There is no denying that over the course of the last year and a half, the decentralized finance (DeFi) sector has really blossomed and come into its own, something that is made evident by the fact that since the start of 2020, the total value locked (TVL) within this space has risen from a decent $680 million to an insane $54 billion
That being said, it bears mentioning that while this yet nascent industry has immense financial potential, it also comes replete with its share of risks. For example, last year, it was reported that a total of $120+ million was stolen as a result of various DeFi-based rug pulls, exit scams, etc. Not only that, just a few months ago, three DeFi platforms saw $22 million being wiped out from their coffers within a matter of hours, thereby showcasing the vulnerable side of this burgeoning industry.
In this article, we will look to list out some of the best DeFi insurance protocols that can help users gain coverage against various black swan events such as wallet hacks, smart contract exploits, and so on. So without any further ado, let’s get straight into the heart of the matter.
With cases of DeFi hacks becoming increasingly more common recently, a growing number of crypto users are beginning to realize the importance of protecting themselves from these latest threats. In this regard, InsurAce.io does exactly this, providing users with seamless access to a host of crypto-centric insurance services in a reliable, robust and secure fashion.
To help maximize consumer confidence, the platform has been made to undergo several thorough audits by PeckShield, one of the world’s leading blockchain security firms. If that wasn’t enough, InsurAce.io offers a range of “no premium” deals all while delivering sustainable returns to its users.
2. Nexus Mutual
Nexus Mutual harnesses the power of the Ethereum blockchain as a means of completely decentralizing the way in which individuals file for their insurance claims. As a result, the firm is able to completely flip the narrative in regard to how most traditional insurance firms operate. Furthermore, it should be pointed out that all of Nexus’ internal operations are driven by its community of backers, depending upon the number of NXM tokens held by them.
Lastly, at press time, Nexus Mutual only offers coverage on exploits caused as a result of code vulnerabilities and not issues related to exchange hacks and phishing attacks.
3. Unslashed Finance
After the Eminance.finance debacle last year that saw nefarious attackers make their way with $15 million worth of customer money, projects like Unslashed Finance have started to gain an immense amount of market traction.
From an operational standpoint, Unslashed Finance tokenizes its coverage for DeFi participants as well as utilizes the concept of “money streaming” — basically allowing users to repay their premiums in a manner that is extremely user-friendly and flexible. In terms of what’s on offer, Unslashed Finance currently provides coverage for a wide array of potential financial mishaps ranging from smart contract hacks to oracle failures to unforeseen validator issues.
4. iTrust Finance
iTrust Finance is an all-encompassing risk mitigation suite that helps streamline not only the process of participating in the global DeFi market but also the risks associated with the projects within this space. In this regard, the platform has recently partnered with a number of today’s major insurance projects — including the above-mentioned Nexus Mutual — and has its helm, leading industry personnel including Aave’s Alex Bertomeu-Gilles.
5. Cover Protocol
As highlighted earlier, in recent months an increasing number of DeFi platforms have made their way into the market, with Cover Protocol being one of them. In its most basic sense, Cover can be thought of as a peer-to-peer insurance offering that has been designed to help users protect themselves from several pertinent risks like hacks, bug exploits, etc that can potentially lead to substantial monetary losses. The protocol’s backing community includes the likes of Sam Bankman Fried, renowned analyst Julien Bouteloup, amongst others.
It is a well-known fact that yields emanating from conventional savings accounts are minuscule when compared to the returns offered by most DeFi platforms in the market today. Thus, it stands to reason that as we move into an increasingly digitized future, the use of such protocols will only continue to grow — in turn spurring the demand for more DeFi insurance platforms.