Amulet Explains: Crypto Insurance

Although still in its relative infancy, there’s no doubt that the crypto-insurance industry is gaining traction. In fact, as DeFi has been growing rapidly since the boom in 2020, crypto and DeFi insurance companies are emerging to protect users against potential losses of their digital assets. But what exactly is crypto insurance, and why is it necessary? Let’s find out. 

What is crypto insurance? 

In short, Crypto insurance is a way of protecting your digital assets against potential breaches and losses within the industry. DeFi insurance companies will offer insurance products based on the risk factor of various protocols. As blockchain technology is emerging and due to the enormous levels of assets that users own, hackers and fraudsters are regularly trying to exploit the systems for their own gain.

These attacks are happening on a weekly, and maybe even daily, basis. Therefore, crypto insurance policies are emerging to protect consumers against the risks posed by these cybercriminals. Although the industry is still in its infancy, more and more crypto insurance companies are emerging to serve the growing need for online protection. 

What does crypto insurance cover? 

While not every asset is protected by crypto insurance, many crypto wallets and exchanges can be covered by insurance policies if they have an agreement. This means that users will have the option to purchase insurance cover should they feel the need to. We’re also seeing the emergence of more traditional insurance products that protect against the risk of lost or stolen assets at a personal level.

For instance, BitGo provides insurance for crypto coins lost from personal wallets. Evertas is another company that provides coverage to institutional investors in the UK, Canada, and the US. Their service protects customers from hacks and theft, as well as the loss of crypto assets. 

Specifically, cyrpto insurance policies typically cover the following: 

  • Smart contracts vulnerabilities: Smart contracts are specialised programs that are stored on a blockchain. They guarantee that the specific outcome written within them will occur, and the final state of the network will stay ‘immutable.’ There are several types of smart contract vulnerabilities, including the indirect execution of unknown code, reentrancy, the incorrect calculation of the output token amount, and interface issues. DeFi insurance can protect you from such vulnerabilities as and when they occur. 
  • Stablecoin de-peg: Stablecoins attempt to peg their call to an external reference – typically a currency such as the US dollar. De-Fi insurance can protect you when your stable coin is trading below its peg for a significant period of time. 
  • Slashing: When your crypto assets are slashed, you run the risk of losing coins. Your coins might get slashed if you participate in bad behaviour on the network in question or leave your account inactive for a prolonged period. While Solana hasn’t yet implemented slashing penalties, the likes of Ethereum and Polkadot do have slashing policies. Again, DeFi insurance can protect your assets from slashing. 

Is crypto insurance really necessary? 

Theft is a big problem in Web3. In 2021 alone, more than $10 billion was lost due to hacks and frauds in the crypto space, with $2.6 billion in exploits on DeFi protocols alone. Hackers are able to exploit the lack of coverage in the DeFi space, and only a very small proportion of the money stolen by hackers has been recovered. 

Cryptocurrency insurance is easy to find, buy, and use, typically with one click. It offers you protection against hacks, and if your holdings are stolen, you will get your money back. Essentially, crypto insurance can protect all of your coins from hackers, and you can even buy insurance for groups of crypto. So, if you have significant crypto holdings, it’s undoubtedly worth considering insuring your assets. 

Introducing Amulet’s unique DeFi solution 

Amulet is a new Rust-based insurance protocol from MTR Labs, with a focus on protecting all users within emerging technologies within the crypto space. Our DeFi insurance protocol is deployed on Solana and has been built to the demands of the market, using a unique PCP (Protocol-Controlled Underwriting) approach. We firmly believe that this model is both scalable and sustainable and has the potential to change the game as far as the future of crypto insurance is concerned. 

Ultimately, if you’re looking for a simple and reliable insurance protocol for any of your Web3 financial assets, Amulet could be the perfect fit for you. Find out more about how Amulet works and follow us on Twitter for our latest updates. 

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