Hacks Aren’t Stopping in the Crypto Industry. Solutions?

Hacks Aren't Stopping in the Crypto Industry; Here's How One New Project Plans to Solve This

It feels like a daily occurrence that we read the news or scroll through Twitter to find another malicious attack within Web3. In the first half of 2022 alone, bad actors netted a staggering $1.9 billion in crypto hacks; up 60% from the year before.

Decentralized finance (DeFi) protocols are particularly susceptible to these devastating attacks. Eight of the ten largest attacks on crypto targeted DeFi protocols, resulting in a total loss of $2.47 billion. Despite current market conditions and the continued exploitation of protocols, the DeFi industry has remained resilient and continues to grow. At the same time, only around 2% of the total $54.08 billion of value on DeFi protocols are protected by a cover option.

The lack of insured digital assets within DeFi ecosystems is not an issue of access. The rise of DeFi exploits naturally led to the creation of new, on-chain insurance mechanisms called covered protocols. Nexus Mutual, InsurAce and Unslashed are three of the leading participants in the space, providing on-chain coverage for a variety of incidents.

Despite growing DeFi exploits and a variety of risk protection protocols to safeguard from them, we still haven’t seen Web3 users adopting DeFi cover protocols. Amulet Protocol, a cover protocol specifically for Rust-based ecosystems, is looking to change that.

Amulet protocol is innovating on the traditional cover protocol model – and Web3 users are paying attention. Compared to other cover providers, Amulet is receiving rapid community growth, with over 18,000 new Twitter followers and 17,000 new Discord users in the past two weeks alone. Since they announced their project in April, Amulet’s community of organic followers are pulling together to promote the necessity of Amulet’s cover solution.

So what is bringing the Amunation community together to support Amulet, and how would it act during significant crypto events?

What makes Amulet unique from other cover protocols?

Amulet is the first protocol developed for Rust-based ecosystems. The protocol is currently being developed on Solana, but can be natively integrated into several other Rust-based ecosystems like Polkadot, NEAR, Elron and others.

Amulet chose to begin working on Solana after comparing the blockchain’s recent growth metrics against Ethereum. With stronger growth, lower gas fees and quicker transaction speeds, Amulet determined Solana was the best environment for building its unique cover protocol, and received funding and support from Solana as a result.

By focusing on Rust rather than a specific blockchain, Amulet has taken a more blockchain-agnostic approach that enables a wider range of coverage within Web3 and the metaverse. The team is currently working on developing novel cover offerings including cover for NFTs, crypto wallets and GameFi.

Additionally, Amulet distinguishes itself from other cover protocols through its Protocol Controlled Reserves (PCR) model. The PCR model is a first of its kind and is redefining the entire risk protection industry. Currently, risk protections protocols rent underwriting capacity from stakers through token emissions. This model has been used by every cover protocol to date, with the exception of Amulet. Instead of renting underwriting capacity, the PCR model brings together a Yield Back Claims pool, a treasury and other reserve layers to reduce loss to staked capital.

Amulet in action: the depeg of UST and collapse of LUNA

The shocking demise of Terra Luna and the depeg of UST was a catastrophic event for the entire blockchain industry. While it highlighted pre-existing issues in the industry, it also presented the first real test for DeFi cover protocols.

Existing cover protocols like InsurAce and Unslashed both offered UST depeg cover, and many users took action on this offering to protect their assets. Despite short-term effects on both protocols, they were successfully able to cover their users and demonstrate their credibility and functionality. While the event was drastic, it also provided users confidence in cover protection for digital assets.

Despite the success, the depeg event nonetheless caused these protocols, and other protocols using the traditional cover model, a dilemma during the process and the decision-making period before payout. When these protocols knew that they were going to have to payout (based on terms and conditions), they had to think fast to not upset the stakers that provided the capacity within the underwriting pools.

The collapse of LUNA and UST came just one month after the seed funding and announcement of Amulet Protocol. While the protocol has only launched its testnet, with the mainnet expected by the end of September, the collapse provided key insights for the then proof-of-concept PCR model.

Had Amulet launched ahead of the depeg event, it would’ve been well-positioned during the collapse, providing a solution without conflict between stakers and covered users. This is all down to the PCR concept that the Amulet team has designed themselves.

Since the PCR model utilizes a Yields Claim Pool, a treasury and other reserve layers, Amulet provides a multi-layered safety barrier around staked capital. Doing so creates an environment where Amulet would have greater reserves and a lower fear of loss.

Amulet wants to provide simple, reliable cover for everyone in Web3, and it seems their solution will keep both sides of their users happy. Hacks aren’t going away, and cover is imperative when owning crypto assets. Despite the existence of cover solutions already, Amulet’s will be the most sustainable and scalable to date.

Amulet will launch on the mainnet on September 29, creating the opportunity for its users to protect their assets through its initial offerings: smart contract vulnerability and stablecoin depeg cover. You won’t have to wait much longer to protect your Web3 assets with Amulet and if you are reading this after that date, you’d be able to start today. To learn more, join their Discord channel, where the core team is available, or access their website: http://www.amulet.org/.