Decentralized insurance – Protecting your crypto from DeFi risks

I probably do not need to tell you that trading crypto is risky. When you buy crypto, the value can increase, but it can also decrease. So you always risk losing your bet. It’s part of crypto trading.

Yet you can also lose money in completely different ways within the crypto world. Think not only of scams and scams, but also a technical error. Such errors are quite common in DeFi.

Fortunately, more and more companies are looking for solutions to this type of error. Think, for example. on special DeFi insurances† These types of DeFi insurance are becoming more and more popular. Nexus MutualNSure network and lethed are a number of such insurances.

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The risk of DeFi

When using DeFi, there are a number of risks involved. DeFi is dependent on smart contracts† These are automated scripts running on blockchain. Such smart contracts handle or hold large amounts of cryptocurrencies in some cases.

The moment something goes wrong within a smart contract, no one can solve the problem† Everything is done fully automatically and registered directly on the blockchain. Transactions are irreversible, which means that an error cannot be reversed.

When using a DeFi protocol, you should always take into account money loss due to errors in a smart contract. And if you lose money, it’s obviously very sour. There is nothing you can do about it yourself other than not using the platform.

Fortunately, there are solutions to such risks† Several companies have devised a special insurance policy that can cover you against such losses.

What is DeFi Insurance?

DeFi insurance, or DeFi insurance, is an insurance that covers you against risks of DeFi. As you have just read, using a DeFi protocol is not entirely without risk or danger. There is always a chance that something will go wrong and you will lose your bet.

DeFi insurance also runs as dApp on blockchain. This way, it is possible to track hacks or errors on the blockchain. Some protocols have a built-in tool that can check for hacks and errors. This way, it is possible to determine exactly how much cryptocurrency you have lost.

Because such insurances run on the blockchain, there is no central party that can secure payment of damages† Instead, it is other people who take care of this. How exactly it works, and how it works, is of course different per DeFi insurance.

Nexus Mutual (NXM)

Nexus Mutual is an application running on the Ethereum (ETH) blockchainOne could see it as a decentralized insurance company† But unlike central insurance companies, the Nexus Mutual is non-profit. It is a mutual, which means that the company is owned by the policyholders. All profits will be shared between them.

By purchasing insurance from Nexus Mutual, you can protect yourself against errors in the DeFi application code† Suppose you lose money during a token exchange due to an error from UniSwap, Nexus Mutual will compensate for the damage.

How does Nexus Mutual work?

First, indicate on the Nexus Mutual website which protocol you want insurance for. You can choose from a wide range of DeFi applications, such as Aave, Balancer or UniSwap. Then you have to pay for the insurance and you will secure a security. All payments from policyholders are kept in a pool

You can report a claim the moment you have suffered damage. The network will then vote on the validity of the claim† Users who try to deceive will be severely punished: security will be taken. So it does not pay to try to cheat.

Fraud is impossible. All events are stored on the blockchain so you can always see what happened in the past. You can not change the history of blockchain as a loner. You have to own more than 51% of the network for it, which is technically impossible in many cases.

The moment you take out insurance and submit a valid claim, the protocol will cover the damage† The damage is covered from the pool. You will receive the amount in the form of NXM tokens sent to your wallet address. You can then convert tokens to other cryptocurrencies or to fiat currencies.

You can terminate the insurance at any time. In that case, you will receive the security you have wagered back to your wallet address.

Nexus Mutual Exchange Depot Coverage

You can also take out insurance with Nexus Mutual against loss of crypto when a wallet or purse is hacked† It is possible to file a claim as soon as you have lost more than 10% of your assets or you can no longer perform a transaction on the platform for more than 90 days.

It is possible to take out a Custody Insurance for Celsius, BlockFi, Nexo, inLock, Ledn, Hodlnaut, Coinbase, Kraken and Gemini.

NXM token

Nexus Mutual has its own NXM token. You can use the token to bet, to cover smart contracts. NXM has management functions, and as the owner of NXM tokens, you can also assess validity requirements.

How to use Nexus Mutual?

You can use Nexus Mutual by first navigating to the platform. You do this by clicking here. You will then need to attach your external cryptocurrency to be able to select a protocol and insurance package. Then go through the steps to take out insurance.

NSure network

NSure network is an open insurance platform for Open economy† Chances are it will not mean much to you. Maybe you ever like Lloyd’s London heard. This is a marketplace where insurance risks can be resold.

In such a marketplace, insurers can resell the policies† If you believe the risk of injury is low, you can purchase such insurance. You will then receive the premium paid by the policyholder, but you will also have to pay for any costs.

Insurance trading can be lucrative, but it is also very risky. It can cost you a lot of money if someone claims their insurance† You are legally obligated to cover the required amount when you are the buyer of the policy.

How does the NSure Network work?

NSure’s decentralized protocol allows anyone to take out insurance or cover risk for policyholders. As a capital provider, you can see on the platform what kind of insurance people would like. Then you can decide to bet NSURE tokens on any insurance application that looks attractive. Such an application may be attractive if you expect the risk to be small. You will receive daily rewards in the form of NSURE tokens when you cover someone’s risk.

Before you can do that, you need to make sure you have security. This way, the protocol knows for sure that you can cover any loss† Because if something goes wrong, you as a lender have to pay for the costs. In reality, the risk is thus transferred from the user to the lender. The lender can achieve a good return on the risk covered.

The costs you have to pay as a policyholder are determined by supply and demand† When a large number of people want to cover the policyholders’ risk, the policyholders pay a lower price. It also means that lenders get a lower reward.

NSURE token

NSure Network has an NSURE token. This token plays an important role in the protocol that you just read. In addition, NSURE also has a governance function, and owners can participate in decisions about the protocol’s organization and future. Of course, NSURE can also be used for price speculation.

How can you use NSure Network?

You can use the NSure Network by first navigating to the platform. You do this by clicking here. You will then need to attach your external crypto wallet (choice of Metamask or Wallet Connect) in order to select a protocol and insurance package. Then go through the steps to take out insurance.

lethed

Ease is a protocol where you can take out insurance against loss of money through DeFi protocols. This project was formerly called ArmorFi, but changed its name and branding in early 2022† Users can protect themselves from hacks, scams and withdrawals through Ease. According to Ease, this can be done in a way that easiersafer and more effective than many other insurance protocols do.

With other insurance protocols, you need to have one secure security† This security must match the value of the tokens you insure. The moment the collateral decreases in value or the covered tokens increase in value, you will have to take out a new insurance scheme.

This ensures that these types of applications can only be used by a small portion of crypto traders† You must have a large amount of money before you can insure yourself against the risks. Ease has a solution called uninsurance suspicious.

How does non-insurance work?

Covering DeFi damage makes it easy with uninsurance† Previously, this solution was called Armor Smart Cover. All assets covered by the ecosystem immediately serve as collateral† This means that participants do not have to provide extra security and everyone can participate in Ease.

There will always be enough security. The value of the covered assets is equal to the value of the total collateral. That way, Ease wants to be an insurance protocol that is as user-friendly as possible.

The moment a hack takes place, the victims’ assets are immediately liquidated to absorb the loss

You can participate in Unassurance without having to pay for the services. The assets of all participants serve directly as collateral, so there is no need to pay costs. You can cancel your insurance by removing your assets.

ARMOR token

The Ease ecosystem still uses the ARMOR token for control functions. In the future, ARMOR will be converted to the EASE token† It is not yet known when this will happen.

How can you use Ease?

You can use Ease by first navigating to the platform. You do this by clicking here. You will then need to attach your external cryptocurrency to be able to select a protocol and insurance package. Then go through the steps to take out insurance.

Conclusion

Using a DeFi protocol or platform is not without risk. There is always a chance to lose money. All DeFi products use smart contracts and something can go wrong. Because blockchain technology is irreversible and decentralized, errors cannot be repaired.

Fortunately, you can take out insurance against such risks with Nexus Mutual, NSure Network and Ease† With these types of protocols, you do not have to worry about risks, although it is important to be aware of the risks you run at all times.

After reading this article you will hopefully know more about what a DeFi insurance is and which you can use† Would you like to know more about DeFi insurance such as Nexus Mutual, NSure Network or Ease after reading this article? Then ask all your questions in our AllesAboutCrypto Facebook group and our experts will answer all your questions.

Do you have other crypto-related questions? The easiest way is to look up your question in our FAQ. You can also google your question + “AllesOverCrypto”. You will then quickly come to one of our other articles dealing with that topic so you can quickly learn more about that topic.

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