One of the biggest problems standing in the way of widespread crypto adoption is lack of trust, particularly when it comes to assets on centralized exchanges or complex exploits on decentralized protocols. While it is true that cryptocurrency blockchains are difficult to tamper or manipulate, other services in the space still experience multiple large-scale hacks per month.
Centralized exchanges are prone to having their funds hacked, stolen, or lost. From the infamous Mt. Gox and FCoin hacks to the most recent KuCoin heist, dark clouds have been cast over the industry for centralized exchanges. These frequent incidents, in addition to the frantically volatile nature of crypto markets, have stopped cryptocurrency from gaining momentum.
That’s where Bridge Mutual comes in to offer insurance. It aims to give institutional crypto investors a reliable way to offset their investment risks by issuing discretionary insurance against exchange hacks, smart contract attacks, and stablecoin crashes.
How does Bridge Mutual work?
The funds used to insure Bridge Mutual’s policy holders come from stakers who are able to select the stablecoin, exchange, or smart contract that they want to insure. After funds are locked in, they enjoy passive income from investment yields and profit sharing in the system.
Likewise, the process for purchasing insurance through Bridge Mutual is just as simple as stakeholding. All users have to do is select the stablecoin, exchange, or smart contract they want insurance for. The protocol automatically calculates a premium based on the coverage requested by the user, and the user pays via their wallet. Once paid, the user becomes a policy holder and is able to easily make a claim on the Bridge website.
The Bridge Mutual API constantly scrapes and analyzes price feeds of stablecoins so that the claims process for stablecoin crashes can be settled automatically and instantly. Any smart contract or exchange claims are then processed through a nuanced, three-phase voting system. In a nutshell, this means that claims are voted on by the community and there are incentives and penalties in place to assure that every claim is adjudicated with high accuracy.
Two ways to earn rewards
Anyone who invests in the Bridge Mutual system can earn income in two different ways. One way is to contribute funds to the various insurance pools that Bridge Mutual offers. Once locked in, stakeholders will be entitled to earn profit-sharing rewards and yields. The other way to earn money is by voting on claims. Reliable and trustworthy voters can receive up to 5% of a claim’s premium by voting correctly.
What impact will Bridge Mutual have on the crypto industry?
As Bridge Mutual points out in its pitch deck, its closest parallel in the traditional financial world is the credit default swap. While it is true that unregulated credit default swap trading was one of the main factors behind the international economic crisis of 2007, most experts agree that credit default swaps generally play a positive role in the economy.
Since financial instruments of the type offered by Bridge Mutual can allocate crypto trading risks in a more optimal way, they can make the entire industry safer for institutional investors. If institutions were to become less reluctant to invest in crypto projects, the entire industry could benefit as a result.
Led by a crypto lawyer, a blockchain developer, a former SEC attorney and an executive from Paxful
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