Underwriting and Leveraged Mining
The Concept of Underwriting
If you have full confidence in the security of a project in Meta Defender's whitelist, you can become its underwriter by injecting capital into its Capital Reserve.
Underwriters share the Rewards from each premium according to the weight of the capital they provide to the whole Capital Reserve. At the same time, the underwriting capital is correspondingly frozen until the policy expires.
5% of the premium are credited to Meta Defender's program income, with the remainder going entirely to the underwriter.
Provision and Withdrawal of Liquidity
As a decentralized financial protocol, freedom of liquidity in and out and being free from any censorship are necessary. But insurance capital, in turn, is fundamentally different from ordinary DeFi liquidity.
1. The capture of premiums by insurance capital is an immediate matter; whereas making claims or not is a long-term matter.
2. The capture of premiums by insurance capital is a certain matter, whereas making claims or not is an uncertain matter.
Obviously, if an underwriter writes a policy, the protocol will freeze the corresponding amount of coverage. Until this policy expires, the underwriter can only withdraw the unfrozen portion of its own provided assets.
The protocol allows the underwriters the freedom to withdraw unfrozen assets while it ensures that the capital for compensation is adequate. The portion that has been frozen may also be withdrawn when the policy expires and the capital is unfrozen.
Adding Leverage to Underwriting Capital
Blockchain insurance is currently a brand new market, with user education far from the maturity of the traditional insurance market. Premium returns may be lower in the early years than other DeFi agreements over the same period, reducing underwriters' willingness to participate. At the same time, if a claim does not occur (and obviously no one wants it to), underwriting capital sitting idle in the protocol for a long time can result in a huge waste of capital.
The Meta Defender protocol makes secondary use of the underwriting capital, with 70% of the stock participating in the public chain's officially secured mining pool, and the mining proceeds are distributed according to the following ratio.
The first and third parts in this table can be adjusted with the decentralized governance of the project, with the aim of balancing the interests of the holders and the financial security of the protocol.
When a claim occurs, priority is given to using the funds in the Risk Reserve to pay out; when there is not enough to pay out, the excess is shared among all underwriters according to the weighting of the capital provided using the initial capital injected into the Capital Reserve by the underwriters.
Leveraged Liquidity Mining not only improves the utilization of project capital and the underwriter's rate of return, but also protects the Meta Defender protocol. It avoids the erosion of the equity of the insurance protocol as much as possible, which will become more and more insurable as the Risk Reserve accumulates over time.
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