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Seems too many people get excited with @AndreCronjeTech’s yinsurance and some even go further think it will take over @nexusmutal. I see many flaws in the design. Let's dissect this fallacy.
(1) Issue 1: incentives. Yinsurance LP earn 0.01% per week, compared with 2.5% ROI weekly of yCRV vault ATM why would anyone want to provide liquidity? You need a better pricing model...
But you can say I don't need fully collaterize the total cover amount (say leveraged) to earn a better ROI. No this won't be the case because as an insuree why do I want to buy your insurance if I know you can't pay my claim?...
Take @nexusmutal, right now Nexus's LP's are pooling 115k ETH, of which 82k ETH (MCR) are set aside to insure 86k ETH cover bought. It means insurees can be guaranteed they will be paid even if all Defi protocols get hacked at the same time...
(2) Issue No. 2 Mutual longevity: There's no information on how the mutual diversifies different risks of different assets. If the mutual only simply sells arbitrary amount of cover to any protocols/assets it falls prey to being default on the first unfortunate event.
This is where @nexusmutal is miles ahead. The safety is implemented in different layers. Different prices for different risks, 20% exposure limitation to specific protocol, team's manually work to verify covered protocol's legitimacy, and its ultimate weapon...
The risk modeling system that outputs the MCR, The system is developed following European insurance standards, which takes into account different types of risk including external risks. What it means is @nexusmutal will stand firmly in most severe situation
(3) Issue 3: Demands. From the post it's not clear to as whether yinsurance only provide a means for protection against plunging of asset price or it also covers other risks such as protocol hacks, smart contract bugs...
If the former is the case @opyn_ and @hegicoptions are doing very well. And eventually who wants to hedge price of stable coins, which account for 80% of farming market?
(4) Issue 4: anti-kyc delusion. Unless you’re a criminal or a tax evader nobody give a sh*t about KYC’s inconvenience. One thing certain is people will do anything to make money, look at the YAM and CRV saga.
(5) Saying all of this only to see it will be a long way until yinsurance can deliver a working business, and no-KYC isn’t a killer feature. Until then it's only a primitive concept as Andre said.
(6) From investment perspective I can't be more bullish to see it happening, why? As a Nexusmutant I desperately need alternative insurer to insure my investment because until now if Nexus get hacked there’s little thing I can do but f*ck myself.
(7) Moreover right now the whole fortune worth multi-million dollars of Nexus LP pool doesn’t generate a penny of yield is just a waste but until there’s a means of hedge it’s too risky trying to make it work...
(8) Lastly the Defi market is too large one single insurer. If you read the news @aaveaave wants to tokenize the mortgage and not bullish on on-chain insurance I don’t know how to help your brain...
Just imagine a scenario where @aaveaave go to a mortgagor and say “Your mortgage token is hacked and because you didn’t buy insurance we need to take your house now” LoL.
