A quick guide on how DeFi insurance works?
The alarming rise in crypto exchange hacks has highlighted the crucial need for DeFi insurance that has been lacking in the crypto world. Just as we purchase traditional insurance to protect our cars, homes, and even ourselves, DeFi insurance protects your crypto assets from possible worst-case scenarios.
If you have participated in this market since 2017, you can see that a number of exchanges have been hacked: Binance, Okex, Mtgox and many more. Moreover, hackers can attack Dapps like the DAO hack that rocked the Ethereum community in 2017 that led to the hard fork for ETH & ETC. All of the above has caused billions of dollars in damage to users and exchange platforms. Decentralized Insurance will minimize the risk in such scenarios.
But how does DeFi insurance work? Well, decentralized insurance consists of primarily of 3 parties
- Insurance Aggregators
Users or Buyers are parties who want to get their assets insured while the insurers are people who believe in DeFi-related systems or products. They spend money to insure others. When the buyer pays money to buy Insurance, this money will be divided among these insurers. Insurance protocols on the other hand help evaluate and issues insurance types and encode them in smart contracts in their system. These systems are usually DeFi applications in the insurance field, such as 3F mutual, UnoRe, Nexus Mutual, etc.
Insurance aggregators such as ourselves play the middlemen to connect users with insurance providers & to provide further liberty in decision making. At CoverCompared we prioritise user benefits and also offer the option to compare and customise various policies so that users remain in total control when it comes to policy purchase decisions. Purchasing our varied insurance products using our very own native token $CVR gives the added advantage of 25% to users.
DeFi insurance protocols are aiming to provide DeFi space participants with the solution they seek; insurance for crypto assets. Such protocols offer down-to-earth insurance coverage plans as they established deeply-rooted connections with their communities.
So in case say crypto exchange X gets hacked, having coverage would significantly reduce the level of risk imposed on crypto holders who might have wallets available on these exchanges.
Given the fact that there are a total of 83 DeFi exploits that have occurred, with lost funds amounting to a total of approximately $2.3 billion at the time of these exploits so far, DeFi insurance is a must for all participants of this exciting new realm.
Since DeFi takes its power from the community, insurance protocols have to maintain a level of trustworthiness. This is why such protocols are known to address the needs of DeFi space with high accuracy.
CoverCompared acts as an aggregator for DeFi insurance providers to access masses. Removing gas fees out of the picture, CoverCompered aims to help DeFi users stay protected in case of smart contract hacks which may result in permanent loss of funds. We are revolutionizing the DeFi space and taking insurance to the next level.
CoverCompared is the First DeFi insurance marketplace for the global crypto ecosystem. We aim to lower transactional and administrative costs of insurance policies and coverage while providing high-value, cost-effective insurance products bought using a host of cryptocurrencies.
Our platform will be connecting users with multinational insurance providers for all global insurance products such as crypto-related protection, health, life, and travel policies. The platform will include a frictionless insurance marketplace experience that incorporates next-generation blockchain technology and tokenized incentives.