$8 Million ChainSwap Exploit

The Intelligent Insurer #25 - An $8 million protocol exploit highlights the need for insurance solutions in the DeFi space - Insured Finance Development Update

A recent hack on the ChainSwap protocol has raised further concerns among DeFi users as it becomes the latest in a series of exploits in the world of DeFi. The frequency and magnitude of such attacks has forced sophisticated DeFi users to employ digital asset insurance solutions to minimize their exposure to such attacks.  

While announcing the exploit, the ChainSwap team advised its community to cease from further investing in the platform’s token until their investigations are concluded. The team also promised to carry out a 1:1 airdrop for all tokens that were held by investors before the hack occurred.

In the latest Intelligent Insurer, we explore the recent trend of exploits in the DeFi industry. We also consider how users can protect themselves in this high-risk segment of the cryptocurrency industry.

However, before we dive into this week’s content, we are thrilled to announce that we will be providing regular development updates on the progress of the Insured Finance insurance marketplace. We have been making phenomenal strides towards the launch of our two-sided digital asset insurance marketplace. This weekly update will allow Intelligent Insurer readers to stay on top of the progress made each week.

Insured Finance Development Roundup

The past week has been packed with major milestones being hit and comprehensive testing taking place on several functions. The below points summarize the developments on both the frontend and backend while also presenting what can be expected in the coming weeks.

💻 Frontend milestones:

  • Pages finalized for Home, My Listing, Cover List, Create New Listing, Take Request, Token Bridge, and Listing Detail.

  • The frontend for the Create New Listing and Create Cover Request pages has been integrated with the backend logic

  • API connection has been integrated with the Cover List page

🔗 Backend milestones:

  • Code finalized for creating insurance requests and insurance offers

  • The code for taking insurance requests and offers is also finalized

  • API connections also integrated for insurance requests and offers on both the creator and taker side of the marketplace

  • API connection established which will scan new blocks

✔️ In progress:

  • Token bridge from the Goerli to the Mumbai tesnet implemented for USDT, DAI, and USDC. This will facilitate the transfer of these tokens between these test networks.

  • Smart contract tests ongoing for several functions including deposit refunds, premium refunds, and premium claims.

  • The advanced filter on the homepage is being refined to include wider optionality

🗒️ Coming up!

  • Working with the Chainlink team to refine the process for making claims

  • Further testing on the frontend

We will provide further updates next week. In the meantime, here is the remainder of this week’s coverage on major DeFi exploits and the need for digital asset insurance solutions.

DeFi exploits on the rise

Exploits in the world of DeFi have been growing throughout 2021. The successful attacks in April alone surpassed the figures for all of Q1 2021. Some project teams attempt to recover the funds lost due to exploits. However, in most cases, DeFi participants suffer the full loss.

(Source: CipherTrace.com)

The relative nascency of the DeFi industry imposes significant risks on participants. As DeFi rapidly innovates, some of the key elements of the technology are left with security flaws.

Liquidity pools are at the heart of the DeFi ecosystem. These pools attract significant capital from DeFi participants who are seeking outsized returns. However, these pools are also hotbeds for malicious actors with some teams knowingly targeting their users through rug pulls.

Cryptocurrency risks were present long before DeFi

Exploits in the cryptocurrency industry are certainly not a new phenomenon. Long before DeFi began rapidly growing, a series of exploits tied to initial coin offerings (ICO) drained considerable funds from cryptocurrency investors. 

However, coin offerings have evolved significantly since this point. Legitimate teams issuing coins began partnering with respected exchanges to issue their tokens through initial exchange offerings (IEOs) and initial DEX offerings (IDOs).

This helped bring down the incidence of investors falling victim to malicious entities. A similar evolution can be expected in the DeFi industry as projects will naturally become more secure and put their technology to more rigorous tests with respected audit partners.

How DeFi users can protect themselves

Nonetheless, risks are still present in the DeFi space and they will persist for many more years. DeFi will naturally innovate and become more secure as the technology advances.

However, in the meantime, sophisticated DeFi users are ensuring that their downside risk is minimized. This can be achieved by employing digital asset insurance solutions like Insured Finance. Insured Finance allows users to secure insurance on specific risks such as rug pulls, exchange hacks, and smart contract exploits.

About Insured Finance

Insured Finance is a decentralized, peer-to-peer insurance marketplace. Insured Finance users can request customized insurance on a wide variety of digital assets. Those that fulfill requests earn premiums and can earn a competitive return on their capital. Claims are fully collateralized and settled instantly.