What role can DeFi insurance protocols play in mitigating existing vulnerabilities in decentralized platforms?
Decentralized finance (DeFi) brings a vast realm of opportunities to the table, but these often get eclipsed by the inherent risks tied to crypto markets and decentralized platforms. With a scarcity of trustworthy insurance options, users risk losing their investments due to hacks or exploits, an occurrence that is becoming more common with the expansion of the DeFi ecosystem.
The DeFi sector’s rapid growth often leads to rushed security measures and insufficient audits of smart contracts, creating weak spots in decentralized platforms. According to CoinGecko, a data aggregator, more than $2.8 billion in cryptocurrency was stolen in various malicious attacks on DeFi platforms last year. Compared to the $0.3 billion in total value locked (TVL) in DeFi insurance, it’s apparent that DeFi insurance needs to scale up.
For the crypto space to flourish and DeFi to realize its full potential, it’s crucial to address users’ concerns about potential loss of funds due to hacking or exploitation. It becomes important for decentralized exchanges, decentralized applications (DApps), centralized finance (CeFi), and metaverse projects to adopt reliable methods to safeguard users’ assets against potential attacks.
As an embodiment of decentralization ideals, the DeFi ecosystem has devised its solution – Neptune Mutual. In the following interview, Binod Nirvan, the CEO and co-founder of Neptune Mutual, delves deeper into how DeFi insurance protocols can augment security within the industry.
When asked about himself and Neptune Mutual, Binod Nirvan stated: “I am the CEO and co-founder of Neptune Mutual, a DeFi insurance protocol that allows CeFi, DeFi, and metaverse projects to create cover pools to shield their communities from smart contract and custody risks. We focus on incident-based covers for swift resolution and payouts, not individual loss claims. Starting June 14, our protocol will necessitate policyholders and liquidity providers to hold and stake our native NPM tokens. To facilitate this, we’ve listed the NPM token on both Sushiswap on Arbitrum and Uniswap on Ethereum, and we’ve opted for a decentralized exchange listing instead of a public sale, IDO, or IEO, to let users get the tokens they need for our cover marketplace.”
When asked about other necessary measures to enhance the security and resilience of DeFi protocols in addition to smart contract audits, he said: “Neptune Mutual insurance pools help projects strengthen their resilience. Trust is crucial to the success of DeFi, which may seem ironic given the trustless nature of the DeFi model. Apart from preventative measures like rigorous cyber/blockchain security implementations and audits, it’s important to have mitigation measures such as cover protection to restore trust in case of an incident.”
Regarding the integration of insurance protocols within the DeFi ecosystem and their contribution to overall interoperability and risk management across multiple platforms, he commented: “Anywhere there are digital assets and risks, DeFi insurance protocols have a role in safeguarding the community. There is no other DeFi sector that exhibits such a potent growth dynamic. The scalable nature of parametric covers, in combination with our growth initiatives that align incentives with increasing cover capacity, such as the vote escrow token and liquidity gauge pool, lays a robust foundation for the much-needed expansion of DeFi insurance.”
On the benefits of Vote Escrow and the Liquidity Gauge pool, he added: “Vote Escrow bestows holders with amplified voting power, enabling them to influence decisions about the future distribution of NPM emissions in specific cover pools. It empowers users who are liquidity providers and allows them to guide the strategic direction of the project. Furthermore, veNPM holders are eligible for boosted NPM rewards due to the Liquidity Gauge pool. This means they receive a larger portion of NPM token emissions compared to regular LPs, thereby incentivizing long-term engagement and enhancement of the protocol’s stability.”
When asked about Neptune Mutual’s plan to launch an NFT marketplace and its potential benefits to the crypto community, he stated: “We are initiating one of the largest NFT reward programs for two main reasons. First, we’re using NFTs as an engaging way to disseminate crucial information about risks and how to circumvent them — we invite interested parties to join the waitlist to receive our NFT magazine profiling the NFT characters and their stories. Second, we’re rewarding our loyal Neptunite community members with NFTs when they buy insurance coverage and contribute liquidity. We’re not selling any NFTs, rather giving them away for free.”
In a nutshell, just as the sea is fraught with treasures and dangers, so too is the blockchain world, which carries valuable digital assets alongside potential risks from hackers. Neptune Mutual aims to bring about a significant shift in the adoption of DeFi insurance, represented by characters such as Neptune, Salacia, the Guardians, and the beasts.
For more information on when these features will be launched, please visit our website for the latest updates and make sure to follow us on Twitter. Don’t forget to use the promo code “CT020623” when purchasing your first policy to receive a full rebate on protocol fees for any cover pool.