Project description (please explain how your project works):
InsureDAO is a DeFi insurance protocol, where users can purchase&sell insurance against any DeFi protocol, and the only DeFi insurance protocol on Optimism now.
Currently, insurance against smart contract vulnerability is available to purchase, and we are now preparing for stablecoin de-peg insurance, which is planned to be live in October.
Single pools & Index pools
There are two types of insurance pools on InsureDAO: Single pool and Index pool.
The single pools underwrite each single protocol’s insurance and are isolated from other insurance pools. These pools won’t be affected by payout that occurred in other insurance pools.
The Index pools consist of multiple single pools and underwrite multiple protocols’ insurance at once. Liquidity in the pool is diversified across underlying pools and it is leveraged to increase the cover capacity so that returns for underwriters are leveraged.
Reserve Pool
The reserve pool is the liquidity pool in the case of insolvency. Each time an insurance purchase occurs, a certain percent of the protocol fee is accumulated in the InsureDAO Reserve Pool for reserve.
Since index pools leverage their liquidity, there would be a chance that the amount of insurance payment might surpass the actual liquidity if several protocols got hacked at once.
If any index pool becomes insolvent, the accumulated liquidity in the reserve pool will be used to pay out surpassed amount.
ReportingDAO
ReportingDAO is the third party committee, which consists of security experts, such as Quantstamp. The committee is responsible for insurance payment decisions based on its investigation and voting when an incident occurs.
API for the integration
We have developed an API for insurance integration to other DeFi protocols, which enables users to access insurance for a certain protocol from the partner protocol UI. The partner protocols can earn a referral fee every time insurance is purchased on their end.
De-peg insurance (to be launched in October)
We are now developing stablecoin de-peg insurance and planning to launch the insurance for sUSD in October.
Insurance purchasers will be instantly compensated when a subject stablecoin goes below a target price.
On the underwriting side, provided liquidity will be used to make and keep a short position for a subject stablecoin. When a de-peg incident occurs, profit from the short position will be used to compensate insurance purchasers so that underwriters’ funds remain in the pool.
Liquidity Investment (to be launched in October)
Underwriting liquidity in insurance pools will be utilised in external protocols for capital efficiency. This function allows underwriters to get not only insurance premiums but the additional yield from investment.
At the launch, liquidity will be supplied in the Aave USDC pool.
Security
The protocol got audited by Quantstamp, Peckshield, Solidified, and Code4rena.
Also, we are working together with WatchPug for development and security