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From DeFi cover to ease.org Uninsurance

TradFi insurance & DeFi Cover

DeFi cover was a logical improvement over TradFi Insurance. 

Ease Uninsurance isn’t just a logical next step in the short history of Decentralized Crypto cover, but a giant leap forward.

The ease Uninsurance system isn’t even Insurance as no premiums are charged. 

Reciprocally Covered Assets

The full name of the ease.org system is Reciprocally-Covered Assets, or RCAs.  

There are no outside underwriters needed, as the deposited Crypto is the coverage!

The details have been outlined in the revolutionary RCA/WhitePaper, which can be downloaded here.

A brief history of Insurance and DeFi cover

Following is a short timeline showing the history DeFi coverage, from TradFi cover, via DeFi insurance and Armor DeFi cover to ease.org Uninsurance. 

Below the Coverage timeline we will dig in deeper into the many differences between TradFi insurance and the newer DeFi cover variants.

Traditional Insurance

TradFi insurance has moved away from the idea of risk-sharing to a cashcow for insurance companies and their shareholders.

Their business model is based on profiting by charging premiums while minimizing claims payouts.​

The first DeFi cover solutions were a giant step forward.
The need for profit was much lower as blockchain-based solutions were more efficient and transparent.

Still, the fact that underwriters were needed and the inflexibility of the systems were two major drawbacks.​

Armor Smart Cover

Armor.fi introduced smart cover and shield vaults, the predecessors of Uninsurance. 

Now, everyone could get coverage for their DeFi assets, with flexible amounts and dates, while earning yield

Still, the system was underwritten by leveraged collateral seeking yield, paid by the DeFi users using premiums.

ease Uninsurance

ease takes all the positives and fixes the drawbacks.

Flexibility in coverage without costs. Finally everyone can get their assets covered and truly DeFi at ease.

Differences between TradFi Insurance and DeFi cover

Below is a detailed overview of the different aspects of insurance and the DeFi variations of them, as well as how Uninsurance differs from those. Please mouseover for more details:

TradFi cover

Insurance V1.0
  • For profit
  • The first aim for most current insurance companies is to make as much profit as possible. 
    For public companies raising shareholder value by overcharging and underdelivering is more important than charging fair prices and paying out when needed.

  • Buildings & offices
  • A large part of TradFi insurance premiums are needed to pay for office buildings in prime locations.  

  • Expensive
  • Whether you actually suffer a loss or not, the premiums need to be paid and won't get reimbursed.

  • Agents & middle men
  • Though nowadays many TradFi companies do direct sales, a large part is still done through agents and middle men, who all need a slice of the pie.

  • Hard to update/cancel
  • TradFi insurance is notoriously hard to update and often is silently renewed against new prices, terms and conditions.

  • Protected funds
  • The FDIC and similar governmental organisations outside of the USA keep a close eye on TradFi financial operators. 

    Normally user's deposits are protected up until a certain amount.

TradFi insurance has moved away from the idea of risksharing to a cashcow for insurance companies and their shareholders.

Their business model is based on charging premiums while actively denying claims payouts.

DeFi cover

Insurance V2.0 / DeFi cover 1.0
  • For profit
  • Though no expensive office buildings were needed anymore, DeFi cover needs to create a profit as the system is based on underwriters demanding yield.

  • Underwriters
  • In order to supply cover, underwriters are needed. If there aren't any, then there is no available coverage. 
    They supply funds in exchange for yield, which needs to come from premiums.

  • Expensive
  • Due to the need for underwriters to earn yield and to spread risk, premiums for DeFi coverage ranged from 2.6% to over 20%.

    Whether you actually suffer a loss or not, the premiums need to be paid and won't get reimbursed.

  • KYC & AML needed
  • The main decentralized protocol needed users to become members and supply their personal details. Know Your Customer and Anti Money Laundering restrictions were in place.

  • Hard to update/cancel
  • DeFi cover 1.0 was based on fixed coverage: a fixed amount for a fixed period, with no option to cancel or adapt.

    Due to this inflexibility, many were either under-covered or over-covered as the underlying assets change in value all the time.

  • Decentralized
  • A giant step forward from TradFi, blockchain-based cover offered transparency and efficiency.

    Decisions could now be made by all users of the system, using DAO's.

The first DeFi cover solutions were a giant step forward. The need for profit was much lower as blockchain-based solutions were more efficient and transparent.

Still, the fact that underwriters were needed and especially the inflexibility of the systems were 2 major drawbacks.

Armor cover

DeFi Cover V2.0
  • For profit
  • Though no expensive office buildings were needed anymore, DeFi cover needs to create a profit as the system is based on underwriters demanding yield.

  • Underwriters
  • In order to supply cover, underwriters are needed. If there aren't any, then there is no available coverage. 
    They supply funds in exchange for yield, which needs to come from premiums.

  • Expensive
  • Due to the need for underwriters to earn yield and to spread risk, premiums for DeFi coverage ranged from 2.6% to over 20%.

    Whether you actually suffer a loss or not, the premiums need to be paid and won't get reimbursed.

  • No KYC needed
  • Armor.fi built a layer on top of DeFi cover V1. The first result was that the membership and KYC requirements were no longer needed!

    Now all DeFi users could get covered.

  • Easy to update/cancel
  • With the arrival of Armor's Smart Cover system and the Shield Vaults, DeFi cover finally became flexible. Now you could cover a flexible amount of assets with no fixed end dates!

  • Decentralized
  • The control of Armor was handed over to the Armor DAO.

Armor built and improved upon DeFi v1.0 cover.

By removing the need for KYC and adding flexibility all DeFi users can now cover exactly what they need, for the exact period they want.

ease cover

Uninsurance
  • Not for profit
  • ease.org cover isn't focused on maximizing profit, but on minimizing costs and loss.
    There are no shareholders that need dividends nor underwriters that need yield.

  • No underwriters
  • Normally, in order to supply cover, underwriters are needed. In the ease system the deposited amounts cover each other!
    That's why the ease cover system is also called Reciprocally Covered Assets in the WhitePaper.

  • Inexpensive
  • ease.org users share the risk of hacks. There are no upfront fees nor any premiums.
    Only if a hack takes place in one of the covered vaults, then all users lose a tiny % of their deposits, which effectively would mean a retroactive cost of magnitudes lower than regular DeFi cover premiums. If there are no hacks, then there are no costs at all.

  • No KYC needed
  • As there are no premiums paid and anyone can deposit their tokens, no membership and KYC requirements are needed!

    Now all DeFi users can get covered.

  • Easy to update/cancel
  • DeFi cover finally has become really flexible. If you don't need the cover, just remove your (auto-compounded!) assets.
    If you want to cover more, just add more. No long-term contracts, no premiums.

  • Hybrid Decentralization
  • While decisions about the future economics of the protocol will be taken by the DAO, extra care will be taken to only approve trusted protocols to the system.

The ease.org system is the ultimate coverage model: - No separate underwriters means no inflated premiums. - no premiums means no costs if there are no hacks. - No fixed term contracts mean complete flexibility.
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