DIMCredits

In this article, we are going to explain the case of decentralized credit insurance in Web3 ecosystem and how it can boost it.

The role of credit insurance in current economy

Credit insurance acts as a significant actor to boost economic activity. Currently, about 90% of economic activity relies on some form of
credit, insurance or guarantee issued by financial institutions.

By being protected against non-payment events, sellers acts with confidence and sign contracts which derives in more products or services being done worldwide. This way, economic activity and money velocity increases.

The role of credit insurance is even more important during financial crises. In 2008, a credit crisis emerged, lack of trust arises and many economic actors chose to hoard cash and not to invest in new projects. But credit insurance services keep confidence in markets and serves the economy keeping it alive.

But it is not only the increase of economic activity that credit insurance provides. Playing with confidence in the market, prices for products and services also go down. We can think that the insurance fee increases the total amount to be paid for a product or service, but sellers would increase prices to cover contingency risks by a bigger amount than that insurance fee. This is because credit insurance institutions operate with high quality data and advanced analytics.

Credit insurance is critical in business sectors like transportation, manufacturing, energy, IT, natural resources and more.

Web3 and credit insurance

Web3 aims for a decentralized economy,where users can take part of organizations governance, trade, perform instant purchases or barrow tokens. But Web3 is missing the 90% of current economy by falling apart of credit insurance.

A decentralized credit insurance system is needed. It could bring big projects and integrate a big portion of the economy into it. And also could enhance current credit insurance by

1.- Giving users the choice to be a part of the insurance ecosystem.

2.- Providing a trusted and transparent data.

3.- Democratizing access to it.

4.- Empowering new kind of decentralized financial systems like mutual credit ones.

5.- Giving big quality services to all size of economic participants.

Conclusion

We want a society not driven just by asset bubbles, but driven by projects, innovation, and social evolution. Decentralized credit insurance and the DIMCredits project, designed for the Holochain framework, is the first stone for a big change.

References

Analysis of the sector published by the European Systemic Risk Board

Credit insurance and its role supporting world trade

DIMCredits whitepaper