Every year, and especially in 2020, sums of money often in the hundreds of millions of dollars are stolen from various blockchain applications.
This is caused either by hacking, smart contract vulnerabilities, destabilization of an asset, or just a good old fashioned cryptocurrency rug pulls. Either way, solutions are needed to mitigate these losses.
With the birth of Decentralized Finance (DeFi), transactions are now possible that before would have required a third party. Enter decentralized insurance offerings.
Using smart contracts, DeFi developers can now create applications that insure users against potential hacks or vulnerabilities, seen as a critical technical step for the emerging field to mature.
Nexus Mutual Upgrade
Nexus Mutual, one of the first DeFi platforms offering limited insurance capabilities in the form of protection against smart contract vulnerabilities, has expanded its insurance product offerings.
The project will now cover both smart contract and centralized exchange (CEX) exploitations, an offering many of its competitors have also implemented or are trying to implement.
With the Total Value Locked (TVL) in DeFi reaching all-time highs of close to $25 billion, it’s more important than ever to have insurance protecting these experimental transactions.
TVL has had a massive increase from less than $700 million in late 2019. In decentralized applications, there is usually no single body that can step in to mediate. With a market cap of only $200 million, there is still a lot of room for growth in this sector.
The Beginning of Decentralized Insurance Offerings
Since DeFi didn’t really start to take off until 2020, insurance platforms were slow to appear. With decentralized exchanges (DEX) like Uniswap or decentralized loan platforms like Compound, this is the first time large sums of money have been actively locked within these applications.
This has spurred the rise of decentralized, peer-to-peer insurance offerings. Some offerings provide more coverage than Nexus and are looking to find a niche.
Staking via Nexus Mutual is now live for Binance, Coinbase, Gemini, and Kraken. As DeFi continues to grow in complexity, users will need innovative product offerings that protect against crypto disasters.