ZZZ Insurance? (NAP Premium)

My Vision:

Users can spend 10K NAP to buy “50/50 ZZZ Insurance” on each ZZZ they’re staking.

For example, a user initiates an insurance policy, spending 10K NAP to insure their pooled ZZZ. At the time the contract is initiated, the value of ZZZ is $10,000. They’re insuring themselves against a drop below that threshold. If the price continues to rise up to $20,000, this has no effect on the insurance policy. The policy is for the price at the time of the contract initiation ($10,000=1 ZZZ in this case)

ZZZ Insurance in Action:

The Insurance Policy is only triggered if the price of ZZZ drops by 50% from the price at the initiation of their policy. So if they bought insurance when the ZZZ price was at $10,000 then they’d be covered if the price drops to $5,000.
In the case that the value of their 1 ZZZ drops to $5,000, then they’d be paid out $2,500 worth of a stable coin (50% of the loss). Thus, 50/50 insurance.

How do we get the stable coin? Sell the NAP Insurance Deposit right away, at contract initiation. That way we set ourselves up to pay them back, should prices drop. People could farm 2 pools – wBTC and NAP – constantly moving their NAP into their insurance policies.

The greatest part is if the price of ZZZ never drops down to $5,000, then they never get paid out.

If they buy more ZZZ in the future, they’d need to increase their premium. If the value of ZZZ rises and they want insurance on that increase, then they’d need to increase their premium. Say, pay in an additional 5k NAP to insure every additional ZZZ that they gain. Pay an additional 5k NAP to insure every added $10k in ZZZ value. (Or whatever. An actuary scientist could calculate this out for us.)

This would be a huge draw for obvious reasons.

It’d also add additional utility to NAP. We could even use their Insurance Premiums to buyback ZZZ and add liquidity to the NAP pool.

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I really like the idea of insurance and have been pondering it a little myself. Think you got the upper hand on the mechanics of how it could all work though.

YFI starting doing insurance didn’t they?

yea. limited info on how YFI insurance works. My mechanism is lacking on sound math. We’d need some serious actuaries to write the formula. And we’d need someone/something to manage the stablecoin fund.

This will be a difficult concept for users to wrap their heads around. It will likely cause a lot of consternation as well, even though it can be 100% code based (no human error). People will want the insurance on their pooled ZZZ even if the price rises well above their policy limits. There’d need to be a pretty healthy explainer about why they need to buy more insurance to cover additional ZZZ added to the pool/additional value added to the pool (ZZZ price increase).

Perhaps in the ui/ux, if the users could drag a slide bar that allowed them to choose the ZZZ price range that they want to insure. As they drag, the price of the policy would increase or decrease. This way, they can plainly see what the policy is actually covering. IE – drag the first hand of the bar down to $9,000 (if price is $10,000) and then the 2nd hand would rest at $4500. The median point would have an indicator that says “if ZZZ price drops to $4500 you’ll be paid out $2,250.”

At any rate, I think the important thing is adding utility to NAP. It isn’t valuable enough in the ecosystem. Not by a longshot. Simply pooling it might add some limited-time value, but if we give it some legit purchasing power, then we’d see people hodl and spend instead of just sell. This Insurance scheme adds value to NAP. I’m still thinking of other ways to add NAP value.

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Ah but I just noticed a flaw in my plan. By buying the insurance policy, the user is essentially selling their NAP on the open market. Because in my plan, we’d be selling it immediately for a stablecoin fund…

Hmmm… Maybe we only sell 70% on the market and return the other 30% to our pool? Or perhaps once our stablecoin fund reaches a certain threshold that the algo deems safe, we could initiate a buyback of NAP?

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There is one company/coin out there right now that I know of that was created by an actuary that is providing DeFi insurance - Nexus Mutual - NXM

  • but regardless I like the idea of figuring out how to insure these pools, sounds like a great idea!

This is an interesting idea - but we need to grow our liquidity pool to attract investors to grow a massive pool to offer insurance against - we are too small and devalued our market cap and unique market cap spread accross 20k coins, I cannot stress enough the power a huge pool of liquidity will bring to our growth potential - but to attract the investors and big buy ins we must return to small ZZ token spread to offer stalkers great return on their investment and commitment to the community