Lemonade, a top American insurance company, has revealed the formation of the Lemonade Crypto Climate Coalition meant to offer blockchain-enabled climate insurance to the most vulnerable farmers across the globe.
Through its nonprofit organization dubbed the Lemonade Foundation, Lemonade has partnered with other companies like Chainlink, Avalanche, DAOstack, Hannover Re, Tomorrow.io, Pula, and Etherisc as founding coalition members.
Based on the Lemonade Foundation’s objective of rendering environmental and social change through technology, the coalition is being established as a Decentralized Autonomous Organization (DAO) to create and distribute parametric and instantaneous weather insurance to livestock keepers and subsistence farmers in emerging markets.
The climate insurance will be developed on Avalanche’s proof of stake (PoS) as a stablecoin-denominated decentralized application (dapp).
With the initial rollout expected in Africa this year, farmers will have the ability to make and receive payments using local currencies or stablecoins.
Daniel Schreiber, a director at the Lemonade Foundation, welcomed the collaboration and stated:
“By using a DAO instead of a traditional insurance company, smart contracts instead of insurance policies, and oracles instead of claims professionals, we expect to harness the communal and decentralized aspects of web3 and real-time weather data to deliver affordable and instantaneous climate insurance to the people who need it most.”
With Africa having nearly 300 million smallholder farmers who face real climate risks, Rose Goslinga believes blockchain-powered climate insurance will come in handy in safeguarding their livelihoods.
The co-founder of Kenya-based insurtech Pula added:
“This is where the power of the Lemonade Crypto Climate Coalition comes in: An on-chain solution that can be immediately impactful at scale will allow farmers to finally get financially protected against the increasingly frequent risks such as drought.”
Blockchain is emerging as one of the sought-after technologies for tackling climate change. For instance, Samsung Electronics announced plans to utilize blockchain in a climate-focused reafforestation program in Madagascar earlier this year.
An insurance collaboration between decentralized protocol Etherisc and microinsurance issuer ACRE Africa has allowed thousands of farmers in Kenya to receive coverage for weather-related risks.
Etherisc and ACRE Africa said they had processed insurance payouts for some of the more than 17,000 smallholder farmers in Kenya covered under the collaboration. The Chainlink Community Grant, the Ethereum Foundation and the Decentralized Insurance Foundation helped fund the project, which was first announced in November 202.
“We’re thrilled that after months of hard work on this initiative, we’re seeing the fruits of our labour — which has a tangible social impact on farmers in Kenya who are threatened by the devastating effects of climate change,” said Etherisc chief inclusive officer Michiel Berende. “The solution that we built with our valued partners at ACRE Africa overcomes a number of challenges associated with traditional crop insurance — delayed payments, high premium costs, and lack of transparency.”
As part of the initiative, smallholder farmers are reportedly able to pay as little as $0.50 in premiums to receive coverage for crops adversely affected by climate change — Kenya has been previously hit hard by both droughts and flooding. Though Etherisc and ACRE Africa said they aimed to reach roughly 250,000 farmers in East Africa, some of those already receiving coverage have been paid using an end-to-end solution on the blockchain.
Etherisc reported it had dispersed payments to farmers in need using the cash and mobile payment system M-Pesa, with roughly 6,000 expected to be compensated for lost or affected crops before the end of the season. Kenya is home to a large number of flower farms, but it also grows sugarcane, sweet potatoes, maize and other fruits and vegetables.
Related:Banking The Unbanked? How I Taught A Total Stranger In Kenya About Bitcoin
Many have touted blockchain solutions for a multitude of issues facing residents of African nations, from helping women become financially independent to proposing blockchain voting systems to reduce costs and provide more secure elections. In Zimbabwe, a blockchain-based tracing app allows local farmers to track and trace cattle, a system aimed at making it easier to export beef and increase profits.
1inch exchange has announced a second round of its yield farming program.
Yield farming has fallen out of the spotlight, but is still providing annual returns unheard of in traditional finance.
The first round of 1inch distributions generated an average annualized return of 300%, according to 1inch.
The summer’s buzz around yield farming may have tapered off as assets like Bitcoin and Ethereum have moved into the spotlight, but DeFi protocols are still hard at work distributing their governance tokens and rewarding DeFi users in the process.
1inch is a popular decentralized exchange aggregator that helps users find the best prices when swapping assets. After launching a “liquidity mining” program last month, it today announced a second round of governance token distributions, set to begin January 9. The first roundbegan December 25and ends today.
In the new round, the DEX aggregator will distribute 1% of the 1INCH token supply over the course of one month to users who provide liquidity in the form of ETH, WBTC, and dollar-pegged stablecoins on the platform.
Liquidity mining, also known asyield farming, has become a hallmark of DeFi, or decentralized finance, since the summer of 2020. DeFi is a group of protocols that replicate financial services formerly provided by banks like making loans and providing interest on user deposits—all on decentralized blockchain networks such as Ethereum.
DeFi protocols require user funds in the form of cryptocurrencies or dollar-pegged stablecoins to perform their financial functions, and typically use a“governance token”, like 1INCH in this case, held by members of the community to make decisions about the development and future of the application.
Yield farming programs distribute these governance tokens, which can then be traded on the open market, as a means of attracting funds to their respective protocol, and to try to align token holders with those who understand and plan to support the application long term.
Many DeFi protocols have implemented yield farming programs, including thelargest decentralized exchange by volume,Uniswap, and lending protocol Compound, whichset off the yield farming crazein June 2020.
Yield farming also quickly grew in popularity at a time when cryptos like Bitcoin and Ethereum were rising slowly or not at all. It offered a means to earn profits with unheard of annual yields in the hundreds or thousands of percent when simply waiting around for Bitcoin to moon seemed like a less viable strategy.
DeFi yields in the high double or even triple digits can be enticing, but of course annualized yields take a year of consistent returns to be fully realized, and DeFi is not exactly known for low risk over the long-term. With Bitcoin prices up more than 100%just in the past five weeks, it might not be surprising that would-be yield farmers are cashing in on those gains instead.
Still, according to 1inch’s press release, its liquidity mining program returned an average annualized yield of 300% to farmers.
Although the yield farming craze may have taken a backseat to other crypto events, the extended 1inch program shows that sky-high yields are still possible, and that liquidity mining isn’t going anywhere.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.
In the space of 12 months, DeFi has become a $15 billion industry — spawning governance tokens that are now worth even more than Bitcoin.
But the rapid explosion of protocols has brought considerable growing pains… and concerns that the sector is not on a sustainable footing. When interest rates in conventional savings accounts stand at a fraction of a percent, while yield farming generates triple-digit returns, it’s inevitable that questions will emerge about whether this is a bubble that’s fit to burst.
As Ethereum co-founder Vitalik Buterin recently pointed out on a podcast with Ryan Sean Adams, such sky-high interest rates are “just a temporary promotion that was created by printing a bunch of compound tokens, and you just can’t keep printing compound tokens forver.”
SEBA, a regulated crypto bank in Switzerland, hit the nail on the head in September when it released a report that asks this: “What happens when the music stops?”
Its analysts warned that the current yield farming trend in DeFi is not sustainable — and went on to predict that only a small handful of protocols would survive in the long-term. Indeed, Yearn.finance has already embarked on a plethora of mergers in recent weeks designed to bolster development resources and expand its liquidity pool.
Although SEBA went to great lengths to stress that not all yield farming lacks merit, the company added: “Yield farmers made money by hopping from one protocol to another. As long as there are buyers for new protocol tokens, yield farmers can continue jumping among protocols. When buyers stop accepting the other side of the trade, this deranged activity will be arrested. Clearly, this trend is not sustainable.”
It pointed to SushiSwap, a fork of Uniswap, as an example. Following its launch, a myriad of other food-themed forks emerged. “When markets took a bad turn, all except SUSHI corrected by more than 99% and became almost worthless,” SEBA’s analysts wrote.
The bank ultimately drew parallels with the dizzying ICO boom seen in 2017 and 2018 — where most ambitious projects failed to stand the test of time.
Unfortunately, headaches in the DeFi space don’t end here. This year, Ethereum has established dominance as the main blockchain where protocols are based — and according to DappRadar, this network held 96% of total transaction volume in the DeFi ecosystem in the third quarter of 2020.
As reported by Cointelegraph in September, this led to alarm bells being raised over Ethereum’s scalability issues — with transaction fees surging to an all-time high. Although it is hoped that Eth2 will dramatically increase the network’s capacity, experts warn it could be years before the transition to proof-of-stake is complete… and by then, the industry may have had little choice but to look for alternative blockchains.
The research company BraveNewCoin touched upon these challenges in a recent report, where it identified 18 serious non-financial risks facing the DeFi sector.
“Scalability risk is also the risk that Ethereum itself will not scale properly for DeFi protocols to be able to function sustainably over time. If network activity is too high (as it has been recently) it deters smaller investors and removes the ‘accessible’ aspect of DeFi — because smaller investors are earning rewards that are less than the fees required to obtain them. Not only does scalability risk impact investors, but it also impacts protocols,” BNC wrote.
And all of this is before we mention the countless smart contract vulnerabilities that have led to millions of dollars in capital from being sucked out of the DeFi ecosystem by malicious actors. High-profile incidents appear to happen on an almost weekly basis — affecting investor confidence and jeopardizing the industry’s long-term potential.
Finding the answers
According to Unifi — which has already launched on five different blockchains — change is needed if the sector has any prospect of establishing a meaningful presence in the crypto industry into the 2020s and beyond.
At present, the team behind this protocol believe the space is deeply flawed. On most DeFi platforms, those who make the most rewards are those who leave a platform first and move on to the next thing — creating distrust and causing confidence to evaporate. Resultantly, the top-ranking protocols with the highest total value locked are constantly changing.
“Unifi is custom built to be an efficient, rewarding, and sustainable system. Capitalizing on the strengths of each blockchain Unifi is on, we have created a system where all chains contribute together to form a complete tokenomics model, ensuring the success of the entire protocol,” Unifi CEO Juliun Brabon said.
Unifi says it isn’t a clone of any existing protocol — and instead, the project says it delivers a sustainable tokenomics system that is more akin to a blockchain than a conventional DeFi protocol. This is demonstrated by their governance token, UNFI, which incorporates proof-of-stake into its model. Unifi offers loyalty rewards to liquidity providers and traders, encouraging a sense of community instead of being a race to be the first out.
The protocol adds that its multi-chain approach results in an ever-increasing audience with each new blockchain supported — with Ethereum, Tron, Ontology, Harmony and the Binance Smartchain united through the use of base tokens. In the last quarter of 2020 and continuing through 2021, Unifi is set to launch on additional blockchains — and new DeFi services, such as cross-chains swaps and a lending platform, will be released.
In order to gain cross-industry support, Unifi says it has received investment from over 20 blockchain venture capital firms, including four major exchanges — Binance, MXC, Bibox and HBTC. Unifi’s governance token, UNFI was recently featured on Binance Launchpool.
As 2021 begins, all eyes will be on DeFi to see whether it can maintain its current size — let alone build on the astronomical growth that was seen in 2020. Sustainability is shaping up to be crucial in making this happen, and encouraging user loyalty could be the key to success.
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