In August 2021, hackers attacked a popular decentralized finance protocol Poly Network and stole over $600 million worth of assets only to return them later. Although no damage was caused, it left the DeFi community grasping for breath. The safety of assets in a decentralized framework was always debated, and this cyber attack only proved how the pseudonymity, immutability, and trustlessness of DeFi could be exploited for the wrong reasons. Hacks like these have cost the crypto community over a billion dollars in 2021.
On one side, DeFi protocols are skyrocketing in value and the total volume locked on different chains has crossed $200 billion. On the other hand, these cyber attacks are causing distrust toward DeFi, hindering the true growth of this space. In a risky sector like this, it is obligatory to have a mechanism that safeguards user assets against threats like these so that investors and businesses would be able to safely navigate the space. This is exactly why we’re seeing the emergence of decentralized insurance protocols with Bright Union leading the way.
What is Decentralized Insurance?
Decentralized coverage (crypto’s alternative to insurance) is as simple as it sounds. It is an insurance cover for assets in the decentralized finance framework. Protocols issuing decentralized insurance leverage the power of blockchain technology to cover for cyberattacks, smart contract exploits, and crypto wallet hacks, and any other black swan events that could occur. But mind you, this is not about big firms trying to make big bucks out of people’s vulnerabilities.
Decentralized insurance is where the community of users cover each other to ensure that it is the user who gets the ultimate profit. The main idea is to make the DeFi space safer for businesses and investors in an effort to earn the trust of the community and propel the growth of the industry.
The potential with decentralized insurance is practically endless. Over 96% of the crypto assets are still uninsured, creating opportunities for businesses to earn by providing cover for a growing community. In recent years we’ve seen the emergence of quite a few protocols offering cover for everything DeFi. But a protocol that seems to have a huge potential to transform the DeFi space is Bright Union.
The Insurance Aggregator for a Growing DeFi Ecosystem
Bright Union is a decentralized insurance aggregator protocol that brings together the best risk coverage providers in the DeFi space onto a single platform where users can compare, buy, and sell insurance. A protocol like this is important because it makes insurance accessible to everyone in the DeFi space and reduces the heinous process of going from platform to platform in search of the best risk cover.
Bright Union has the widest range of covers available for its platform for over 150 different protocols. Along with coverage for protocol hacks and failure, Bright Union also features covers for stablecoin de-pegging, yield de-pegging, and custodian covers. It has a mechanism where suitable covers are recommended to investors based on their investment portfolio.
The platform has so far managed to partner with three of the top DeFi insurance providers – InsurAce, Bridge Mutual, and Nexus Mutual who sold 98% of the covers and have already paid $5 million in claims. Coverage costs for hacks on this platform typically start at 2.5% per year.
Making Risk Coverage Accessible and Affordable
Having already achieved significant success, Bright Union recently announced its multichain expansion to make risk covers accessible to the DeFi community and to provide users the choice to choose the blockchain network that is most feasible to them. It comes without saying that the Ethereum network is the most popular blockchain for DeFi accounting for over 69% of the TVL.
However, with the growth of Ethereum came problems like network congestion, resulting in high gas fees and making even the simplest of transactions unaffordable for some users. This is why users of Ethereum have recently set out in search of alternative affordable networks and in this context, the Polygon network and Binance Smart Chain have presented a fair case. Both of these networks are considered to be third-generation blockchain networks that provide high transaction speeds, almost no network congestion, and minimal gas fees.
To leverage the power of networks like these and to provide speed and affordability to its users, Bright Union and its partner protocols have taken the leap towards multichain coverage. To better understand this, consider this example.
Imagine a user who wants to cover his investment portfolio worth $50K. Buying a cover on Bright Union would typically cost them 2.5% of the insured value per year which translates to $1250 per year. If this transaction takes place over the Ethereum blockchain, the gas fees required would be so much that the cost of coverage could increase by nearly 30%. But, on the networks like BSC or Polygon where gas fees are minimal, users would not notice a significant spike in the cost of coverage.
This is why providing multichain coverage to users could be key to the adoption of decentralized insurance. Bright Union’s partner InsurAce has already launched this feature and sold over 75% of its active covers on Polygon and BSC. Even Bridge Mutual, another Bright Union partner, is actively making strides towards providing multichain coverage to users.
With numerous multi-chain options like these now becoming available to users, they can invest fearlessly in the DeFi while being assured that their assets are protected without costing them a bomb.
Decentralized Insurance for Mass Adoption
Decentralized Insurance is a pretty novel concept today with a vast majority of the industry oblivious to its existence. But, with the emergence of protocols like Bright Union, decentralized insurance as an option is now being looked into by investors in DeFi. Along with protecting user assets from attacks, decentralized insurance creates trust among users by mitigating which could draw them towards DeFi and aid mass adoption.
