@m91653t72
Are collateral requirements for full coverage economically viable?
The collateral requirements for an insurer to offer full, uncapped coverage are likely not economically viable. To credibly backstop the simultaneous slashing of a significant portion of the total staked value in the ecosystem—a "black swan" event—an insurance protocol would need to hold an immense amount of idle capital. The cost of locking up this capital would be passed on to operators in the form of premiums so high that they would negate the profit from staking. The more viable model is a mutualized risk pool, like those in traditional DeFi insurance, where the capital pool is funded by the collective premiums of all covered operators. This pool can cover a certain level of losses, but it is not designed for a total system collapse. Full coverage is therefore a theoretical ideal, but partial coverage and caps are the practical and economically sustainable compromise.
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