Binance CEO CZ: DeFi Has Huge Potential Despite Signs of Bubble
— — Developing Crypto Insurance Covers Lights The DeFi World
Biance CEO Changpeng Zhao warned that some Defi projects will not last long and possibly never recover from the bubble. Wyoming-based decentralized insurance provider Bridge Mutual announced the industry-first insurance solutions for stablecoins.
“A lot of DeFi projects are already in a bubble, and I also believe that there are some signs of a bubble in the DeFi industry, but this does not mean that DeFi will eventually disappear entirely,” CZ highlighted.
The Defi ecosystem has boomed in the past few months with most of the native respective tokens experiencing heightened volatility. According to Zhao, the DeFi industry has a significant potential for market growth in the future based on the booming demand. He further noted that the DeFi tokens are still very popular amid the ongoing Bitcoin rally. However, Zhao warned that some DeFi projects will not last long and possibly never recover from the bubble.
DeFi Ecosystem in Relation to Highlights Made by CZ
According to the metrics provided by Coinmarketcap, the DeFi crypto market cap stands at $16.04 billion. In addition, Defi Pulse market analysis shows that the total value locked in the DeFi ecosystem as of November 17 stands at $12.909 billion.
Leading the list is the MakerDAO with approximately $2.34 billion locked assets in its ecosystem, thus a dominance of 18.16% of the total Defi ecosystem. Followed closely by WBTC with approximately $2.11 billion locked assets in its ecosystem after it added around 4.3% in the past 24 hours. Compound closes the top three Defi projects with $1.47 billion locked assets in its ecosystem having added approximately 3% in the past 24 hours.
The ecosystem is poised to further explode once Ethereum 2.0 is fully implemented and more projects get built on the Binance Smart Chain that offers more scalable services than those in Ethereum blockchain.
The DeFi industry is facing immense challenges that put it at risk of lagging behind in the near future. Among the challenges is the increased level of scams especially from project managers who vanished with users’ locked assets.
Besides, there has been an increase in DeFi attacks that have left most users stranded in the market. Earlier today Origin Protocol reported that attackers had compromised its system and made away with $7 million of customers’ funds. With no refund policies, most projects are left bankrupt after such an attack and users counting immense losses of capital.
However, there are insurance companies that are developing crypto covers that lights the DeFi world. One such company is the decentralized insurance provider Bridge Mutual, announced the industry-first insurance policy for the stablecoin market.
Bridge’s new insurance service leverages a decentralized app on both the Ethereum and Polkadot network to enable stablecoin users to buy coverages against a market crash or an attack.
Bridge’s insurance solution to stablecoins is impactful because it’s truly decentralized and doesn’t depend on people to handle the claims.
Bridge tracks the price of all the stablecoins on its market across multiple exchanges. If the average price of a stablecoin drops beneath a predefined price point for a set period of time, any claimant that was covered before the price drop can submit a claim using our app and instantly receive the full value of the policy they purchased. There is no voting or chance for human manipulation that might result in a valid claimant being denied.
Users that want to provide insurance simply purchase BMI tokens and stake them in Bridge coverage pools. Those funds are then algorithmically invested in on-chain in platforms like Compound and Aave to generate yields for the insurance providers.
Stablecoin holders that want insurance can get a quotes generated on-chain by an actuarial formula. To purchase the insurance, users then connect their wallet (e.g. Metamask and others) and pay for the coverage.
Part of the premiums paid by users buying coverage is split among users providing that coverage as a profit-sharing incentive.
Originally published at https://www.coinspeaker.com on November 17, 2020 by Andrey Sergeenkov.
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