According to a crypto insurance executive, the $2 billion loss in decentralized finance this year shows just how big the market is for crypto insurance companies.
Only 1% of all crypto investments are insured.
Inequality Between Locked Crypto Asset and Insured Assets
Speaking to Cointelegraph, Dan Thomson, CMO of decentralized protection protocol InsurAce, said that there is a large disparity between the total value (TVL) locked in crypto and decentralized finance (DeFi) protocols and the percentage of this TVL under insurance:
“DeFi insurance is a sleeping giant. With less than 1 percent of all cryptocurrencies covered and less than 3 percent of DeFi covered, there is still potentially huge market opportunity.”
Despite a lot of investment in smart contract security audits, on-chain insurance is a system that serves as a viable solution for digital asset protection, such as leveraging a smart contract or compromising the front end of a Web3 protocol.
The collapse of Terra (LUNA) and the resulting Terra USD peg provide an instructive example of how in-chain insurance can protect investors, Thompson says. He adds that InsurAce “paid $11.7 million to the 155 affected UST victims.”
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