Decentralized Insurance for Smart contracts

One of the largest events that has impacted the smart contracts ecosystem is the lack of security and an ever increasing number of vulnerabilities in the decentralized space. A very detailed account of vulnerabilities in this smart contract ecosystem has given analysts, security firms such as trail of bits a lead in detecting and to some extent recommending best practices. That being said, there are too many of these issues to be tracked by teams building Dapps across the world. Very often these teams are understaffed and automation with tools such as Slither – which does static code analysis, and Echidna – a fuzzer for smart contract code accomplishes only so much. According to this detailed report by Trail of Bits, there are more than 246 different types of vulnerabilities that they discovered.

This is virtually impossible to detect and test using any type of automation, across all the millions of smart contracts that exist out there. As a result, Firms such as Nexus mutual have introduced a pooled insurance policy for smart contracts.

Their workflow is documented here :

Whenever, a smart contract deals with finances of individuals or contracting parties, nexus mutual’s funds provide a significant fallback to users. Nexus Mutual allows individual users to provide guarantees for use cases that are not tested and that tend to loose funds or operate unexpectedly. Insuring smart contracts is also a community activity in which all those users who have participated in a particular smart contract system, can pool in resources to an insurance pool and be compensated in times of a crisis.

On the overall, what we see is an insurance plan that can protect people against the downside. however adoption questions remain

a. Will decentralized finance users who have no insurance subscribe to nexus mutual?

b. Will non decentralized finance users take up insurance using nexus mutual?

c. What about insurance products that are not dependent on code per-se and can protect investments or locked up funds in contracts against market fluctuations?