With the entry of institutional investors into DeFi, can it usher in the explosion of the insurance track?

With the rise of DeFi and the associated myth of rich wealth, risks also follow.

The total risk loss in the DeFi field is as much as $1 billion. Some losses may be due to the design of the agreement itself, but in addition, a large part of the risks are insurable.

In 2021, the DeFi business will continue to grow unless unexpected, which may indicate that DeFi insurance companies may explode.

DeFi business risks increase

The exponential growth of DeFi business is a normal phenomenon. After all, smart contracts avoid any third-party participation, and transaction costs also decrease. These all stimulate the growth of users.

Another point is also very important, and that is the scalability of DeFi-which means that it can be easily transformed into endless scenarios and applications.

But it is worth noting that the more assets of the DeFi ecosystem, the greater the risk of exposure.

Some time ago, hackers used Polygon ‘s vulnerabilities to steal more than $600 million in assets, which can be called the largest DeFi hack in history.

Polygon is not the first network to be attacked by hackers. Hackers can use the same method to steal assets from other platforms:

· Yearn Finance Flash Loan-Loss of 11 million US dollars.

· Alpha Homora Iron Bank-Loss of 37 million US dollars.

· Meerkat Finance-13 million U.S. dollars BUSD and 73,000 BNB

Top 5 DeFi hacking events (from February 2020 to July 2021): $FARM, $SPARTA, $ALPHA, $BUNNY, $URA.

But DeFi insurance agreements can take emergency measures to protect personal deposits and avoid the destructive effects of exploiting loopholes.

DeFi ecosystem needs to be improved

When DeFi emerges and thrives, we must also ensure long-term stability and reconcile our expectations for DeFi.

With its disruptive solutions, DeFi has continuously penetrated into the mainstream financial market, but DeFi must also continue to grow, and at least it should have a complete ecological structure-such as insurance.

DeFi should continue to innovate and iterate like the mobile phone and automobile industries to ensure that the technology can meet actual needs.

DeFi insurance business is still in its infancy

Insurance has always been one of the important means of hedging risks, but the data pointed out that the amount of insured by investors for DeFi project assets is only 2% of TVL.

Considering DeFi’s market size of over 100 billion U.S. dollars, this value is insignificant and capital allocation is inefficient.

With the entry of institutional investors into DeFi, can it usher in the explosion of the insurance track?

Overall TVL by DeFi Category

What’s more, the scale of DeFi is far from reaching its peak, so the current TVL only reflects the tip of the iceberg of the potential market.

In addition to benefiting policyholders, the DeFi insurance business is also ensuring the steady development of the entire industry.

Traditional financial need replacement products

People are more and more aware of the great value of data and privacy, so traditional financial institutions are facing users’ doubts.

Moreover, a large number of users cannot enjoy the services and products of traditional financial institutions, so the demand for alternatives to traditional financial institutions has also emerged. This demand has promoted the transformation of the financial market in the direction of decentralization.

DeFi insurance meets this demand very well. It does not have the inconveniences and limitations of modern insurance business, and the process is fair.

Reliable and accessible risk protection

If the DeFi industry wants to attract mainstream investors, it needs a strong risk protection plan to ensure the safety of user assets.

Especially considering that the number of institutional investors is growing significantly, the development of DeFi insurance business is particularly necessary.


The speed of DeFi development is not proportional to its ability to cope with this rapid growth. As the industry continues to expand, the increase in demand for DeFi insurance is inevitable.

In other words, DeFi insurance is just needed by the industry, so when will it really become a hot demand?

Author: Steady State

Translation: Henzel 


Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/with-the-entry-of-institutional-investors-into-defi-can-it-usher-in-the-explosion-of-the-insurance-track/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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