Opyn launches insurance platform to protect DeFi users
Opyn, beforehand a leverage platform that has since pivoted to insurance has launched on mainnet. By constructing on high of a generalized choices protocol known as the Convexity Protocol, Opyn has created an insurance contract for Compound deposits. It works by creating tokenized put choices generally known as oTokens which provide the suitable to promote a stablecoin for a greenback sooner or later. The tokens themselves are priced on the open market and traded on Uniswap. In this case, users are wanting to purchase choices on their USDC and DAI deposits on Compound to protect in opposition to something from sensible contract hacks to liquidity crises. The insurance is supplied by ETH holders who need to earn the premium paid by these wanting to achieve insurance.
Why it issues
Dai has develop into an indispensable a part of DeFi. This has been a superb factor in that it brings trustless stability to the system, but it surely additionally compounds threat as there are numerous protocols relying on it. There are many unknown dangers current in a fancy monetary system equivalent to Maker. While its collapse could be a devastating blow to DeFi, the provision of hedging instruments equivalent to Opyn at the very least supply a method to mitigate monetary loss for users with giant publicity.
Opyn is a two-sided market, which means for each oToken created there has to be a purchaser on the opposite facet prepared to buy that contract. As we noticed with lending protocol Dharma’s pivot, it may be tough to bootstrap liquidity on this peer-to-peer mannequin as these wanting to put their capital to work want to wait for somebody to take the opposite facet of the wager. This contrasts with the peer-to-contract mannequin utilized by Compound that allows users to seamlessly withdraw and deposit funds right into a pool of capital. By permitting users to work together with the combination of all different users, the P2C mannequin has dominated the decentralized lending enterprise. To keep away from the destiny of Dharma V1, Opyn can have to overcome this situation and guarantee there’s ample liquidity to make the expertise related to that of a pooled mannequin.