Kyber Network, an on-chain cryptocurrency liquidity protocol, has announced it is now offering the first natively insured pools for its new Dynamic Market Maker (DMM) protocol. The policy acquired by Kyber from Unslashed Finance covers up to $20 million (10,000 ETH) and is focused on smart-contract risk.
Dynamic Market Maker (DMM) is a next-gen AMM and major protocol that will be added to Kyber 3.0’s liquidity hub and provides important benefits to DeFi liquidity providers including, optimized fees, extremely high capital efficiency, as well as fully permissionless liquidity contribution from anyone and access to liquidity by any DApp, aggregator, and end-user.
The Kyber DMM codebase has been reviewed and audited multiple times by both the team and external auditors, and remains open source on Github for community developers to review. But as an additional safeguard and a sign of commitment towards security, Kyber has also now purchased cover from Unslashed for its users.
“Kyber has made the decision to purchase bulk insurance for the DMM, covering all liquidity providers and market-makers. In doing so, Kyber demonstrates the importance of combining the transparency of self-custody and smart-contract audits with insurance as an additional layer to mitigate risk for users.”
– The Kyber Network Team
Operating since 2017, Kyber was one of the earliest DeFi protocols focused on providing seamless on-chain liquidity through an open reserve architecture. Kyber has always maintained a high standard of smart contract security, and its liquidity infrastructure has facilitated close to $5 billion worth of trading volume for thousands of users while managing more than 50 reserves and being integrated into over 100 decentralized applications.
Insurance Advantage for Smart Contracts
Smart contracts can be subject to different types of attacks, many of which exploit vulnerabilities in the smart contract’s code.
The losses resulting from technical issues with smart contracts which could be either code vulnerabilities, errors or omissions in code implementation, or unavailability or failure to access or process deposited funds, is one of the main risks in DeFi, sometimes resulting in losses for users.
Currently, if an event were to occur involving one or several smart contracts, LPs and market-makers might be impacted and they might suffer losses.
The status quo within the DeFi insurance industry has been to allow users to buy and handle their own coverage. Historically, protocols have put a burden on their users to insure themselves. When this happens, it is the user who ends up footing the bill, not the protocol.
Bulk insurance offers significant benefits to Kyber in several ways:
- Provides a smoother experience for users and fosters inclusivity.
- Builds trust between Kyber and its users and demonstrates how important protecting users is.
- It sets the precedent that insurance is a must-have.