DeFi users are profiting from lower prices for DeFi insurance
$3 million covered in one month since Bright Union launched automatic wNXM arbitrage
In mid July, Bright Union announced that it has automated a process which allowed customers to get up to 75% discount for Nexus Mutual covers. Traction for decentralised insurance has been increasing rapidly, as businesses are now seeking protection as a hedge against catastrophic losses since the UST crash.
Industry leader Nexus Mutual has been leading the quest to provide DeFi insurance. The annual rate to cover digital assets was around 2.5%, making it still a burden for many DeFi funds to mitigate risk as it would decrease their bottom line. Applying automatic wNXM arbitrage lowered the price for decentralized insurance by ~75%, making coverage far more accessible.
DeFi investors can now get covered against hacks and protocol failures for <1% annual rate
Bright Union Sales Update
$2.88m in covers were sold over the past month for Bright Union, with over $2.83m for Nexus Mutual (with the remaining $50k for InsurAce).
DeFi users are able to perform wNXM arbitrage themselves and get this discount via the Nexus Mutual platform. However, they must perform a series of swaps of currencies.
Arbitraging the Nexus Mutual token economy clearly demonstrates that users will buy insurance against protocol failures when it is affordable and easy to purchase.
Those customers buying the covers were a combination of both retail and institutional clients. Increasing institutional adoption in DeFi seems like a never-ending discussion for retail investors in crypto. However, with the world’s largest asset manager, Blackrock, announcing their Bitcoin trust, we predict that this leader will cause other funds to follow suit. Of these most recent sales over 80% was institutional.
The most popular protocols covered were Convex, closely followed by Alchemix v2 both at less than 1% per annum for coverage. Overall, these customers saved ~$5k in total compared to if they bought directly through the Nexus Mutual app.
Crypto Markets Recovering
After the Luna UST de-peg crash market sentiment was down. Investors scrambled to secure their portfolio in whatever way they could. As protocols were falling like dominos, HODLing was safer than staking.
Over the past few weeks it feels as though the mood has changed. Since mid-June TVL of DeFI has been (very slowly) creeping up [$52bn june 19th > $66bn august 15th].
Bloomberg also notes an increased uptake in Decentralized insurance, but states that these traditional institutions are not currently fully equipped to provide insurance against DeFi native risks. In the Bright partnership network, it seems as though all platforms have noticed this increased uptake. With new platforms launching or preparing to launch (like Amulet protocol and InsureDAO), activity is increasing across the board.
DeFi hacks not stopped by bear market
Crypto investors are resilient to what feels like a continual barrage against them. If it isn’t hard enough to protect their portfolio against catastrophic market failures, they still have to contend with the billions of dollars lost in hacks. DeFi and Web3 have seen $2 billion lost in Q2, according to CertiK.
In this time period since mid-July, investors have faced over $205m lost from:
- August 10, 2022: Curve finance, $575k lost
- August 3, 2022: Solana wallets, $5.3M lost
- August 2, 2022: Nomad bridge, $190M lost
- July 29, 2022: Nirvana finance, $3.5 M lost
- July 25, 2022: Audius finance, $6M lost
The need for investors to buy coverage and for protocols to tighten their security is as present within DeFi as ever.
What does this traction mean for the wider crypto space?
Insurance, audit, and other security tools are necessities for bringing crypto into the next stage of maturity. Regulators have a duty to protect consumers. However, Bright Union believes that the space should have the opportunity to self-regulate with tools built upon the same foundation. With every cent put into insurance and other security protocols, the entire crypto space becomes more secure and more trustworthy.
“This significant uptake in covers demonstrates that investors want insurance, but that price and accessibility limit users from purchasing. Nexus Mutual has been a pioneer in DeFi and many other platforms have taken inspiration from their mutual model. However, as more platforms are launched, the space will become more competitive. Bright Union exists to allow users to compare, buy and manage their covers from a single point.”
Kiril Ivanov, Co-founder & Tech lead of Bright Union.
About Bright Union
Bright Union is the world-leading multi-chain decentralized finance cover marketplace. A platform to aggregate and match supply and demand, it also accelerates the industry by providing strongly needed insurance liquidity.
By aggregating & accelerating the entire web3.0 insurance landscape, Bright Union is uniquely placed to offer easy integration to any dApp, wallet, exchange or metaverse and provide their investors an extra layer of trust by offering the best insurance policies on point of need
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