Litentry, a cross-chain decentralized identity (DID) aggregator that enables the linking of user identities among multiple decentralized networks, has announced a new strategic partnership with InsurAce, a Singapore-based DeFi insurance protocol.
Both teams will be working together to explore the application of decentralized identity technologies for decentralized insurance use-cases.
Litentry DID Technology Empowering InsurAce Insurance Protocol
Under this partnership, Litentry will provide a privacy-computation-based KYC/AML identity service to InsurAce. The purpose is to verify the identity of its clients and assess their suitability; along with the potential risks of illegal intentions towards the business relationship.
The data is signed by third-party institutes and could be verified by providing zero-knowledge proof. This will make sure one can perform computation and analysis of users’ data without compromising privacy.
Moreover, InsurAce will integrate Litentry’s DID aggregation API and computation model; which will help them to better understand the on-chain behaviors of insurance buyers and hence their risk profile. This risk profile would be used to set premiums for different users based on sophisticated algorithms.
Challenges For Decentralized Insurance Protocols
Although DeFi insurance leveraging on the blockchain technology has proven to be effective and useful, it can be further improved if more identity information can be applied to tackle some of the challenges.
Blockchain technology can prevent a profile from being monitored, but its pseudo-anonymous nature creates additional issues which compromise the user experience and fails to meet legal requirements.
- Insurance protocol is not able to identify humans from a large number of anonymous addresses.
- Detecting suspicious users, such as hackers and money-launderers which may lead to fraud activities.
- Cannot assess risk profiles of users to customize insurance premiums for individuals.
- Difficult to continually monitor user behavior; therefore cannot optimize risk management strategy.
InsurAce has quickly become the second-largest insurance protocol in DeFi. At the time of writing, the protocol has a $40 million market cap based on a circulating supply of 8 million INSUR tokens. There is a maximum release of 100 million INSUR tokens which can be mined through staking on the protocol.