Having peace of mind is an essential aspect of finance. The multi-trillion-dollar insurance business sprang from this requirement and has operated for hundreds of years based on assessing risks down to fractional degrees. With the introduction of DeFi comes an intriguing question: can insurance be decentralized? Etherisc, a business that provides a platform for decentralized insurance applications, is giving it a shot. Etherisc, hosted on the Ethereum blockchain, seeks to provide on-chain insurance, cut insurance prices, and democratize access to reinsurance.

The History of Etherisc

Etherisc, like many blockchain initiatives, began as a hackathon submission in December 2016. Stephan Karpischek, Christoph Mussenbrock, and Renat Khasanshyn, Etherisc engineers and co-founders, published the project’s whitepaper a year later, in November 2017.

The plan was to provide an open-source platform for insurance-related dApps. Etherisc’s on-chain insurance market is accessible to any private, for-profit, or non-profit business since it operates on the Ethereum network.

Etherisc automates and simplifies insurance products by employing peer-to-peer blockchain transparency, resulting in faster reimbursements. Such decentralized service protects against three primary threats in the blockchain travel insurance world: hacks (code exploits), theft, and fraud. Etherisc also draws reinsurance business from the domain of traditional insurance.

What Exactly Is Reinsurance?

Reinsurance, often known as stop-loss insurance, is a form of insurance coverage that insurance firms utilize. A reinsurance business absorbs the risk for another insurer’s policies in exchange for a percentage of the premium payments. It implies the policy must pay a settlement, and the reinsurance firm is liable.

How Does Etherisc Function?

In the last 25 years, the experience of flying has become challenging and time-consuming. Add flight delays to the normal deterioration of service. What is required then is insurance against flight delays, carried out in the most convenient manner possible.

Etherisc’s FlightDelay Portal provides just this service. The Etherisc Flight Delay Dapp uses the Gnosis Chain (previously xDai) to handle payments for at least 80 airlines. The following is how it works:

• Etherisc token holders use DIP tokens to create an insurance risk pool. This is analogous to Aave liquidity providers putting tokens into liquidity pools so borrowers can make loans depending on their collateral.
• Instead of taking out loans, consumers may utilize Etherisc smart contracts to automate risk criteria.
• Customers sign up for insurance that ensures their on-time flight via Oracle networks. The latter monitor real-world situations and communicate them to smart contracts (flight policies). Chainlink would supply airport trip data in this situation.
• For example, if a flight is delayed for more than 45 minutes, Etherisc users will get reimbursed straight into their MetaMask wallet, which they used to sign up for the program.

In other words, just as debtors’ collateral is liquidated when a certain smart contract condition is satisfied, Etherisc customers receive payments when their insurance policy is met. On the opposite end of the insurance equation, liquidity providers anticipate that more requirements will not be satisfied, just as insurance companies do.

Yet, because a blockchain protocol has no employee/software/labor overhead, Etherisc’s insurance automation is far leaner as it concentrates on the core business. Although Etherisc DIP tokens are ERC-20 compliant, the example of Gnosis Chain for Flight Delay insurance demonstrates that Etherisc may also be linked to other networks.

Etherisc chose Gnosis because their blockchain network is 100x cheaper and 10x quicker than Ethereum’s. Etherisc is still in its early stages and lacks crypto-backed lender insurance. Instead, insurance premiums are paid in fiat or stablecoin.

Tokenomics of Etherisc DIP Token (DIP)

DIP Token (DIP), which stands for Decentralized Insurance Platform, is the governance and utility token that powers Etherisc. Its entire supply is limited to 1 billion DIP, which its Foundation mainly controls.

TGEs, like ICOs, are token-generating events that provide additional DIP tokens to registered Etherisc donors at a predetermined exchange rate. Apart from TGEs, the Foundation makes grants to help Etherisc’s insurance ecosystem grow.

Etherisc established a 50M DIP Token award program in November 2020, as the Board of the Etherisc Decentralized Insurance Foundation announced. Developers use Etherisc’s Generic Insurance Framework (GIF) to create insurance products.

Etherisc funding programs aim to encourage more open-source insurance product development. This is because DIP tokens perform three essential services:

• Investing in risk pools
• Quality and reputation are at stake.
• Taking a stand for governance

DIP token holders can place them in risk pools as collateral (bond) to offer liquidity for insurance claims, similar to lending dApps like Aave or Compound. DIP stakers earn payouts according to the Etherisc staking mechanism in exchange for this service.

Etherisc’s African Foray

Crop insurance against changeable weather conditions was one of the first historical use cases for insurance. Today’s need for such insurance is the same. As a result, Etherisc collaborated with Chainlink and the Ethereum Foundation to establish ACRE Africa, a blockchain-based weather index agricultural insurance.

ACRE offers microinsurance to small farmers in East Africa to increase insurance availability in developing areas. ACRE has integrated over 1.7 million farmers as of October 2022, with insurance rates as low as 50 cents.

They established Impact B.V. as a distinct company inside its ecosystem to develop similar projects. Impact B.V., led by Jan Stockhausen and Michiel Berende, has launched a microinsurance presence in Kenya since 2021.

The Future of Etherisc

This Dapp plans to upgrade its major products, such as FlightDelay, by late 2022. This includes not just adding cryptocurrencies to risk pools but also converting policies into NFTs. Even insurance contracts may be traded this way, with smart contract logic providing optimal insurance.

Etherisc intends to extend its existing ties with Mercy Corps Ventures, the Swiss Agency for Development and Cooperation (SDC), the Ethereum Foundation, and the Climate Ledger Initiative in the future (CLI).