Veda CEO discusses challenges of DeFi insurance amid growing interest

DeFi insurance sounds great in theory. Protocols promise to make users whole when smart contracts fail, bridges get exploited, or liquidity pools drain overnight. The problem, according to Veda CEO Sun Raghupathi, is that nobody really knows if these programs work until they’re stress-tested by a major claim event. Raghupathi, who leads the DeFi vault infrastructure provider Veda, says insurance programs across decentralized finance are gaining interest from both retail and institutional participants. But interest and proven effectiveness are two very different things. Until significant claims are processed and paid out, the industry is essentially buying a parachute it has never tested. The insurance gap in DeFi Traditional insurance works because actuarial tables are built on decades of claims data. Auto insurers know, with reasonable precision, how often a 25-year-old in Texas totals a sedan. DeFi insurance providers are working with a fraction of that historical information, trying to price risk for protocols that may have existed for less than a year. The handful of notable DeFi exploits that have triggered insurance payouts offer a mixed record. Some mutual-style coverage pro...