Transfer Risk with Opyn Insurance
Opyn Insurance is another example of evolution in DeFi services. A big issue in stablecoin deposits is that of risk in the global DeFi ecosystem. You don’t want to be caught off guard due to systemic risk or other risk components present within the world of DeFi.
Before Opyn, you really didn’t have too many options and had to eat the different risks involved in locking up your stablecoin deposits.
Now, with Opyn, you can insure risk at some of the protocols that this provider associates with at the current moment.
The Opyn marketplace is one that is fascinating as in the initial days, Opyn will not require know-your-customer information. It will forgo that aspect as it is facilitating put options to generate coverage. But how does that work for the insured?
Simple. If you are a borrower and deposit 2,000 DAI into Compound, you could then buy an equivalent value of oTokens for a reasonable fee. You would rest easy for a year knowing that you can obtain a large portion of your DAI if something were to go wrong on the Compound Protocol.
That’s about it for the borrower.
Who does Opyn work with right now? Let’s find out.
Opyn and the Compound Protocol
You can now insure Compound stablecoin deposits with Opyn.
Current stablecoins covered via Opyn on Compound include USDC and DAI. Remember that there is a limit for how long you can insure your deposits. At the present moment, you can deposits for 11 months and 13 days for both USDC and DAI.
Of course, there’s a catch.
You’ll have to sacrifice yield if you choose to insure your deposits with Opyn. Yields will slightly decline if you seek protection and coverage on your initial capital.
What Does Opyn Insurance Cover?
Opyn Insurance will cover a broad range of risks, from technical to financial risks. That means that those who opt for Opyn Insurance can find coverage for smart contract attacks, a panic that leads to bank runs, issues with key credential compromise, and additional risks.
You can also receive immediate payouts after making a claim and don’t have to worry about an extensive process for filing your claim. The process is trustless and requires no intermediaries to facilitate payouts. The best part is that Opyn acts in a decentralized manner when dealing with your assets as all funds present in your wallet.
What does this mean?
You’re the only one that has access to your funds, not Opyn or others.
Who Provides the Insurance?
The creators designed the application in a way to facilitate risk between parties. As such, if you’re interested in contributing insurance to the marketplace, do so by depositing ETH and earning a percentage on that ETH.
Opyn notes that these deposits are excessively collateralized. The marketplace dictates minimum collateralization rates of 160% for each position, which means that there is $3.20 locked up for $2 of insurance coverage.
Overcollateralization helps to insure risks are accounted for within the system and is a strong theme in the DeFi sector at the current moment.
The aspect of over-collateralization also accounts for price drops in ETH in addition to other risks in the system.
Pretty fascinating, right?
Remember that application creators will work on user interface aspects for those who wish to provide coverage and improve the Opyn system.