Autor Cointelegraph By Rachel Wolfson

Insurance is key for financially securing important assets. Yet, the cryptocurrency sector — which is predicted to reach a global market size of $4.94 billion by 2030 — may be lagging behind when it comes to insuring digital assets. For instance, it’s been noted that less than 1% of all crypto investments are currently insured. This statistic is alarming, considering the rapid growth and high-risk profile associated with today’s cryptocurrency market. Ben Davis, team lead for digital assets at Superscript — a British startup and Lloyd’s of London-licensed insurance broker — told Cointelegraph that crypto has been marginalized when it comes to insurance solutions. “Superscript has spent years focusing on insurance for emerging tech fields. I lead a team that focuses specifically on crypto and never in my career have I seen an industry more marginalized,” he said. Although the cryptocurrency sector is advancing, Davis believes that it continues to lack insurance solutions due to the industry’s strong financial focus. He said:“Crypto is tackling something very fundamental, which is money. But, as a society, we tend to shy away from this topic. When a technology sector focuses on hard questions relating to value and exchanging money, insurance underwriters tend to move away from this conversation.” Growing need for crypto insurance Although this may be, the need for insurance solutions within the crypto industry is becoming more important than ever before. In order to fill this gap, Davis explained that Superscript is taking a centralized approach to bridge the divide between traditional insurance providers and crypto companies. “We translate the risks associated with digital assets to the broader insurance community. Everyone on our team holds and interacts with crypto, so we speak the language,” he commented. As a Lloyd’s broker, Davis elaborated that the firm has experience getting customers in front of multiple insurance companies. As such, the firm has a centralized finance (CeFi) approach by presenting crypto companies to insurance providers suitable for their needs. “We work with many nonfungible token organizations, or crypto companies partnering with big names in entertainment, to help secure contracts with traditional insurance firms. We provide insurance for the full spectrum of digital asset businesses including tokenization platforms, miners, custodians, blockchain developers and more,” he shared. Regarding the process involved, Davis explained that Superscript helps educate insurers about risk concerns related to cryptocurrency to ensure they can work with digital asset companies. Like most traditional insurance providers, Davis pointed out that insurers working with crypto will take premiums in fiat currency rather than in crypto. “We are currently looking at ways to innovate by making this process more seamless for our clients,” Davis added. While Superscript aims to bridge the gap between traditional insurers and crypto companies, a number of decentralized finance (DeFi) insurance solutions have also come to fruition. Dan Thomson, chief marketing officer of InsurAce.io — a decentralized finance risk protection protocol — told Cointelegraph that although crypto insurance is broad, it fundamentally means that crypto users are protected against certain risks and catastrophic losses to their portfolios. “It is a financial insurance tool emerging in the wake of a multi-trillion dollar market,” he said. Given this, Thomson explained that InsurAce aims to solve the intrinsic risks associated with DeFi protocols. In order to do so, Thomson mentioned that InsurAce works by allocating staked capital in its protocol as insurance capacity. DeFi users are then able to buy this capacity to cover their investments and staked assets in various protocols. “In the event of an exploit, for example, customers can claim via the InsurAce app. The decentralized organization, or DAO, will then vote on the legitimacy of these claims,” Thomson said.Although this process differs from traditional insurance solutions, it has proven to be effective. According to Thomson, InsurAce’s largest payout occurred when the Terra ecosystem collapsed in May 2022. Recent: Does the Ethereum Merge offer a new destination for institutional investors?“We received 180 claims in total. InsurAce paid out $11.7 million to 155 affected TerraUSD Classic (USTC) victims,” he said. Some 8% of InsurAce’s USTC payout was made in stablecoins, while 60% consisted of layer-1 tokens, and the remaining 4% was paid in the platform’s INSUR token. According to Thomson, this process took one month to complete, which is typically faster than payouts processed by traditional insurance firms. Given the decentralized nature of the crypto sector, it shouldn’t come as a surprise that other projects are focusing on DeFi insurance. Adam Hofmann, founder and CEO of decentrazlied insurance protocol Nimble, told Cointelegraph that digital assets must be backed by insurance in order for the crypto sector to advance. After spending 22 years in the traditional insurance sector, Hofmann founded his firm in June 2021 with the goal of creating a more democratized insurance process. Hofmann explained that Nimble applies traditional insurance concepts to decentralized finance. For instance, the platform is built on the Algorand blockchain and works to insure DeFi projects powered by Algorand. But like traditional insurance providers, Hoffman explained that Nimble consists of underwriters, claim assessors and loss adjusters, all of which are pulled together to help facilitate “risk pools.” “A risk pool is like a liquidity pool, but this involves retail and institutional investors allocating money to subsidize the risks on insurance. This creates a more democratized insurance process,” he remarked.Hofmann added that Nimble works directly with customers to gather important information necessary for underwriting. This data is then released into the Nimble portal, allowing users to purchase insurance for certain DeFi platforms. “If users stake an amount of crypto on a platform we support then they can purchase the insurance for a rate. This premium goes into the risk pool for that project and customers receive a nonfungible token in their crypto wallet representing that insurance policy,” he explained. In the event of a DeFi hack, Hofmann mentioned that customers will be notified immediately and receive payouts in crypto directly to their wallets upon community and smart contract approval. Indeed, democratization seems to be a common theme among crypto insurance providers. For example, Nexus Mutual is a discretionary mutual currently covering millions of dollars in Ether (ETH) for various DeFi projects. Hugh Karp, the firm’s founder, told Cointelegraph that the platform is an automated version of a very old structure where members share risks together. “The primary problem Nexus solves is the sharing of new and novel risks in the cryptocurrency space where coverage isn’t available in normal markets.” According to Karp, Nexus does this by allowing members to decide how risks should be priced, along with how claim payments should be made. While this approach may be a good fit for the crypto industry, Karp noted that building trust with customers to ensure that genuine claims will be paid remains a challenge. “This can only be achieved with time and a track record. It’s also challenging to price risk appropriately, and we’ve seen some other crypto insurance platforms have trouble with this recently with the Terra collapse.”Education is crucial for DeFi and CeFi insurance to take offWhile some members of the cryptocurrency ecosystem view centralized approaches to insuring digital assets as harmful, it’s evident that both CeFi and DeFi solutions are needed. “Traditional CeFi insurers often get a bad rep, but this year alone I have seen more traditional insurers enter the crypto space than I have seen in the last five years of my career,” said Davis. This has become the case, especially as more institutional investors enter the digital asset sector. “Many of the companies we insure need to have financial backing from traditional insurance providers that are regulated,” Davis remarked. This notion is also starting to resonate with DeFi providers. For instance, Hofmann mentioned that Nimble is in the process of obtaining an insurance license through the Bermuda Monetary Authority in order to ensure both DeFi and traditional insurance capital protection. In the meantime, Hofmann believes it’s important that the Algorand Foundation is backing Nimble by providing a certification of the platform for users.Even with certifications and credibility, insuring crypto assets remains a tricky business. For example, a number of cryptocurrency exchanges have been under fire recently for making false claims of being insured. Last month the leading cryptocurrency exchange FTX received a letter from the Federal Deposit Insurance Corporation (FDIC) accusing the exchange of falsely implying that user funds were FDIC-insured. Moreover, Celsius — the cryptocurrency lending platform that recently went bankrupt — is facing a lawsuit based on forged claims that users’ digital assets were insured. “The challenge of the insurance industry is that it can be confusing. People, along with organizations, sometimes don’t know what they are actually covered for,” said Davis. Due to this, Davis believes that trust within an organization or an entire industry can be easily eroded. Recent: The Metaverse is becoming a platform to unite fashion communitiesTo ensure smooth development moving forward, industry experts agree that more education is needed. For Davis, this starts with educating traditional insurance brokers on how to handle crypto claims. DeFi-focused solutions, on the other hand, must focus on helping investors understand what is covered from the start. “For instance, market volatility can create confusion. InsurAce also doesn’t KYC customers, yet a protocol listed that their assets are insured through us on their website. When the Terra incident happened, customers were unclear about their coverage,” said Thomson. Given this complexity, Thomson believes that the vast majority of insurance coverage will be provided by crypto-native solutions. “The risks are very novel and require deep specialist knowledge, which our members have. Some traditional providers have started dipping their toe in the space, but I suspect they will have a few false starts and progress will take quite some time.”

A recent report from technology research and advisory firm Technavio predicts that the Metaverse will hit a market share value of $50.37 billion by the year 2026. Therefore, it shouldn’t come as a surprise that the trillion-dollar fashion industry has started taking a major interest in the Metaverse. While most luxury labels and brands remain focused on creating nonfungible tokens (NFTs) to replicate physical items, a handful of projects have started bringing their communities into the Metaverse. For example, on Sept. 5, Vogue Singapore launched a fashion-first Web3 community known as “Vogue Singapore’s New World.” While Vogue Singapore has previously shown an interest in NFTs by tokenizing their Sept. 2021 cover, Natasha Damodaran — managing director of Vogue Singapore — told Cointelegraph that the publication has gone a step further by creating a virtual experience that encompasses the theme of “Fashion’s New World.” Damodaran explained that the platform allows its community to interact with various types of content and imagery. She said:“Vogue Singapore’s New World currently allows users to explore a surrealism-inspired realm featuring a welcome video from Vogue’s September 2022 cover star and supermodel Lina Zhang. Users can also experience an AI-generated beauty shoot called Bio RESONANCE by artist Terry Gates, along with digital couture by Beijing-based designer Yimeng Yu created exclusively for Vogue Singapore.”A glimpse inside Vogue Singapore’s New World. Source: Vogue SingaporeDamodaran explained that Vogue’s metaverse is powered by Spatial.io, a Metaverse platform that specializes in 3D spaces. The virtual space has also been designed by Polycount.io, an agency focused on NFTs. Gianna Valintina, head of marketing at Spatial, told Cointelegraph that Vogue Singapore’s Metaverse is accessible via mobile devices, desktops and virtual reality (VR). She added that users who enter the New World are able to create a custom avatar that can then be dressed in two Vogue-exclusive wearable creations by fashion designer Yimeng Yu. Damodaran further noted that users can interact directly with Vogue Singapore’s September cover, while reading various pieces of content associated with images.While Vogue Singapore’s New World enables a more engaging way for users to view and read content, Valintina stressed that this also allows brands and communities to build better experiences. Indeed, Damodaran noted that the Metaverse offers labels an opportunity to expand their reach to other market segments while showcasing creativity and craftsmanship. “For Vogue, that means connecting the fashion community and introducing them to Web3 and vice-versa while still creating avenues of engagement that are relevant on digital platforms,” she said. Although this concept is still new, it resonated with Yu, who created the two digital couture designs for the platform. Yu told Cointelegraph that the development of digital technology and the surge of online life in the post-epidemic era have brought new opportunities to the fashion industry. She said: “Digital technologies and Intelligent production are innovating the fashion design paradigm, production process, display method, retailing path and user experience within the fashion industry. In both designer creativity and user experience perspective, the Metaverse brings the fashion industry endless possibilities.”A couture design for Vogue Singapore’s New World by Yimeng Yu. Source: Vogue SingaporeRegarding new opportunities, Steven Kold, CEO of The Council of Fashion Designers of America (CFDA) — a non-profit trade association founded in 1962 consisting of American fashion designers — told Cointelegraph that to strengthen the impact of American fashion globally, the CFDA decided to launch an exhibition in the Metaverse: “As we were mulling ways to mark our 60th anniversary, we decided it had to be future-facing, and an exhibition in the Metaverse was a perfect way to honor our past with an eye to what’s next.”Similar to Vogue Singapore, Kold explained that he hopes the CFDA’s entry into the Metaverse will reach new audiences while sparking an interest in American fashion and designers: “Because it’s in the Metaverse, individuals don’t need to travel to see the exhibition, but can enjoy it from the comfort of their own home.” Kold shared that the CFDA’s entry into Web3 will be marked with a curated retrospective of the last 60 years of American fashion, along with a collection of commemorative NFTs for auction to benefit the CFDA Foundation. The exhibition is expected to open in Dec. 2022 in The Sandbox. While this demonstrates the CFDA’s first entry into Web3, Kold pointed out that the organization is not yet launching a formal platform. Although Vogue Singapore’s Metaverse project is expected to evolve (with a new phase launching in Oct. 2022), Kold explained that CFDA’s etaverse exhibition is a “test and learn” for the organization. “The CFDA will start building its Web3 community while it onboards its current Web2 base. This will help us slowly build toward a larger Metaverse community and experience for American fashion,” he said. Regardless, Akbar Hamid, founder and CEO of 5Crypto — the creative consultancy behind CFDA’s project — told Cointelegraph that bringing the CFDA’s community together in the Metaverse is a first for fashion. “This is a great way to raise awareness and interest for fashion amongst the Gen Z audience while bringing an older audience into the Metaverse. This is also an opportunity to engage Metaverse creators to work alongside iconic fashion designers and curators to reimagine visionary style and design in a voxelized environment,” he said.Will fashion communities want to engage in the Metaverse?Although encouraging fashion-focused communities to engage in the Metaverse may be the next step for certain projects, it remains unclear how users will react. For example, while Vogue Singapore’s New World is innovative, the concept may not immediately resonate with the publisher’s audience. Brian Trunzo, metaverse lead for Polygon Studios, told Cointelegraph that while brands on the Metaverse tend to have a deeper connection with their consumers, media publications are still trying to better understand this:“Media is still trying to figure out how to use Web3 tools to engage an audience and convert them from consumers into community members or, in the best instance, super fans. Even those who succeeded at this in Web2 are finding it difficult as converting one from Instagram to a DAO [decentralized autonomous organization] member or NFT holder is no easy task.”However, Jinha Lee, co-founder and chief product officer of Spatial, told Cointelegraph that within a week of launching New World, users collectively spent over four million minutes on the platform. “Seeing this demonstrates that a large majority of people have been enjoying the space during Vogue Singapore’s launch,” he said.While this statistic is noteworthy, Justin Banon, co-founder of Boson Protocol — a metaverse commerce protocol focused on digital and physical fashion — told Cointelegraph that, as with any new technology, there will initially be a period where users visit the platform exploratorily rather than with a fervent desire to do much else. But, while adoption may be slow, Banon believes that projects like the one being initiated by Vogue Singapore will ultimately impact the entire fashion and media sector:“When we ask whether more fashion magazines will want to enter the Metaverse moving forward, I believe the only conclusion to come to is yes. It’s a new space, brimming with innovation and authenticity, concepts that the world of fashion has prided itself on since its inception, so the Metaverse is the next logical step forward. I don’t believe that there will be a single fashion magazine that won’t have adopted Web3 and the metaverse in some shape or form in the future.”