What is DeFi Insurance?

Decentralized insurance services protect users from potential losses or problems.

Whatis Decentralized Insurance?

In traditional insurance, intermediaries prevail.These are mainly large companies such as GEICO, State Farm and Nationwide. These companies provide invaluable services to those who wish to insure their homes, cars, savings and even their lives. Insurance companies also play a vital role in the traditional insurance landscape.

Decentralized finance has createdthe need for new forms of insurance. Large cryptocurrency deposits can be stolen or devalued within minutes. Smart contracts may contain unexpected errors, rendering any funds they contain permanently unavailable. These risks require new forms of insurance.

In addition, players in decentralized insurancespace is provided by democratized versions of traditional insurance. They provide users with protection against adverse outcomes, without involving any large structure in between. Various incentives allow these decentralized insurance platforms to support themselves.

Today DeFi insurance is offeredseveral projects at once: Cover, Mutual, Etherisc, Opyn, which itself came under attack from hackers, and many others. The insurance mechanism is simple - users provide liquidity to cover damage in the event of an insured event, and they themselves receive interest for providing liquidity.

What is decentralized finance insured against and how to choose a project?

Most of the ones on the market todayinsurance projects offer a wide range of services, including insurance against protocol hacking, technical and other errors that can lead to loss of funds, bankruptcy of the issuer of tokens or stablecoins, and many others.

When choosing a project for insurance, expertsrecommend paying attention to the territorial coverage, services offered, insurance payments and the list of insured events, as well as the technical and legal features of the project.

Analytics company Xangle has presented a list of insurance projects that users may find interesting and useful.

We also advise you to read the material: What are the risks of investing in DeFi projects: software code, centralization, regulators.

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