Yesterday, Yearn Finance announced it was working on a tokenized insurance system.
The Yearn Finance project is unfortunately famous for a bug that made its token lose about 90% of its value.
In any case, in the post we can read there will be 3 main components for these insurances:
- Insurer Vaults: these are the liquidity pools that provide the insurance. The first vault will be yiUSDC, whose pool will provide USDC and will receive the fees paid by those who will use the insurance;
- Insured Vaults: they hold the insured tokens. The asset to be insured, for example USDT, is put into the vault and yiUSDT is generated. An initial fee of 0.1% is applied to these and 0.01% of the fee is deducted each week, and the USDT tokens can be withdrawn or deposited. The insurance will cover the total amount of USDT deposited;
- Claim Governance: allows the insured to create a claim by staking their yiUSDT. In this case, the policyholder can vote with their yiUSDC. Voting lasts 3 days. 33% is required for approval, while 25% is vetoed, which is determined according to the total amount of the claim.
This system can insure any type of asset, both basic assets such as DAI, and complex assets such as aDAI or yDAI, paving the way for decentralized insurance systems of different types.
The system is managed by the community that must take care of making the claim, also because the system does not have a minimum quorum and therefore pushes users to be pro-active.
Moreover, if liquidity pools were to decline valid claims, policyholders would move their funds from the pool, which would make the system less profitable.
The first Insurer Vaults will use USDC, while the first Insured Vault will be yUSD (wrapped yCRV) from yVault, and will start as soon as everything is ready for the public.