In the past 2-3 years, decentralized finance (DeFi) has taken off in the crypto space with various applications from lending to payments and assets. One of the least recognized, however, is crypto insurance because it is still in the nascent stages. Nevertheless, a lot of progress has been made in the space and we think these 5 coins/tokens are worth trying.
February 2020 was the first time Nexus Mutual was tested when several claims were filed following a hack on the lending platform Bzx. On 19 February, Nexus Mutual paid out about $31,000 to the claimants, proving that crypto insurance could actually work. Although not the first DeFi project to enter the insurance space, it has been the most successful and is not the top crypto insurance company with a market cap of nearly $918 million on CoinMarketCap.
Like a traditional insurance company, Nexus Mutual is supposed to cover the insurance cover holder in case of a problem with a particular asset. But unlike a regular insurance company, it only covers crypto assets and in particular, smart contract failures. In the snapshot below, you can see how an individual purchases insurance cover from the service.
The main difference, though, is that Nexus Mutual is a mutual insurance, meaning that the company is held by policyholders. Whenever a claim is filed, policyholders stake NXM, the native token on the platform, and participate in a vote to determine if the claim should be paid. Voters are then rewarded with new NXM tokens that can be used for further staking (voting) or converted to fiat on the Nexus Mutual website.
NXM is the native token for the Nexus Mutual network but unlike other coins, it can only be purchased from the Nexus Mutual website. According to the project whitepaper, this is in order to link the value of NXM to the health of the platform. For instance, the more money staked in NXM, the higher the probability of paying out claims, thus causing the token to be more expensive and vice versa. The reasoning is that it will encourage members to keep on staking without letting the value become unreasonable.
Since being launched in May 2019, the total circulating supply has increased from 3 million to 6.9 million while its price has risen from about $10 to over $138 at the time of publishing. Naturally, investors are keen to trade the coin but since it’s unavailable through crypto exchanges, wrapped NXM (wNXM) was created.
While wNXM does not constitute an actual insurance token, it does encourage trade of NXM and staking on Nexus Mutual. At the moment, wNXM has a market cap of over $125 million and is second among crypto insurance coins.
Instead of voters staking their coins to make a decision about a claim, inSure DeFi leaves the decision to inSure DAO. The group includes several community members chosen for their expertise but in reality any holder of the native token SURE can participate in the decision making process.
To take out an insurance policy, you will need to purchase SURE tokens either from the company website or a Dex/Cex such as Bilaxy, Quickswap, PancakeSwap or any other supported platform. The amount of investment insured will depend on the type of claim you present as indicated in the screenshot below.
This project was among the first in DeFi to get into insurance and the foray has been largely successful as it now has a market cap of over $100 million. Unfortunately, the SWAP token hasn’t done as well and it is currently trading below the opening price at the beginning of 2020.
Also an insurance mutual, Bridge Mutual relies on investor staking to provide insurance to individuals. To get coverage, an individual applies for coverage by purchasing an insurance policy using crypto. Cover is provided for crypto assets such as stablecoins, smart contracts and even crypto exchanges. A fee is then charged for purchasing the policy.
On the other side are the investors who provide coverage by purchasing the network’s native token BMI. An investor chooses to stake their BMI on projects they believe are safe, and in so doing earn additional BMI over time and profits from fees and investment of the insurance policies. These investors are the ones responsible for making decisions on which claims are paid out.
The fourth among crypto insurance coins, Bridge has a market cap of $34 million and is ranked 638th among all coins on CoinMarketCap. But just as SURE tokens, the value of BMI is also trading below the opening price.
It works in a lot of ways like inSure DEFI with a DAO managing the regulation of the network and making decisions on payouts. In addition, anyone who owns the token INSUR can become a member of the DAO and participate in decision making while earning from the policyholders’ investments.
You can become a member too by purchasing the token from a number of exchanges including Huobi, Bilaxy and UniSwap. Payouts of insurance policies are determined based on the type of loss experienced and the level of risk involved.