DEFI

How are the protocols providing UST unhedged insurance doing lately?

2022/5/17

The recent UST pegging incident has caused a stir in the entire crypto community. However, this article is not to discuss the reserve fund flow of LFG or Do Kwon's anchor proposal, but to take a look at the current situation of the DeFi protocols that initially provided insurance for UST pegging.

Table of Contents

The Four UST Unpegged Insurance Protocols

DeFi 🦺 is of paramount importance when trading or farming with funds.
Given the recent $LUNA implosion, depeg insurance has become a hot topic of conversation. Let’s see how the 4 protocols that offered $UST depeg have done since the recent debacle.
👇🧵 pic.twitter.com/ahlX6tqAxw
— CryptoCondom (@crypto_condom) May 15, 2022

Crypto researcher CryptoCondom shared four DeFi insurance protocols related to UST on Twitter yesterday, detailing their current handling methods:

1. InsurAce.io Protocol

InsurAce's compensation claim condition is when UST's 10-day TWAP falls below $0.88. They have already paid out $12 million USDT in insurance claims, which can be applied for before 5/21.

InsurAce has provided a comprehensive incident report and offers assistance via Discord.

2. Unslashed Finance

Unslashed Finance's compensation claim condition is similar to InsurAce, with a requirement that UST's 14-day TWAP falls below $0.87 to be eligible for a claim. However, as UST has not been unpegged for two weeks yet, claims are not open for application.

Nevertheless, Unslashed Finance has urged insured parties not to sell tokens at a loss, as the possibility of meeting the claim conditions is high.

2/ In the meantime, please do not sell your UST as the conditions of the claim are not yet fulfilled (TWAP under 87c for 2 weeks at least), although they are very likely to be fulfilled in the coming 2 weeks if UST stays at current levels
— Unslashed Finance 🛡️ (@UnslashedF) May 11, 2022

3. Risk Harbor

Risk Harbor's compensation claim condition is the simplest among all protocols: if Chainlink's UST price < $0.95, aUST can be exchanged for USDC through the protocol. Approximately $2.5 million USDC has been paid out so far.

4. Nexus Mutual

Lastly, Nexus Mutual, although an insurance protocol, does not provide UST unpegged insurance, only insurance for protocols like Anchor. Despite the drop in TVL of the Anchor protocol post this event, Nexus Mutual has not paid any insurance claims.

This is because the insurance coverage only includes "financial loss" and not "value loss."

After this UST unpegging event, it is essential to be more cautious when dealing with risky algorithmic stablecoins or DeFi protocols. Prudent investors may consider exploring the above insurance protocols to find suitable insurance products to secure their on-chain assets.

However, each protocol has different claim conditions and methods, so it is advisable to carefully read the usage documentation of each product before getting insured.