The decentralized nature employed by cryptocurrencies brings many advantages when compared to traditional payment methods. It mitigates server downtime, hacks, middleman corruption and makes these services more efficient by eliminating exorbitant middleman fees.
Centralized exchanges and wallet providers have demonstrated the advantages of a decentralized system again and again through countless hacks, thefts, corruption and incompetence that has resulted in the loss of user funds. Of course, exchanges provide a valuable service, but there are decentralized solutions like Bitsquare that can be used to exchange your Bitcoins for fiat or altcoins.
Despite this, the majority of people still store and trade their cryptocurrencies on centralized services for a simple reason, they are convenient. Decentralized exchanges offer features that blockchain technology simply does not allow decentralized exchanges to employ at the moment. Despite this overwhelming risk, users have no guarantee that their funds will be returned if a hack does take place, although some exchanges like Poloniex have managed to pull it off in the past. So, what happens if a hack takes place? If you’re lucky your wallet may not be affected, but even in if that’s case, the exchange can socialize losses throughout all the users, like Bitfinex did recently with the issuance of BFX equity tokens.
There is currently no insurance for cryptocurrency funds, but that’s about to change. Inchain (INC), an Ethereum based insurance platform will allow users to take out insurance on their crypto assets, ensuring that even if a user gets “Goxed“, his funds are not lost. Inchain is a decentralized platform that issues and maintains insurance policies and their associated bonds, allowing not only users to protect their investments but also to create new ones by purchasing insurance-related bonds.
Insurance Policy offers are made according to the risk factors of the exchange or wallet being used, duration of the insurance, and ranking model. When a user accepts an offer and pays the premium, Inchain generates a smart contract that keeps track of the service where the funds are held in case the insured risk materializes. The premium payment is then sent to the insurance fund which is managed in a decentralized manner, allowing INC tokens holders to vote on which projects to invest using the insurance fund. Investors can now buy bonds related to the newly created insurance. If the insured risk takes place, the smart contract system will pay the policyholder out of the insurance fund and the bond holders cease to receive coupon payments. If not, the bond holders receive all coupon payments and the bond’s face value.
Applying this system, Inchain allows users to enjoy the benefits of centralized services with the guarantee that a decentralized insurance platform has got their funds covered. Inchain also creates investment opportunities through insurance-based bonds.
Inchain will host an Initial Coin Offering period. This crowdsale will start on October 12th and will last for a month. During this ICO, 85 million tokens will be sold to investors, while 15 million will be kept for core activities. Early investors will be rewarded with a 20% bonus during the first week.