The DeFi Insurance Problem

Why Decentralized Finance doesn’t have scalable insurance

What is underwriting, and why is it a unique problem in DeFi?

What’s the probability that this asset loses its current value compared to the revenue generated from premiums?

The Chicken and the Egg

Which one comes first?
Armor’s TVL on DeFiLlama is coming from the same Nexus contract viewable here.

DeFi Insurance Business Models

One of the many forum submissions on Nexus sharing their inability to withdraw funds.
Functioning of a payout after a hack with RCA.

Money Makes Money

All it takes is time and a little bit of luck.
Above is the year-over-year growth of Northwestern Mutual’s invested assets.
Above is the year-over-year growth for client investment assets, which grew 25% just in 2021.
Displayed above is the weekly chart for the Nexus and Unslashed vaults.
Unfortunately, this vault only generates an average monthly return of 0.07%.

Reality Check

Time to pay reality’s dues.
Full thread viewable here.

What should be decentralized?

What We Can Learn from Traditional Insurance

“Over the years, inflation has caused a huge increase in the cost of repairing both the cars and the humans involved in accidents. But these increased costs have been promptly matched by increased premiums. So, paradoxically, the upward march in loss costs has made insurance companies far more valuable. If costs had remained unchanged, Berkshire would now own an auto insurer doing $600 million of business annually rather than one doing $23 billion.”

Heavy is the Head the Wears the Crown

Very few are destined to hold the weight.



| USC Grad Student | Blockchain@USC researcher | writing ✍️ | musician 🎸

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| USC Grad Student | Blockchain@USC researcher | writing ✍️ | musician 🎸