Why does the DeFi space still remain vulnerable to safety risks?

3 min readMay 11, 2022


Despite the various safety regulations in place, the DeFi space still remains very vulnerable to exploits as was witnessed from the multiple hacks that occurred this past month alone. But why is safety the primary concern within the DeFi space?

In order to avoid government regulations, many cryptocurrency projects are set up in countries where law enforcement agencies are unable to deal with transnational hackers. If they are hacked, they are less likely to call for government assistance on ideological grounds.

A finance professor at the University of Texas at Austin, John Griffin, warns, “DeFi has risks, and in particular could malfunction in ways that we can’t predict. That could lead to financial fragility in ways we also don’t expect.”

While it may be a boon in terms of passing traditional financial institutions, DeFi has its own challenges in terms of safety. Although all transactions are recorded on the blockchain, bugs and errors in the smart contract code could lead to accidents when dealing with financial data. Other risks include phishing, rug pulls and honeypot scams.

The fact that there is a limited regulatory framework is only one of the many reasons why safety is still in question within the DeFi space. Often hacks can be contributed to human error as smart contract codes could possibly have flaws that can be leveraged by third parties.

Although the risk in safety within the DeFi space looms largely over users, we at CoverCompared have found the perfect solution to combat this issue.


Just as we insure traditional assets that could potentially cost us billions in case of an unprecedented event, cryptocurrencies should be viewed from the same lens. We have no control over the bad actors that could affect the same which would then adversely affect our crypto assets but we can be cautious & insure them accordingly.

Through our wide portfolio of various crypto insurance products (crypto exchange covers & smart contract covers) that support over 10+ chains, you can get assurance on the safety of your crypto funds even in the unlikely event of a hack/exploit.

What’s more? We offer gasless transactions that allow for purchases without imposing any gas fees & at a discount of 25% when purchasing with our native token $CVR.

About CoverCompared

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.

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The First DeFi Insurance marketplace for the global crypto ecosystem