Why Protocol Insurance?
Insurance projects and protocols in the DeFi industry focus on one insurance market segment - retail insurance. Retail insurance has many drawbacks such as inefficient capital allocation and low liquidity. For a rapidly expanding industry, we believe DeFi requires a more encompassing insurance product covering every participant in the market. Our focus on protocol insurance covers not only the protocol but also users of the protocol. Insurance in DeFi is typically limited to retail investors who can buy one specific policy for one specific event. This type of coverage works for individuals but fails to properly scale due to drawback such as inefficient capital allocation and low liquidity (i.e. not enough money for payouts if something bad happens). For a rapidly expanding industry, we believe DeFi requires an all-encompassing insurance product covering every participant in the market. Our focus on protocol insurance achieves full insurance coverage of both users and the protocols.
High-profile DeFi exploits continue to increase on an almost weekly basis. Several key issues require addressing as DeFi continues to grow exponentially. Problems such:
  • Low liquidity assurances and capital inefficiency
  • Lack of a proper risk management framework due to data limitations
  • Poor risk assessment provisions and inefficient claims processing.
  • Asset volatility
  • Systemic failures creating loopholes for cybercriminals
  • On-chain vulnerabilities
The lack of a safety net further exacerbates the situation and the minimal amount of TVL currently insured.
Last modified 2mo ago
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