OpenCover Releases First Industry Report on the State of DeFi Insurance Alternatives

LONDON, April 19, 2023 (Newswire.com) - OpenCover, the leading provider of data on decentralized finance (DeFi) insurance alternatives, has released the industry's first comprehensive report. The report provides an overview of the industry players, current approaches to mitigate technical and economic risks in the DeFi ecosystem as well as industry statistics such as the amount of underwriting capital, claims and payouts.

The report highlights the emergence of self-custody and DeFi as the ultimate solution for a safer digital asset ecosystem while underlining that security remains a fundamental bottleneck to adoption, with a record $3 billion lost to DeFi exploits last year.

DeFi insurance alternatives, commonly referred to as DeFi cover, is a rapidly emerging industry with a variety of approaches to risk management (e.g. mutualization and parametric insurance), governance (e.g. Decentralized Autonomous Organizations, private regulated companies) and claim assessment (oracle-based triggers and community-based governance).

"DeFi cover is an essential component of the growing decentralized finance ecosystem," said Jeremiah Smith, Founder & CEO of OpenCover. "Our report provides valuable insights into the current state of this emerging industry and its potential to mitigate risks in the DeFi space."

The report also discusses some challenges facing the industry, such as regulatory uncertainty and lack of standardization. It suggests that collaboration among stakeholders such as insurers, regulators, and developers is necessary to address these challenges.

"We believe that collaboration among stakeholders is crucial for the growth and sustainability of this industry," said Smith. "We are committed to working with other players in this space to develop best practices and standards for DeFi cover."

Report Key Takeaways

• The DeFi cover industry was born in 2017 and is now composed of over 23 active participants, ranging from DAO-governed protocols to regulated companies. Nine new players launched in 2022.
• Historically, DeFi cover providers focused on protocol, custody, and stablecoin de-peg risks. The recent launch of new products like validator slashing, audit, and credit default covers indicate that offerings are evolving in tandem with the overall ecosystem.
• At the time of writing, OpenCover tracked $286m in current underwriting capital across on and off-chain pools covering $231m in risks, which represents approximately 0.5% of DeFi TVL. This represents over 90% of industry activity extrapolating from the size of on-chain capital pools.
• The number of covers sold since November 6, 2022, grew by 85% compared to the previous four months. While materially driven by L2 airdrop speculation, the real figure is estimated to be around 15%. However, the total amount of active cover decreased by 44% since its June 2022 peak.
• 2022 marked the industry's first large-scale stress test, with $34.4m in claims paid out (out of $36.9m all-time tracked total, i.e., over 90% of all payouts occurred in the last 12 months). Notable payouts include UST de-peg ($22.5m paid out) and FTX collapse ($4.7m paid out).
• For 2023, DeFi cover founders and builders are most excited about cover marketplaces, scaling cover capacity, and bridging the gap with traditional insurance.
• Delivering these advances at scale will likely be key for rekindling and growing institutional DeFi adoption, as the lack of insurance is often cited as a key friction point.

The full report is available to download here or to learn more about OpenCover services, visit opencover.com.

About OpenCover:

OpenCover is the first DeFi insurance alternatives analytics platform. OpenCover provides investors with standardized, unbiased, real-time industry and provider-level data to help them protect their crypto portfolio across DeFi and centralized exchanges. The company is backed by leading web3 investors including NFX, Village Global, Alliance, Orange DAO, Jump Crypto, Third Kind VC and over a dozen leading Web3 angels. To learn more, visit opencover.com.

Source: OpenCover