~$2.3 billion is permanently lost from ~377 recorded Web3 scams, hacks, and exploits in 2022 so far (@CertiK). It's essential that we insure our digital assets if they are to truly go mainstream.Today, I'll be diving into NFT insurance. Thread below 👇
1/ Out of an estimated 84 million total active wallets in Web3 (this number is hard to gauge), there have been over 950,000 unique wallet addresses that sold/purchased NFTs in Q2 2022 (data @chainalysis).
So, how is risk currently being mitigated when dealing with NFT assets?
2/ It appears that the first line of defense is the age-old adage, "Don't invest more than you can afford to lose," with many investors, both institutional and retail, adhering to it.But, what happens when an investor does lose?
3/ In many cases, it appears to be plainly accepted, at least by retail investors, that the value of the initial investment is gone forever.
4/ Demographics show that the Web3 space is mostly made up of men between the ages of 18-41 (data via @MvmtStrategy), i.e. individuals who typically have no dependents and are just beginning or in the prime of their professional careers.
5/ These "degens" (myself included) who invest in NFTs are referred to as such for a reason ➡️ most understand the high risk of investing.
6/ But, what about institutional investors and whales?
7/ This is where fine art and specie insurance comes in. Specie insurance is a form of coverage that "is essentially about protecting high-value, portable items – such as precious metals, gems, securities, cash and even cryptocurrency." (via @AXA_XL)
8/ For further understanding, check out this article by @HUBInsurance on how specie insurance could help insure your digital assets:
Specie Insurance | HUB International
Specie insurance can offer coverage for specific parts of the crypto market — but there are major caveats. Learn more about specie insurance with HUB!
9/ Sadly, there's no public data available of the inner workings of the fine art and specie insurance industry; it's a very secretive space.
We'll have to see if a trickle-down effect will occur with the insurance polices and tech of whales to retail investors.
10/ In the meantime, the very beginnings of the NFT insurance ecosystem have been slowly kicking off in 2022.
11/ Below are a few Web3 & Web2 entities that have bravely started innovating:
12/ @IMAfinancial's Web3Labs is gunning for first-mover advantage and plans to start selling NFT insurance in @decentraland. It is unknown whether any policies, like "negotiating insurance cover for an NFT somebody is thinking of purchasing," have been sold through Web3Labs.
13/ @hartiofficial partnered with insurance group Mitsui Sumitomo to offer NFT insurance coverage only on NFTs shown in the HARTi app - premium costs will be covered by HARTi. Again, it is yet to be known whether any claims have been paid out via the program.
Pixpel has not yet launched; I'll be keeping an eye out to analyze their insurance policy development!
15/ The Future of NFT InsuranceThe value proposition that NFT insurance brings to the overall Web3 ecosystem is undeniable.
16/ All 3 products above were started in 2022 - it's clear that we're beginning to reach an inflection point on the necessity of NFT insurance in the Web3 workflow.
17/ In 2021, the U.S. insurance industry net premiums written totaled $1.4 trillion (data via @iiiorg), so it's only a matter of time before developers & innovators delve into the untapped potential of the NFT insurance market.
18/ NFT insurance development is crucial for mass adoption of NFTs since the average mainstream user is more risk averse than us degens.
19/ It's important to note that the traditional insurance industry doesn't tend to evolve swiftly and typically lags behind other industries in adopting the latest and greatest technologies.
Fine art and specie market – what are the key trends?
Between Omicron, NFTs and climate change – there's a lot to think about
20/ To summarize, the NFT insurance industry as a whole is shockingly underdeveloped & still in its infancy. NFT coverage is underinsured & limited amongst both Web2 and Web3 entities, but progress is slowly being made. Expect NFT insurance to blow up in the coming years.
21/ Join me in the coming weeks as I take a deep-dive into the broader Web3 insurance ecosystem and explore the possibilities and technologies of this largely unexplored space
22/ Will YOU be the one to develop Web3's first comprehensive NFT insurance protocol?
Do you work in the traditional insurance industry and want to learn more about NFTs?Have I missed anything? I'm keen to find out, my DMs are open to chat all things NFTs and insurance!