March 3, 2021

DeFi coverage protocol expands protection against centralized exchange hacks

Decentralized finance coverage protocol Nexus Mutual has expanded the list of centralized exchanges eligible for incident protection. Users trading on Binance, Kraken, Coinbase and Gemini are now able to buy protection in the event of an exchange hack or prolonged withdrawal downtime.

The project announced the new integrations on Monday as part of their “custody cover” initiative. Users who buy coverage will be eligible for compensation if the custodian is hacked and the user loses more than 10% of their funds. Alternatively, the claim can be honored if the custodian suspends withdrawals for more than 90 days.

The program was launched at the end of 2020 and initially included centralized lenders like BlockFi, Celsius, Nexo, Ledn and Hodlnaut. To apply for coverage, users must become members of Nexus Mutual and undergo Know Your Customer verification.

According to current figures, coverage is quite expensive. For example, a Binance coverage claim for 10 Ether (ETH) lasting 365 days requires paying a premium of more than 3 ETH, or 30% of the coverage amount. Still, these may be temporary figures. For example, the yearly coverage cost for BlockFi and Celsius is just over 2%, while covering other providers is much more expensive. Given the overall
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