Crypto insurance, why does the industry need it so much?

Availability of insurance is one of the major factors that enable businesses to take risks, innovate and transact with more counterparties.

Insurance has played a key role in facilitating transactions since the early days of the industry insuring ship owners against losses due to unforeseen circumstances during voyages.

In cryptocurrencies, however, it has proven difficult to obtain insurance in many cases.

Now,

Now,Although this trend is changing, a growing number of options from Web3-native platforms and existing commercial markets, such asQredo's $600 million physical insurance product, is becoming available.

Given that crypto is such a new industry, many questions remain about what crypto insurance is and the role it can play in expanding the market.

So, how does crypto insurance work,why is it so important？

Why Crypto Insurance Matters

All business involves some degree of risk.

This could be from unforeseen circumstances, malicious actors, or any other situation that results in financial loss.

This is where insurance comes in.

In the cryptocurrency environment, there are many examples of hacking, loss of private keys, accidental transfers, and other resulting losses that may have been covered by insurance.

Stakeholders, from developers seeking to insulate themselves from liability arising from the smart contracts they write, to investors and traders seeking to protect their funds, have reasons to purchase insurance.

But the market is still relatively small compared to demand.

Adoption of Web3-native insurance is still relatively low, and while some exchanges and custodians have coverage from the traditional insurance industry, the limitations and types of policies available are still in their early stages,Only 1% of the $1 trillion overall market is estimated to be currently covered by insurance。

For institutions seeking to get involved in crypto, there is a bigger proposition. Such businesses often list insurance as a requirement to work with other businesses, which means that a wider insurance channel can help these companies enter Web3 smoothly.

How does crypto insurance work?

The crypto insurance market is mainly divided into native platforms designed to manage policies on-chain and slaveLloyd's of LondonTraditional insurance purchased by established companies or markets.

Insurance built on the blockchain is designed by and for digital asset natives. These platforms, such asNexus Mutual, ranging from blockchain-based mutual insurance to transactional insurance, and uses smart contracts and community-led pricing to insure individuals and companies.

Policies and claims can be processed instantly and the community can arbitrate any potential disputes through a blockchain that records deal terms, sizes, and other data.

However, companies such as public companies or regulated asset managers looking to invest in crypto assets will generally need to take out commercial insurance for such activities.

This is where traditional markets step in. While insurers have long been interested in cryptocurrencies, the explosion in the scope and value of digital assets over the past few years — and a simultaneous increase in interest from customers — has prompted a significant improvement in available insurance.

as some of the worldlargest insurance companyThe scale of opportunity for both parties is enormous.

These policies help facilitate the entry of billions of dollars of pent-up demand from mainstream institutions, paving the way for wider adoption of cryptocurrencies.

What crypto insurance is available?

With the surge in demand, insurers have started offering various policies targeting a large number of users.

Commercial insurers tend to offer policies for several types of accidents, including:

• theft/crime

• Physical (covers to protect high-value portable assets)

• In Transit (to prevent loss of assets during the transaction)

• hacker

• hacker

At the same time, in addition to the above, Web3 native companies can often provide more specific insurance items, such as:

• Smart Contract Insurance

• 51% Attack Insurance

• lost key insurance

In many cases, the Web3 insurance platform will also use self-executing smart contracts in payments, so that there is no need for a claims process or even filing a claim, everything will run automatically.

Insuring Web3

Insurance will be a key component in driving wider adoption of Web3 in the coming years.

Especially atinstitutional worldInsurance plays such an important role not only in preventing losses but in instilling the confidence people need to innovate and take risks.

It is imperative for regulated companies to pass policies such as Qredo's Coin Insurance to help pave the way to Web 3 and unleash the huge pent-up demand for crypto assets.

want to know more aboutQredo's Physical Insurance?Qredo Chinese page:。

Original link:https://www.qredo.com/blog/how-crypto-insurance-works  

Qredo Chinese page:qredo.com/zh-cn

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