Enzyme, a blockchain asset management platform, has announced a new partnership with Unslashed, a protocol that enables the creation of structured insurance products, to build out a new capital-efficient DeFi insurance protocol — allowing collateral to earn a yield on top of standard premiums and USF mining.
Recently unveiling its version 2, Enzyme offers everything one would need to run a secure and capital-efficient strategy. Aside from supporting a huge range of assets, Enzyme plugs into all of DeFi making it possible to create a strategy and earn a yield on it efficiently.
“Unslashed reached more than $100M in TVL during a private launch. Those who know Unslashed will know that this is the smartest designed insurance infrastructure available in DeFi. The capital efficiency baked into its design serves as a win-all for underwriters, insurance buyers & stakeholders.”
– The Enzyme Team
The Unslashed approach to insurance
Unslashed focuses on building a protocol that enables the creation of structured insurance products called “Buckets” – a Bucket is a diverse collection of insurance policies that are carefully designed, assessed, priced, and put together for capital suppliers to underwrite.
Each Bucket has a different risk profile, contains different policies, and generates a different yield. In traditional finance, similar products are called ILSs. They offer a yield that is uncorrelated to the market whilst creating a necessary bridge between finance and insurance.
Unslashed provides insurance policies on smart contract risk, validator slashing (PoS networks), exchange hacks, stablecoin pegs, and more. This is combined with a qualitative and quantitative approach covering multidimensional blockchain risks to ensure policy buyers are always protected.
Policy protection is only as good as the claims process underpinning it. The claims process with Unslashed is unbiased and relies on independent assessors and arbitrators. This guarantees that claims are treated fairly and in a non-discretionary manner.
The last component of a successful insurance marketplace is capital efficiency. Insurers sit on huge amounts of capital from underwriters. Allowing that capital to sit and gather dust is just not efficient.
This is where Enzyme comes in…
Enzyme as a natural infrastructure choice
Enzyme’s DeFi infrastructure supports over 200 assets and is connected with all types of protocols. Enzyme Vaults can handle lending, AMM pools (e.g. Uniswap and Curve pools), staking (e.g. Curve LP tokens or just plain ETH), semi-automated farming strategies, leverage, and more.
The modular and extensible design empowers teams like Unslashed to build alongside and extend the protocol to a new use-case enabling them to go to market much faster and at a fraction of the cost.
By leveraging Enzyme as infrastructure — Unslashed can lean on Enzyme’s network of developers and security experts (Enzyme Council, Chain Security, PWC, and Open Zeppelin), outsource the maintenance burden, and free themselves up to focus on building out their insurance protocol.
Why supply capital (underwrite) on Unslashed today?
Supplying capital to underwrite Buckets on Unslashed offers a set of advantages including:
- The Buckets diversify risk – Insurance in crypto needs underwriters and nobody wants to put all their eggs in one basket — especially given the technical barriers to understanding how crypto-systems work. If underwriters can’t be attracted, then no credible guarantees against the risks in crypto can be realized. Diversifying risk is a solution that spreads risk and makes it much more comfortable to underwrite through Buckets.
- Partnership with Enzyme helps grow the Bucket’s capital with simple farming strategies which are compounded – Allocating the capital within the Buckets via Enzyme allows it to earn a yield. Simple farming strategies which compound returns can generate as much as 20% yield on ETH which already creates an additional buffer of safety if claims are triggered but also means that the Bucket can remain profitable even if multiple claims are made.
- Earn premiums from cover buyers – Premiums paid by cover buyers are also added to the Bucket adding another revenue stream to capital suppliers.
- Profit from a generous capital mining program taking place for up to 10 years – Unslashed has launched a generous capital mining program which is taking place for up to 10 years.
Advantages of buying cover on Unslashed
The advantages of buying cover on the Unslashed and Enzyme combined system include:
- Cheaper premiums – With the capital efficiency received from plugging into Enzyme, some Unslashed premiums could now afford to come down.
- Transparency overcapitalization and risk management – The pooled approach helps diversify risk and increase the underwriting capital. The Enzyme system gives full transparency into how the capital is being deployed and users can compare this against how much coverage has been purchased. The Unslashed model gives users access to low insurance premiums and stronger security guarantees. Until now, it was possible to only get one or the other in DeFi. The Unslashed, Enzyme partnership means users no longer have to choose between the two.
Unslashed community benefits
- Empowers Unslashed by enabling them to go to market with a secure and sophisticated product in a fraction of the time.
- Offer higher yields to capital suppliers, in ETH, on top of the capital mining rewards and the premiums earned in ETH. This could allow for an almost doubling of the total yield in a sustainable fashion.
- Enables them to focus on products (different insurance protocols) and perfecting their various risk assessments.
- Allows them to focus on growth and market share without the burden of maintaining the asset management protocol and security considerations
- Faster growth could be better for the USF token.
Enzyme community benefits
- Bringing a new use-case to Enzyme which helps grow assets under management (AuM).
- Working with experts in the insurance field instead of Enzyme trying to build out this use-case themselves.
- Direct benefits to the MLN token (upon implementation of MIP7).
Next steps
Unslashed will next run this through their governance process after which the capital deployment can begin. A bridge between the two protocols has already been built and fully audited by Chain Security.