Decentralized insurance firm Bridge Mutual wants to cover your stablecoins

Decentralized insurance service provider Bridge Mutual has launched a product that covers stablecoin risks.

According to a Nov. 17 announcement, Bridge Mutual’s offering will ensure smart contracts, stablecoins, and exchanges against a market crash or an attack. 

Bridge Mutual aims to provide coverage for the risks involved in holding stablecoins, which now have a total market cap of over $20 billion and are growing fast. While many in the cryptocurrency space believe this kind of asset is mostly devoid of risk, stablecoins can lose their value if they stop being accepted, sometimes can be hacked, and often require a company to be trusted to hold assets to back them.

As Modern Consensus reported in late September, those risks are big enough that the European Central Bank weighed in on the issue, suggesting that a stablecoin version of a bank run could endanger financial stability. The institution suggested that “fragilities within the stablecoin arrangement itself, and its links to the financial system, may give rise to financial stability risks.”

Bringing insurance to your DeFi endeavors

Bridge Mutual built its system on the Polkadot network, where users can stake its BMI tokens in coverage pools. The funds held in those pools are automatically invested on-chain in on-chain interest-earning decentralized finance (DeFi) systems such as Compound or Aave to generate a yield.

Bridge Mutual users pay a premium for using this service, which is used to provide coverage for potential losses. The firm’s founder and CEO Michael Miglio said:

“All funds within our ecosystem are held in smart contracts; Bridge is entirely non-custodial. No Bridge team member ever has access to the funds being staked on the system.”

He added that Bridge Mutual “does not require any form of identification from its users.”

Overall, this is just the latest announcement concerning a company looking to capitalize on the ongoing DeFi craze. As Modern Consensus reported yesterday, crypto exchange Bittrex has listed as many as eight DeFi tokens in one single day.