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Main Channel t.me/blockchain_lobsters
I also don't think that we need to reinvent the wheel. We could take the tradition model of insurance/reinsurance, decentralize the underwriting, pay high yield for high risk, and then we all have to price in the risk from the top of the funnel
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I'd be very interested to learn more! Can't really understand how a slashing-based model would work in a case like GMX, but sounds cool
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I don't think we are talking about the same type of "insurance" here. Yes, stETH is securing the network/base layer, but anything that is built on that foundation isn't covered by Ethereum stakers. I am talking about protocols that build on Ethereum/any chain. They should go through audits regularly, yes, but GMX's L1 was attacked (right?), which was audited many times in the last 3-4 years.
What I am talking about is the "oh shit" insurance that every smart protocol pays into, with a $1m deductible or something, yet backed by Web3 money instead of trad$ like Lloyd's.
Tbh, yes, it still sucks that we have these types of DeFi hacks in 2025, and it looks amateurish for institutions (look at L2 outflows). But, it's really not on the same scale as a CEX hack, which is now in the billions. CEXs have insurances in centralized ways. DEXs should have insurance in decentralized ways, inshallah
But why can't there be a skating/DeFi solution? If a $1b pool were somehow set up with hundreds of DEXs paying in monthly fees, we spread the risk and share the reward, just like every pool works
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Could be an option for small-scale projects, but doesn't seem like they could cover a $44m hack at a sustainable price point
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Insurance and reinsurance are huge financial markets, but the projects I know in our industry are looking to bring trad assets to Web3 via RWA mechanics (eg, hurricane insurance onchain). Maybe we should figure out how to insure ourselves first?
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The modeling done at the moment generally isn’t very sophisticated as there isn’t much data for underwriters to go off. The digital asset exposure generally sits under a traditional bigger line like cyber for crime. The underwriters then decide how much exposure they want to digital assets as part of that book. Prices are generally “market rate” i.e someone a while ago decided that should be the price and everyone goes along with it. Modeling is generally done from the perspective of fitting into the existing book and exposure to that.
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Ours are short dated dCDS like 1 month, 3 month or 6 month.
And it's more like an option on credit events.
And we ain't calculating survival probabilities like in those TradFi CDS instruments as we ain't modelling default probability. We are instead hedging the backing collateral assets that might make the loan default. The intention is to make hedging cheaper with dCDS. So, if a put option for a particular asset is selling at like $200, with dCDS someone can hedge the same asset for like $80
To give an idea, The last month yields for dCDS users were ~ 20%
How can you do dCDS without 3 as the survival probability curve is entirely reliant on a forward curve
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IPOR Fusion has everything you need ser, it's built specifically for this usecase and is much more secure and less laborious than trying to operate an onchain fund from an MPC wallet
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No, licensing is a tool used by those in power to build an artificial, government enforced moat that raises the cost to entry above what any new entrant could reasonably afford
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They didn’t compare them. They just compared a technical detail in the implementation of their yield wrapper. That’s very different from talking about them as if they’re similar projects as you did.
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its defi, what makes you say that? the underwriting is decentralized
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coming back to this…
what if instead of spraying bullshit incentives we paid the premium
What if because of our business line we can get cheap premiums as well.
Would fully insured DeFi be attractive at no extra cost? Or does that somehow end up centralised and anti-defi ethos?
The link to staked eth is that I heard Eigenlayer was exploring a slashing based model for protocol insurance. Maybe someone knows more
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I mean technically that’s what staked ETH is right? It’s insurance against protocol downtime such that everyone who holds ETH sees deflation from the slashing event which is effectively an insurance payout
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The model I think is probably best is where nexus sit as the excess insurance and cover the first $1-5m loss to cheapen premiums but I think you can’t really get the tower into scale unless you look at lloyds market
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Yeah, again, I didn't want to shill, but Nexus is leading the way. That being said, $5.75B protected is kinda a drop in the ocean these days
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https://nexusmutual.io/ are the leaders for decentralized cover
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I think this whole discussion is a bit silly. We, as Web3 peeps, want to get insured by Lloyds? Idk which projects to shill, but there must be some Web3, decentralized model for insurance, right?
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We’ve been working with Lloyds of London over the past few months, working on helping insurers get more comfortable entering the crypto market. We’re starting to get there but insurers move slowly.
Some things we’ve learned: insurers are writing crime policies but they are mostly working with exchanges and custodians, covering wallets against theft, hacks or internal collusion. Cost generally ranges 1-5% annually for hot wallet insurance and capacity is usually limited to max 100-120m per policy. If you see bigger limits marketed, they probably have purchased specie insurance instead/also. Getting underwriters comfortable insuring protocols or smart contracts is going to take more time.
The closest I’ve seen for traditional underwriters touching anything onchain is through Chainproof (www.chainproof.co)
who work with Munich Re and Sompo (both big underwriters in Lloyds). Not sure what the traction has been like with it.
If anyone wants to chat more about crypto insurance or Lloyds, feel free to dm me, happy to help.
Someone should sell compliance insurance to allow everyone to just do business normally, and insurance pays out if you accidentally do business with the Norks
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The main issues in defi (in order imo)
1. Hack Insurance
2. Compliance (ik boring but not for us, for big money)
3. Liquid Forward/swap curve
4. Non USD ccys (xccy basis is unarbitragable)
Actually, I have a dCDS product only but we ain't hedging for hacks and currently mainly lending defaults and crypto price decreases.
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Most regulations are codified cronyism and have no place in dynamic industries.
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