DeFi Insurance or DeFi cover is the coverage to protect user funds across various DeFi protocols. With DeFi getting growing bigger than ever before, it has become an attractive exploit hunting ground for Black Hat hackers due to the sheer amount of money involved.
DeFi coverage providers are financial first responders that offer fundamental risk management for investors.
Unlike TradFi insurers no big buildings at the most expensive sites in the big cities and high streets are needed. No middle men, no shareholders that want as many claims denied as possible.
Most DeFi coverage providers are backed by underwriters. The underwriter takes care of the risk of a future event and reimburses a client by charging a premium, as and when needed.
In Armor Finance’s case, the underwriter happens to be Nexus Mutual, which is a mutual and therefore technically doesn’t offer insurance, but cover.
Nexus, in turn, has many underwriters: users that invest in the protocol. Claims are checked (and approved or denied) by Claims assessors.
If hacks occur and claims are approved, then they will lose part of their stakes. If no hacks occur, they earn yield.
Breaking everything down, the main players of the “traditional” DeFi insurance ecosystem are:
- Underwriters that provide capital to the pool of the covered protocol.
- Claims assessors and token holders are responsible for taking care of protocol governance.
- Decentralized brokerages who leverage proven underwriters to offer coverage.
- The end-users who actually buy coverage.
ease.org DeFi cover
ease.org has taken a giant leap in the evolution of DeFi cover by improving upon the above system. They created a new, different and much fairer system.
- There are no more underwriters, the deposited assets are the collateral, everyone is covering everyone.
- No more fees and premiums: if you covered your assets and no hacks have occurred in the vaults that are part of the ease ecosystem, then you can withdraw your funds and will have paid no premiums at all.
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