Cryptocurrency risk is considered an emerging and dynamic area of concern, and most traditional insurers tend to steer clear of this market due to the scarcity of data and the difficulty in risk assessment. On the other hand, by leveraging the blockchain technology, decentralized insurance has become the pioneers to offer covers for hacks and exploits related losses, and gained significant attention because of its advantages in energy efficiency, transparency, and scalability. In contrast to traditional insurance where the insurance company serves as the central entity, decentralized insurance utilizes the Proof-of-Stake (PoS) consensus for risk and claim assessment purposes.

During the previous semester, our focus centered on examining the pricing and claim assessment frameworks employed by the majority of decentralized insurers in the market. We collected real data of transactions, coverage, claims, and various parameters from the leading decentralized finance (DeFi) insurer, Nexus Mutual. In this semester, we will continue our investigation of the decentralized insurance, with an emphasis on the inherent risks associated with decentralized products and protocols. Our approach will involve conducting thorough analyses for potential factors influencing cryptocurrency prices, pricing of the covers, and claim assessments. Eventually, we will integrate these components to gain a comprehensive understanding of the entire landscape of decentralized insurance.

Supervisor: Xiaochen Jing