A Data Dive Into Blockchain Insurance Platforms
Codefi Data analyzes the on-chain performance of Opyn, one of the leading Ethereum insurance platforms.
Opyn Insurance, which launched in February 2020, is an Ethereum insurance protocol providing protection for DeFi users and ETH speculators. Opyn’s existing products let users buy or sell protection for Compound deposits (USDC and DAI) and hedge against ETH price volatility by either buying or selling ETH protection.
Data shows that at least 35 options have been created for the ETH price hedge market since the launch. The stacked area chart below shows the individual balance of each option token contract and the total sum of value locked in Opyn’s platform. Locked value hit its all time high of $1.6m USD on 23rd April, and currently sits at ~$1.1m USD. The chart also shows the lifecycle of each option; when each colored stacked bar disappears, it means the option reached its expiry date and was exercised.
Typically, around four options have existed at the same time so far in 2020, and each locks an average of ~400k USD. The usual mature length is around 15–40 days.
USDC liquidity providers are the people who have deposited USDC into Opyn’s insurance protocol in order to provide liquidity to people wishing to buy ETH. These USDC depositors are betting that the ETH price increases, and aim to be able to withdraw USDC at a later date for a premium. The people who are buying ETH with the available USDC are protecting it against a price decrease.
Notably following the mid-March market crash — after which people may have been more interested in finding ways to protect their ETH holdings — the number of daily providers and the amount of USDC deposited have been increasing. Since April, there have been nearly 25 days with more than 20 liquidity providers, and four days with greater than 40 liquidity providers. Moreover, these liquidity providers are depositing larger amounts of USDC. In April, the end of the month saw records with just under $500k USDC deposited. May volumes reached even higher, with two days during which USDC deposits surpassed $500k USDC.
The incentive for liquidity providers is to gain a premium on their USDC deposits if the ETH price increases. The top USDC premium recipients have received between 700 and 22k USDC. The largest premium recipient — 22.3k USDC — has accounted for more than 30% of the total premiums on the Opyn platform.
Opyn’s platform launch in February came at a time when the blockchain, Ethereum, and DeFi ecosystem in particular has paid closer attention to security. Among a host of security and market events in the past two quarters, Ethereum users are looking for better ways to ensure their funds are protected as they work with these new platforms. Audits, strict security reviews, and open source architectures will undoubtedly help — but security events will continue to occur. Insurance is the only way to hedge against both security and volatility. Opyn and Nexus Mutual — the two largest players in the Ethereum insurance game — have both come to market to help the ecosystem remain even more resilient in the face of (un)expected events.
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Originally published at https://codefi.consensys.net on June 9, 2020.
