The Intelligent Insurer #32 — Number of cryptocurrency exploits approaching record highs in 2021
With about four months until the end of the year, the number of hacks and protocol breaches is closing in on record high figures. 2020 was a record year in terms of the frequency of exploits and 2021 may surpass this.
Digital assets protection became a serious concern among cryptocurrency users as early as 2017. However, after a monumental bull run and a proliferation in DeFi-related products, the need for protection is higher now than ever before.
In the latest Intelligent Insurer, we highlight the increasing rate of cryptocurrency platform exploits which has vastly accelerated since the proliferation of decentralized finance (DeFi) products. We also consider the recent innovations in digital asset insurance and how these products can protect investors from potential losses. Before analyzing the rising rate of cryptocurrency-related exploits, we present our weekly development update.
Insured Finance Development Roundup
Insured Finance is approaching it’s full-scale testnet release. Upon release, the public and all project stakeholders will be able to get a feel for the marketplace and navigate the sublime UI. As we approach this major milestone, we have recently carried out some key deployments:
- All smart contracts have been deployed to the Mumbai testnet. Contracts related to claims, listing data, cover data, and platform data can all be publicly viewed in the Mumbai Polygonscan explorer.
- The Insured Finance subgraph has also been deployed which will provide a publicly available index of Insured Finance data which other applications and contracts can query.
- After the deployments of both the smart contracts and the subgraph, some minor adjustments are being made to the frontend to reflect these updates
We can’t wait to see the Insured Finance experiencing the full insurance marketplace. Insured Finance will be the most intuitive and comprehensive digital asset insurance solution in the market. With both the smart contracts and subgraph deployed, it won’t be long before the testnet release and subsequent alpha release follow.
Bull runs and crypto hacks
With still four months to go in 2021, the cryptocurrency industry has recorded a total of 32 cases of exploits and fraud. This figure does not cover cases where cryptocurrencies had been seized from governments or law enforcement agencies, or cases with inconclusive investigations. This puts the current year only 6 cases away from the record 38 cases in 2020.
The increasing number of crypto hack cases coincides with pronounced bull runs and the proliferation of new blockchain and cryptocurrency products. 2017 was the beginning of an infamous new trend with an ICO boom resulting in a huge amount of new projects being launched with questionable security.
Cryptocurrency exploits naturally surge as new and rudimentary projects are launched into the marketplace. While these projects may be vulnerable, the liquidity and capital they attract also entices attackers. For instance, since the start of 2020, the total value locked (TVL) in DeFi protocols has increased from under $1 billion at the start of 2020 to almost $100 billion during 2021.
DeFi and non-fungible tokens (NFTs) have significantly expanded the cryptocurrency market. However, as both DeFi and NFTs innovate at a breakneck speed, vulnerabilities are naturally present. These vulnerabilities continue to be exploited which is evident from the Insured Finance weekly release which has covered most of the major attacks this year.
Preparing against future hacks
With another bull run setting up for the cryptocurrency market, there is no indication that the rate of exploits in the industry is going to slow down. Prudent cryptocurrency investors will take measures to reduce their exposure to the growing industry. Hedging with other assets is one method to achieve. However, users can also employ insurance solutions which compensate investors in the case that their funds are compromised due to an exploit. Such insurance solutions allow cryptocurrency investors to maximize their upside exposure while minimizing their downside risk.
Insured Finance is an upcoming two-sided marketplace that allows cryptocurrency investors to secure tailored coverage for their holdings. Users simply pick coverage from the market or submit a tailored request.
About Insured Finance
Insured Finance is a decentralized, peer-to-peer insurance marketplace. Insured Finance users can request customized insurance on a wide variety of digital assets. Those that fulfill requests earn premiums and can earn a competitive return on their capital. Claims are fully collateralized and settled instantly.