Hi Guys Saw this post from Andre on yinsure - seems like us getting into the insurance game is a good idea but I think there may be problems with liquidity and claims:
Liquidity - the return for LPs will have to be large enough to entice them to put up full collatoralization on the cover (that’s a big ask in this space) - I think Nexus has fractional reserve to 6x the staked cover on a contract and where this doesn’t cover the claims - overflow is pulled from the capital reserve of the protocol - I think we can manage this if demand for yinsure is high enough cause the market will sort this out.
There are incentives in the fullness of time for LPs to down vote claims as the protocol grows will increase. As I understand Nexus the actual LPs who stake against the contract to allow for the protocol to provide the cover and are at risk of having it burned aren’t necessarily the ones voting on the claims assessment - because all NXM holders can vote on a claim. I think this is a reputational problem for YFI because if peoples claims aren’t paid a lot of the good will we have built up will be lost. We could perhaps solve this by bringing claims assessment inside our governance structure.
Alternative or in addition - if the problem we are addressing is KYC-less insurance - could we just act as a reseller of Nexus by buying cover for our vaults on behalf of people who want it and taking a premium - almost no risk for us but huge money to be made in our cut? We could even just be a decentralized reseller for all protocols backed by our good name of YFI!!