THORChain is requesting coverage proposals from leading DeFi insurance providers such as Nexus Mutual, Tidal, Cover Protocol, and Risk Harbor.
As part of a large-scale network hardening initiative, THORChain is planning to implement protocol-level insurance coverage to fully protect users from possible future attack.
Insurance is a critical piece of infrastructure in DeFi, but few users actually take advantage of this service due to the upfront cost. Nexus Mutual charges anywhere from 2.6% to 30% per year, and coverage for THORChain is currently around 8.5% (up from 2.6% pre-exploit).
However, with annual yields in the double-digits, insurance coverage can be a very compelling option for protecting liquidity positions — especially when rates are low.
Protocol-level coverage would allow all network participants, including node operators, LPs, and swappers, to be protected by insuring 100% of the network value.
While the recent exploits have been covered by the treasury and not resulted in the loss of user funds, it would bring additional confidence to the network if it was fully covered from future attacks.
Audits and attack-mitigation features are underway, so THORChain will be much more secure by the time it is back up and running. Insurance is a last resort fail-safe that keeps the network and treasury whole in the event of a disastrous attack.
Details of the plan are still a work in progress, but for the first iteration we expect that the team will manually work with providers to strike a deal based on the proposals. A wholesale deal that covers the entire TVL could bring rates down substantially from the average market rate.
Eventually, it is possible that coverage would be paid for automatically via network fees and adjust dynamically based on total value locked. This may mean that APY could drop a small amount, but it is a small price to pay for the peace of mind.