provide claims. In other words, Nexus Mutual’s insurance underwriters will “manually” verify each payment request. In addition, Nexus Mutual has some problems with its claim settlement mechanism. The more requests it refuses, the more it will be financially motivated. In fact, more than 80% of Nexus Mutual claims have been rejected. Risk Harbor resolves the claim in a parametric way: if a predetermined event occurs (for example, the yUSDC token is stolen on the Year.Finance agreement), the policyholder can receive the payment within 45 seconds or 3 blocks, and the entire claim The process is transparent, automated and fast.
2. Capital Efficiency . To purchase insurance on Nexus Mutual, you usually need to pay 2-3% of the premium each year, depending on the rate set in the agreement, and the rate is likely to only increase in the future. In contrast, Risk Harbor’s underwriting process is more efficient and highly composable, and it can also support almost all underwriting assets, even some operational assets (productive assets). Therefore, Risk Harbor can provide the lowest insurance rates in the industry, and many DeFi agreements on the platform currently have an annual insurance rate of less than 1%.
How does Risk Harbor protect users’ DeFi assets?
The first step in using Risk Harbor is very simple, that is, to buy a guarantee that can cover your DeFi position. In fact, compared to the cumbersome front-end service process of other DeFi insurance, the operation of purchasing insurance on Risk Harbor is very simple.
First, we need to look at Risk Harbor’s fund pool, and then find the asset we want to insure. As of the time of posting , Risk Harbor has provided a total of 6 protected assets, namely: yvDAI, bb_cUSDC, fUSDC, bb_amDAI, bb_amUSDC and bb_amUSDT . Before purchasing parametric insurance from Risk Harbor**, we must hold one or more of these assets** and at the same time ensure that these assets have been placed in our DeFi wallet (such as MetaMask, WalletConnect or Fortmatic).
Then, we need to find the asset pool that we want to buy insurance. For example, we can select Barnbridge’s Compound USDC Junior asset pool, then click the “Protect” button, and then enter the number of bb_cUSD tokens that we want to insure.
From the above screenshot, we can visually see the visual display of the insurance underwriters, where the blue line shows the premiums charged by the insurance underwriters and the amount of fund pools that have been used. In addition, under “Default Ratio”, you can see the exact conditions of insurance payouts-as shown in the figure above, when 1 bb_cUSDC falls below 0.5218 USDC, it is considered a “default”.
At this point, we only need to click the “Purchase” button, and then agree that the browser wallet can receive follow-up notification reminders. This is that our assets have been protected by Risk Harbor’s algorithm.
If you want to continue to file a claim, the operation is also very simple. It only takes four steps to complete. You can visit this link for details.
Recently, the Risk Harbor team also released a “hacker simulator” that allows users to simulate protocol hackers, file claims, and simulate receiving payments, all of which are performed on real-time contracts. If you are interested in a better understanding of Risk Harbor’s claim settlement process and the working principle of the claim settlement mechanism, you can try the “hacker simulator” here.
How can users earn revenue?
In Risk Harbor, we can also play another role: insurance underwriters. Insurance underwriters need to bear the downside risk of compensation events. In exchange, the underwriters can obtain attractive income from their capital . The process of participating in a Risk Harbor insurance underwriter is actually very similar to the process outlined above, but we will explain in detail here.
First, we need to choose an asset pool to provide liquidity. Depending on the selected asset pool, different assets may need to be deposited: for example, the fUSDC asset pool needs to be underwritten by cUSDC, while bb_cUSDC needs to be underwritten by yvUSDC.
For example, suppose we want to underwrite bb_cUSDC asset pool insurance. At this time, we need to provide yvUSDC tokens. The process of obtaining yvUSDC is actually very simple:
1. Deposit the required amount of USDC into your wallet;
2. Go to Yearn.Finance and deposit tokens into USDC pool;
After the above two steps are over, we should have the same amount of yvUSDC in our wallet.
Next, click on the “Underwrite” option of the asset pool and enter the amount of liquidity you want to provide. In addition to entering the quantity, you can also choose “Price Point” or choose the fee you want to charge the insurance buyer. It should be noted that the higher the set fee, the less likely the corresponding insurance contract is to be purchased ; the liquidity provider (LP) can look for the utilization/cost “sweet spot” and obtain incentives in this way. The model is similar to the centralized liquidity provision function recently launched by Uniswap V3. Once the parameters are set, click the “Deposit” button.
Now, we can already earn income from the liquid funds provided, and Risk Harbor allows users to pledge their underwriting positions to get additional rewards, which means that our income will become even more .
To do this, we need to go to the “Stake” option, select our position from the drop-down menu, and click “Stake”. For Staking, in addition to earning underwriting fees, you can also earn Risk Harbor governance tokens through untradeable ticket tokens (note: the governance token will be launched soon). We set the “Price The lower the “Point” (price point), the higher the pledge reward will be obtained, which is actually another incentive to reduce end user fees .
summary
The DeFi track is still on the eve of its explosion. With the increasing volume and innovative gameplay of the DeFi market, the corresponding risk exposure behind it is also increasing. This is doomed to the demand for native insurance on the chain to show a spurt of development.
However, although there are already many DeFi insurance agreements on the market, they have not been able to solve the market’s pain points to the utmost extent and usher in explosive development, and have even come to a standstill. Therefore, in the DeFi insurance track, there should be more rising stars, such as new insurance agreements, covering more types of risks, and better risk assessment models .
Risk Harbor, which is committed to becoming a user-friendly insurance solution, is one of the powerful explorers and deserves continued attention.
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