1/ We’re excited to announce at we’re live on mainnet at https://t.co/ohSqfHGcnf! For the first time you can protect your @compoundfinance deposits against both technical and financial risks at https://t.co/ohSqfHGcnf. https://t.co/6NPVOpryyl
— opyn (@opyn_) February 12, 2020
With Total Value Locked (TVL) recently reaching $1B, insurance is needed more than ever. The proliferation of DeFi has built new money protocols providing a new paradigm for financial products. However, it is becoming increasingly clear that many of these platforms may present both known and unkown risks to its users.
As outlined in “The Inevitable DeFi Hack”, a DAO-like black swan event is largely unavoidable. As DeFi protocols continue to accumulate more and more value is locked within them – so does the incentive to steal it.
With that, Opyn is launching its new permissionless insurance layer for DeFi – starting with Compound – easily allowing users to purchase insurance on their deposits.
The insurance platform is built on a set of Ethereum smart contracts connected to Convexity Protocol – a generalized framework for fungible options tokens. Unlike other prominent insurance platforms like Nexus Mutual which leverage a bonding curve, Opyn is a two-side marketplace leveraging Convexity’s oTokens.
This is an interesting development as Opyn is one of the first insurance platforms to offer protection over technical AND financial risks whereas Nexus Mutual largely covers solely technical risks. Moreover, Opyn allows options writers to earn significant premiums by selling insurance covers directly to users – effectively allowing ETH holders to grow their ETH-based holdings in a relatively passive manner.
Ultimately, it looks like Nexus Mutual has a new competitor in the realm of decentralized insurance. Luckily, there’s plenty of room for multiple well-design insurance platforms since there’s no shortage of value locked as DeFi continues to grow at breakneck speeds.
Over the next few months, it will be interesting to see how these platforms garner usage from the broader DeFi community. While the insurance space is in its nascency, there’s a growing demand for it. Nexus Mutual recently surpassed $2M in total active covers as capacity for the capital pool continues to increase.
Regardless, insurance is a vital piece to the broader success of DeFi. Protection and insurance for users will play an important role in long-term sustainable growth in the space. With a diverse range of insurance products on the market, the aftermath of a black swan event can be mitigated.
For anyone interested in getting their Compound deposits insured by Opyn or earning premiums via writing options, feel free to visit their website to get started. To get involved in the Opyn community, you can join their Discord here.
Director at Fitzner Blockchain Consulting. Lucas also has experience working with multiple blockchain-based startups as head of community, blockchain strategist and project manager where he focused on token economics, writing, and marketing.