I was just looking at an article from zycrypto.com regarding a user on Badger DAO who had 900 BTC stolen in a DeFi hack. According to zycrypto.com, DeFi hacks are currently at an all-time high, with 73 Defi exploit incidents ($1.5 billion lost to hacks) listed on the DeFi tool Cryptosec.
According to the protocol InsurAce, as of last December (2020), the TVL (Total Value Locked) peaked in the DeFi space at around $16 billion. At that point, the % of TVL covered from existing insurance projects was no more than 2%, and often dipping much lower than 1%.
Currently, in December of 2021, zycrypto discusses that we are looking at a TVL of nearly $300 billion, which the TVL covered by Dencentralized insurance is somewhere in the vicinity of $1.6 billion. This may be off but I am still searching for good sources on the total current coverage.
Does anyone else feel the insuring of DeFi assets will see huge growth in the coming years? It seems incredibly underdeveloped recently, although some protocols are seeing increases in usage as of late. As more money joins and traditional finance adopts more DeFi practices, insurance seems like a glaringly necessary component, especially with Smart Contract usage coming into play more.
For example, InsurAce (a KYC-less Insurance protocol with a current coverage of $169 million assets) sells covers for particular crypto. Just for curiosity sake, I looked at the apparent premium needed to get a 90 day $5000 DAI coverage for a Loopring Smart Contract https://i.imgur.com/F7lvlIL.png. Seems like it would cost you $32 DAI to ensure $5000 of your LRC contract is covered, so long as it fits the below criteria.
- During the Cover Period, there is a Material Loss of insured’s crypto assets due to an unauthorized, malicious or criminal act aiming at exploiting the Designated smart contracts’ code vulnerabilities; and
- The loss of insured crypto assets is permanently irreversible with no means of repayment or recovery by any parties in the future. It can be in form of being moved to another address or addresses, which the insured cannot access or control permanently; and
- The loss is directly linked to the wallet address which the insured used to purchase the cover or the insured provides evidence to prove the ownership of the impacted wallet address.
Some areas of exclusion for current coverage are as follows:
- Assets lost are NFTs; or
- Any losses due to phishing, private key security breaches, malware, exchange transaction hacks or any other activities where the Designated smart contract continues to act as intended or any activities conducted by insured because of personal careless or misunderstanding; or Any claims due to individual or group’s intentional actions that utilize the Designated smart contract for the purpose of making claims on this Cover; or
- Any losses due to devaluation of insured's assets, regardless of such devaluation is related to the attack or not; or
- Any losses due to the owners or controllers of the covered protocol
confiscating or stealing funds from users in line with the permissions of the covered protocol; or - Any hacks or pre-defined insured events occurring outside of the Cover Period; or
- Any hacks or pre-defined insured events occurring during the Cover Period but the hack occurred or is known, or the hack is due to the bug being disclosed to the public, before the Cover Period; or
- Any events where any other external interoperable or interactive smart contracts, are hacked or manipulated in an unintended way, while the Designated smart contract continues to operate as intended; or
- Any events where inputs, that are external to the Designated smart
contract, behave or are manipulated in an unintended way, while the Designated smart contract continues to operate as intended, where inputs include but are not limited to: oracles, governance systems, incentive structures, miner behaviour and network congestion; or
Thoughts? Anyone have knowledge in this space or feel like there is a lot of potential here?
other projects:
Cover Protocol - a peer to peer coverage platform using fungible tokens that enables the market set projects' coverage prices
Nexus Mutual - a decentralized insurance platform where people can share risk particularly against smart contract bugs, failure or other black swan events
Nsure - an open insurance platform for open finance, in a marketplace model that enables risk outsourcing and underwriting
Union - an insurance platform that provides DeFi users with bundled protection with different layers of coverage and segregated underwriter exposure
https://zycrypto.com/this-bitcoiner-just-lost-900-btc-in-a-defi-attack/
InsurAce Whitepaper https://docs.insurace.io/landing-page/documentation-1/whitepaper
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