P2P Marketplace Etherisc Rolling Out Depeg Insurance to Protect USDC Holders

Etherisc customers are set to benefit from a depeg insurance coverage that the peer-to-peer (p2p) marketplace is rolling out to safeguard against losses. 

Etherisc is considering relieving its customers of the losses incurred whenever the USDC stablecoin loses its $1 pegg. However, the firm seeks to safeguard the stablecoin holders whenever USDC declines between 5%-20%, and the depegging lasts for at least 24 hours. 

Etherisc Offering Insurance Coverage for USDC Facing Capital Risk

Etherisc is targeting to offer insurance coverage for the USDC holders in an automated mechanism that deposits the pre-specified payouts to the non-custodial wallets of investors. The p2p insurance protocol aligns the coverage along the revelation by Circle that an estimated 80% of the USDC stablecoin derives support from short-dated treasury bonds. 

Circle estimates that an estimated 20% of USDC has backing from bank deposits. Consequently, Etherisc would only offer insurance coverage for 20% of the wallet’s USDC as it constitutes the capital at risk.

Etherisc co-founder Christoph Mussenbrock indicated that a wallet holding 100000 USDC would incur a 20% loss whenever the stablecoin depegs to 80% of the $1 peg value. Consequently, the holder would only receive reimbursement from Etherisc of 20%. 

Mussenbrock indicated that Etherisc would still reimburse $20000 even where the wallet loses $40000 when USDC surprisingly depegs to 60%.  

Mussenbrock revealed that Etherisc is partnering with Chainlink to leverage its USDC-USD price feed. The price feed would notify Etherisc protocol whenever the price declines below $0.995. Mussenbrock holds that it would automatically enter the triggered state.  

Etherisc Sets 2000 USDC as Minimum to Qualify

The chief executive illustrates that the failure of the USDC price to recover within 24 hours affirms the depegged state allowing customers to claim USDT payout. Customers seeking to take up the coverage should accomplish the 2000 USDC minimum to qualify for the protection. 

Etherisc co-founder indicated that Ethereum smart contract would facilitate the calculation of the respective customer payouts. The contract assesses the USDC amount covered and the respective USDC balance held by the customer at the depegging time. The contract will ascertain the USDC price level 24 hours after initial depeging.

Musennbrock indicated that Etherisc protocol conducted trials on the testnet by relying on data derived from the USDC depegging experienced in March 2023. He observes that the price data was fed into a time machine as the process was replayed. The accuracy in the testnet is convincing that it would behave accordingly in the live product. 

Linking Capital Providers With Customers

Etherisc functions as a peer-to-peer protocol where investors commit their USDT as cover for USDC. The participating investors would then ascertain the insurance period and fee charged. USDC investors seeking insurance coverage would enter the peer-to-peer marketplace to complete the deal. 

The USDT investors constitute the capital providers, while the other group comprises the customers identified to hold the USDC. Mussenbrock restates that the price incurred in securing the USDC would converge to a particular market price. 

The p2p protocol founder indicated that Etherisc would prioritize striking the market equilibrium. He explained that making the insurance expensive would price out the majority of investors. On the contrary, providing cheaper insurance would imply the protocol would lose potential earnings. 

The depeg protection cover involves a response to withstand the occasional dangerous volatile cryptos. It seeks to arrest individuals’ fears regarding stablecoin depegging, which is often considered the primary threat capable of draining the cryptocurrency ecosystem.  

Protecting USDC Would Secure DeFi Protocols

Mussenbrock considered that USDC constitutes a critical asset in cryptocurrency. He illustrated the case of DAI as one reliant on USDC for cover. He added that a decline in USDC would pull along DAI. Such occurrence would adversely affect the DeFi protocols where DAI constitutes a core element.

Etherisc acknowledges that the interconnected nature of USDC and DeFi necessitates safeguarding holders against losses. The occurrence of challenges threatening stablecoins could bring down the entire DeFi segment. Mussenbrock explains that such justifies Etherisc’s desire to insure the whole DAI project. 

Mussenbrock admits that while the big projects justify the course, Etherisc is pursuing the small investors. Nonetheless, he considers that big projects would show interest in securing a portion of their assets. 

Mussenbrock is optimistic that Etherisc would ultimately expand its scope to insure other stablecoins. The protocol is set to replicate a proven business model where InsurAce offers depeg coverage for multiple stablecoins, including USDT, USDC, and BUSD. Nexus Mutual offers a similar solution in providing coverage to avert losses whenever the crypto-collateralized stablecoin OUSD declines.