The Innovation of Degis Protocol Protection
In today’s on-chain insurance market, due to the low utilization rate of underwriter’s funds, the premium price cannot well reflect a series of problems such as the risk of insured projects. Whether it is for insurance/protection providers or buyers, they do not have enough incentives to participate in the on-chain insurance market. To a certain extent, today’s insurance market is more like a TVL game that is similar to traditional De-Fi projects, rather than actually providing insurance and protection for crypto users and their assets. This is the dilemma faced by most of the on-chain protection protocols today. After in-depth research on the market, we have developed our own solution for the above problems and integrated it into Degis’s latest product — Protocol Protection.
Protocol Protection is the next-generation protection product that offers exhaustive protection for all kinds of on-chain risks. Whether it is a smart contract hack, a cross-chain bridge theft, or a series of protocol security events such as rug pull, Degis will provide users with corresponding protection. Compared with the existing protection products, Degis has made the following innovations to the protocol protection model:
“Protection Pool + Priority Pool” Design, greatly improved capital utilization.
Degis Protocol Protection pools consist of two parts: Protection Pool and Priority Pool. The Protection Pool is the pool that provides protection to all insured protocols on Degis platform. Under Protection Pool, there are specific priority pools for every insured protocol (i.e. Priority Pool A is the specific insurance pool for Protocol A).
Degis is the first protocol to propose dual protection pools model. In today’s insurance protocols, there is often only one layer of fund pools, and underwriters can only put funds into one of the fund pools to earn premium income for only one insured protocol or at a very low APY.
But in Degis protocol protection, the thing is totally different. By the “Protection Pool + Priority Pool” design, underwriters can put their funds into the protection pool and underwrite all protocols that are insured by Degis protocol. As a result, underwriters can earn premium income from all protocols that exist on the platform, which greatly improved the capital utilization for underwriters.
In the meantime, underwriters can stake the Protection Pool LP tokens into the specific Priority Pool and enjoy extra premium income from that insured protocol.
The design of Degis “Protection Pool + Priority Pool” allows users to underwrite multiple projects at the same time, which greatly improves the utilization of funds while ensuring full compensation, and also brings more generous rewards to underwriters.
Dynamic premium design, provide buyers with the best premium price.
Existing insurance protocols on the market often use actuarial models for pricing, but in many cases, actuarial models are not suitable for the highly volatile crypto insurance market. Therefore, dynamic pricing is very important. There are also insurance programs on the market that use dynamic pricing models. Take Nexus Mutual as an example: the premium on Nexus Mutual is mostly determined by the amount of NXM (Nexus Mutual’s native token) staked by risk assessors. But it’s not a good measure of the current market conditions as they only consider the supply side of protection products.
In order to make the premium better reflect the real market conditions and the risk of the project, Degis’s dynamic pricing model will adjust the premium price based on the supply and demand relationship of protections. Degis’s premium model includes two parts: base premium + dynamic premium.
Base Premium will be set by community voting when the insured protocol is listed on Degis. After 7 days of listing, the premium will be adjusted according to Degis dynamic model:
The dynamic premium d%:
By adopting the dynamic model, the premium price will be set according to the both supply and demand of the protection product, providing protection buyers with the price that fit the current market situation the most.
The design of “Protection Pool+Priority Pool” and the dynamic premium model are the two most innovative points of Degis in protocol protection products. These two innovations provide underwriters with better capital utilization and premium income. In the meantime, Degis will provide more accurate and reasonable prices for protection buyers. These are gaps in the insurance market, which cannot be solved now. For the dilemmas and problems faced by on-chain insurance, Degis will give our own solutions, which is also a big step in exploring the on-chain insurance track.
Degis Official Links
Telegram Announcements Channel: https://t.me/ProjectDegisAnnouncements
Telegram Chat Group: https://t.me/ProjectDegis