Decentralized finance (DeFi) is more than simply lending and borrowing. While platforms such as Maker (MKR) and Compound (COMP) account for the lion’s share of overall value locked (TVL) in the entire DeFi ecosystem, decentralized insurance networks are also increasing their presence.
According to Cryptonews.com, The biggest platform in this sub-sector, Nexus Mutual, surged from USD 4m in its own TVL in July to almost USD 90m in September. It currently offers pooled insurance cover for smart contract and wallet failures, but it’s planning to move into more everyday insurance in the future.
This trajectory applies to much of the DeFi insurance sector, which might expand into conventional insurance products over the coming months, albeit with the distinction of providing cover in a decentralized, crowd-sourced way. And according to industry insiders speaking to Cryptonews.com, it will be aided in this by the emergence of oracle networks, as well as by the general adoption of cryptoassets.
In its Q3 2020 market report, CoinGecko noted that decentralized insurance products have grown in step with the growth of the overall DeFi market.
The reason why strong growth has been seen by such networks as Nexus Mutual is that they provide a source of regular income for cryptoasset holders. They provide these holders with a share of insurance premium fees by inviting holders to pool their Ethereum (ETH). Much the same goes for most of the other leasing insurance platforms in the DeFi space, with Etherisc’s Christoph Mussenbrock telling Cryptonews.com that its platform works much like traditional insurance, except for two main distinctions.