Ethereum Co-Creator Hints at an Overlooked Sector of Crypto: Insurance DAOs

• Vitalik Buterin believes that insurance DAOs are quite “underrated.”
• Buterin added that a decentralized insurance system is symmetrical.
• The Ethereum co-creator said that insurance DAOs will ensure “less imbalance of incentives.”

Vitalik Buterin, the co-creator of Ethereum, weighed in on the potential of blockchain technology to the modern insurance industry. He stated how much insurance DAOs were “underrated” hinting the sector had immense potential.

Modern insurance is generally not symmetric. Consumers pay a fixed premium, and the company shareholders get more if they deny more claims and less if they accept more claims. Two classes of participants.

The Problem with Traditional Insurance

DAO cartographer @owocki took to social media platform X (formerly Twitter) to declare that “insurance is the biggest scam in modern finance.” He urged the digital asset community to build a “transparent/fair crypto-based insurance,” pointing out that insurance companies often keep the money that policyholders pay and then find “arbitrary and capricious reasons” to deny claims. In response, Buterin replied, “Insurance DAOs are underrated.”

Insurance DAOs are decentralized entities that provide protection from market volatility or events like the FTX bankruptcy and work to ensure the long-term health of the digital asset and Web3 space.

The Ethereum co-founder suggested that if some crypto investors pool their resources and support each other, a decentralized insurance-focused DAO could be quite successful. Buterin added that a blockchain-based insurance system would offer “less imbalance of incentives,” unlike the traditional insurance system dominated by giant centralized firms. He elaborated:

“The DAO can still hire specialized claims judges if it wants, but their incentive is to be fair, because each participant doesnt know whether or not next time they will be the recipient.”

The crypto entrepreneur further emphasized that insurance DAOs built on these principles have existed and continue to exist, and offer symmetry, unlike traditional insurance firms where customers pay a fixed premium and the shareholders profit more if they deny more claims.