– Insurance companies can help DeFi’s adoption and popularity by offering DeFi cover that protects assets from hacks and programming errors.
-68% of DeFi insurance claims have been filed and paid since June 2020, following the loss of the peg for Terra Luna’s algorithmic stablecoin.
– DeFi cover products operate on the same fundamental tenets as conventional insurance, allowing policyholders to pay a premium and receive a payout when they make a claim.
The DeFi industry has exploded in the past year, with the total assets in the DeFi ecosystem reaching over $47 billion. With this rapid growth has come the need to protect users and their assets from potential hacks and programming errors. Insurance companies are now stepping in to help DeFi’s adoption and popularity by offering DeFi cover.
DeFi cover, also known as blockchain-related insurance, operates on the same fundamental tenets as traditional insurance. Policyholders pay a premium and are paid out if and when they make a claim for an insured occurrence. These products differ from typical insurance in that they are tailored to blockchain-related issues.
An example of this was the loss of the peg for Terra Luna’s algorithmic stablecoin, TerraUSD, in June 2020, which resulted in a $40 billion loss. The consequences of this event rippled through the industry for the remainder of the year, and some would argue they are still being felt today. As a result, tens of millions of dollars worth of DeFi insurance claims were made in order to recover losses.
Fortunately, since June, about 68% of the claims have been filed and paid. This shows that the businesses selling DeFi cover are confident in their abilities and are likely to maintain their success. It is reassuring to know that users are being protected and that the DeFi ecosystem is becoming more secure.
Overall, insurance companies are essential in helping DeFi’s adoption and popularity. By offering DeFi cover, policyholders can pay a premium to receive a payout if and when they make a claim for an insured occurrence. This is a great way to ensure users are protected from potential losses and to help keep the DeFi ecosystem secure.