Blockchain’s maturity is evident in its use cases. Many industries are opting to employ blockchain as means of improving their services and output. One such application is blockchain insurance solutions. As cryptocurrencies become increasingly important and prevalent, insurance becomes a necessity. Expanding values of crypto attract fraudulent market participants who target weak platforms. Theft, hacks, and other exploits are unsurprising events. Shockingly, very few platforms have blockchain cover to protect their assets, which raises the question: Why is crypto underutilizing blockchain cover?
Five common risks solvable through blockchain cover
Cryptocurrencies are volatile commodities. Their dynamic valuation exposes them to risk events, leading to losses. In 2020, TechCrunch reported crypto markets lost over $10M daily through theft and other unscrupulous methods. Blockchain cover significantly reduces protocol losses by protecting against the common risks most often associated with crypto:
Smart Contract Risk
Smart contracts require rigorous testing and adequate control to mitigate any potential risk. Any point of vulnerability exposes an entire ecosystem to exploits. Over$500M was stolen in 2017 due to poorly written smart contracts, and a 2019 report highlighted potential vulnerabilities in Ethereum protocols, stating an additional USD $4m was at risk. Based on some recent hacks (like Polynetwork’s worth $600m), tit’s probably fair to say that number was a bit on the conservative side,
With blockchain cover, users and protocols receive smart contract protection. Smart contract cover offers protection against smart contract vulnerabilities. Ethereum insurance cover providers can compensate for any losses following smart contract exploits.
Creating a working protocol is a complex feat. Meticulous planning and execution are paramount. Unfortunately, protocols suffer from poor designs or unforeseen flaws, allowing for easy exploitation by hackers. Users of these protocols can suffer widespread losses if they’re inherently flawed.
Blockchain cover protects users from undetected imperfections in protocols. It compensates users upon the occurrence of any protocol-related risk factors. Confidence is increased among investors to invest in protocols with greater security.
Oracles are data feeds from external systems providing information into blockchains necessary for smart contracts to execute under specific conditions. Hackers can compromise these data channels to influence outcomes in smart contracts, which potentially leads to losses.Protection against oracle risk is pivotal as blockchain systems continue to expand into practical and real-world use cases. Blockchain cover prevents losses arising from oracle exploits
Hackers use different methods such as phishing, malware, and compromising SMS verification to access a wallet’s private key. Once in possession, hackers drain wallets unbeknownst to the wallet owner. Blockchain cover protects wallet owners by providing compensation against wallet hacks.
Flash Loan Exploits
Flash loan attacks are a type of DeFi attack where an exploiter takes out a flash loan from a lending protocol and uses it in conjunction with other factors to manipulate markets in their favor. These attacks occur in seconds and can involve four or more DeFi protocols.
Such smart contract risks require comprehensive insurance cover to protect all affected parties. Steady State is working on pragmatic insurance coverage solutions to negate the damage of flash loan exploits. Blockchain cover negates the possibility of protocols collapsing following detrimental effects of risk events.
What advantages can blockchain cover bring to the industry?
Credibility. Blockchain innovation in insurance provides a single source of truth via its tamper-proof, decentralized, transparent, and resistant nature. Blockchain cover will normalize confidence in crypto market operations.
Blockchain cover encourages a greater pool of investors. Without blockchain cover, any risk event would disrupt blockchain platform operations, whereby compensation from insurance secures protocols from catastrophic events. Exchanges remain liquid, protocols have operational crypto, and users retain their portfolios despite risk events. Subsequently, investor confidence in crypto markets increases. This materializes in bolder, riskier investments.
Successful execution of blockchain cover will disrupt the traditional insurance and cause a market shift to decentralized insurance protocols. Therefore, blockchain cover advances decentralized insurance adoption by disrupting legacy institutions.
Which protocols offer blockchain cover?
Steady State is a comprehensive DeFi insurance solution protecting users, securing platforms, and reshaping thoughts on risk and reward. We define our insurance products using deep, quantitative data analysis and complex risk modeling delivered through automated smart contracts, supported by a governance DAO and a fully liquid secondary market.
Our combination of coverage pools, index pools, and an automated network delivers comprehensive blockchain cover unlike any other. We create an avenue for users to cover protocols directly in return for insurance coins (native coins of the protocol covered). Our platform has integrated with Chainlink Keepers to obtain accurate data.
Nexus Mutual is an insurance provider offering users protection or cover of their DeFi activities. Nexus Mutual tackles smart contract vulnerability. Its Smart Contract Cover provides users with cover against losses similar to those experienced during the 2016 DAO hack.
Bridge Mutual is a decentralized, discretionary p2p/p2b insurance platform that provides coverage for stablecoins, centralized exchanges, and smart contracts.
Frequently Asked Questions
Will blockchain cover disrupt traditional insurance?
Advantages from blockchain cover will help disrupt traditional insurance by reducing friction in business processes. Easy data reconciliation and improved transparency attract more users to blockchain cover and provide comparable alternatives to legacy market institutions.
How does blockchain cover benefit the industry?
Growth and maturity. Blockchain cover attracts investors by providing a safety net against risk events. It protects against losses common after risk events.
Can I get blockchain cover for Bitcoin?
Blockchain insurance cover for Bitcoin is available through decentralized options. Cryptocurrencies are not legal tender; thus, there’s no FDIC cryptocurrency or FDIC insured crypto exchanges. You can obtain Bitcoin insurance from trusted blockchain insurance applications such as Steady State, Cover Protocol, and Nexus Mutual.
What makes a suitable blockchain cover protocol?
Blockchain users have diverse needs requiring tailor-made solutions. Offering elaborate, reliable, and diverse insurance options to satisfy consumer needs make a suitable blockchain cover protocol.
What insurance companies are using Blockchain technology?
Fidentiax, a blockchain market for trading insurance policies, launched its product for insurance policies in 2018.
Lemonade combines blockchain with artificial intelligence to offer insurance at low prices.Etherisc, an insurtech company using blockchain’s validation and user transparency to automate its claims process.
About Steady State
Steady State gives DeFi protocols and platforms a practical solution to safeguard their financial future. With the help of Chainlink Keeper technology, our platform aims to eliminate bottlenecks in DeFi insurance by using automated processes, shared coverage policies, and a cutting-edge risk analysis database. Steady State is creating a new paradigm for decentralized insurance by delivering DeFi’s best-ever insurance platform for protocols.
To learn more about Steady State and the impact of our pragmatic approach to Defi insurance, visit us at the links below:
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