Perpetual Protocol v1 economic loss event

Total lost
Total claims paid by Nexus Mutual

Extreme volatility caused major price deviations in Perpetual Protocol v1 markets and liquidation mechanisms failed, which created losses exceeding $5.7m due to economic design failure. Claim Assessors reviewed, approved, and paid all claims within days.


When UST and LUNA entered a death spiral in May 2022, the impact was felt across many lending markets and perpetual trading protocols. This extreme volatility led to a loss of more than $5.7m in the Perpetual Protocol V1 markets, which the protocol's insurance fund could not cover. The Perpetual Protocol team was able to compensate many smaller holders, but people who had large balances in the V1 market carried significant losses.

The people who covered their positions with Protocol Cover were protected against this kind of economic design failure. In the week after the loss event, members filed claims for their losses, which Claim Assessors reviewed and discussed. During the review, Claim Assessors came to the conclusion that this event was a combination of economic design failure and oracle failure, since the protocol was not able to liquidate users' assets with enough time to avoid considerable bad debt within the V1 markets.

Claim Assessors voted to approve and pay more than $370k in claims, while other large depositors who didn't protect their positions with Protocol Cover were only partially compensated after the Perpetual Protocol governance proposal passed in late May.Nexus Mutual members received their payouts days after filing their claims and were made whole. No delay, no bureaucracy. Just comprehensive cover, timely claims processing, and peace of mind when you need it most.

Overview of the product

When you deposit crypto assets into a single protocol, your funds are exposed to a variety of risks within that protocol. Protocol Cover protects your crypto deposits against unintended use of code, severe oracle failure, severe liquidation failure, and governance attacks.

Whether you're depositing into a protocol on Ethereum mainnet, a layer 2 network, or any other EVM-compatible network, you can protect your crypto against the biggest risks in DeFi.

Instead of depositing into a protocol and wondering if your crypto is safe, protect your crypto deposits with comprehensive cover. Once you do, you, too, can enjoy timely claims processing and peace of mind when you need it most.