Etherisc, a global, decentralized insurance platform for collectively building insurance products today has announced the launch of a blockchain consortium to create Collateral Protection Insurance (CPI) for the crypto lending market.
In the event that the collateral provided by the borrower is destroyed, stolen or not available, the CPI policy will pay off the loan. The insurance product will focus on several specific risks, including black swan events, regulatory lockdowns, hacking, and trapped assets.
The consortium aims to address a current, significant barrier to mass adoption by facilitating safe participation in crypto lending, clearing the way for more institutional players to enter the market.
Comprised of nine firms in the lending and microcredit field, the consortium will use the Etherisc Protocol to develop an insurance product to help share substantial risks unique to token economies.
The founding members of the lending consortium include bZx, formerly b0x, a decentralized margin lending protocol and liquidation oracle marketplace; Celsius Network, a peer-to-peer decentralized borrowing and lending platform; Colendi, a comprehensive credit scoring protocol and microcredit platform; ETHLend, a peer-to-peer lending smart contract on the Ethereum blockchain for lending ether; Lendroid, a unique non-custodial lending platform working to enable a range of collateralized loans, advanced auction markets and trust-independent margin trading; Libra Credit, a lending ecosystem that facilitates open access to credit; Nexo, a platform for instant crypto-backed loans, powered by the 10-year-old leading European FinTech group Credissimo; Ripio Credit Network, a protocol based on smart contracts and blockchain technology, which brings enhanced transparency and reliability in credit and lending; and Sweetbridge, a blockchain-based economic framework that transforms supply chain, logistics, and unleashes working capital.
Members of the consortium will contribute to the features and specification of the first product templates to suit their network needs. The founders will also encourage the participation of crypto lending networks that focus upon improved borrower and lender security.
“Tokenized economies are expanding rapidly. Yet, insurance is a precondition to the mass adoption of innovative technologies. Just as driverless cars would not be allowed on the road without insurance, most institutional lenders are not allowed to issue secure loans without hard guarantees on the availability of collateral. We believe that up to 10 percent of the token economy GDP will eventually be premiums of insurance. With this consortium, Etherisc and the founding members will demonstrate the power of risk sharing, between similar token economies, ultimately removing bottlenecks that currently prevent mass adoption.”
The consortium’s CPI product will use smart contracts that dynamically issue insurance policies on the Ethereum blockchain. This will provide lenders of participating networks with hard guarantees on collateral throughout the entire lifecycle of a loan.
“Founding the consortium is important for Nexo for several reasons. As the largest crypto lending network by market capitalization, Nexo takes responsibility for ensuring rapid market adoption of crypto-backed debt as a new asset class. Lenders and borrowers already transact on Nexo with limits between $1,000 to $2 million USD per loan. Hard guarantees on collateral protection would attract even more lenders and borrowers to join our rapidly growing network.”
“By allowing individual investors and businesses to use cryptocurrency and other real-world resources as collateral for asset-backed loans, the founding members can help to increase the amount of working capital available, and incentivize businesses to participate in tokenized economies. In today’s volatile market, Collateral Protection Insurance provides borrowers and lenders with a sense of security from crypto lending networks, which is a critical step in advancing blockchain adoption.”
The development of the Etherisc Platform is supported by the Decentralized Insurance Foundation in Switzerland. Currently, Etherisc is holding their own ICO right now for DIP tokens.