Vaults: Curators & Infrastructure
Vaults are one of the most popular and fastest growing primitives in DeFi, but all the moving parts can lead to increased risk exposure. Vaults allocate deposited capital across various protocols. The curator defines the strategy, selects the venues, and sets the parameters and rebalancing, while infrastructure providers furnish the underlying tools to launch and manage vaults. Each of these decisions, along with the smart contracts and data enabling them, can expose the underlying capital to risk. Nexus has been covering vaults since 2022 when we paid out claims on the very first DeFi vault from yearn Finance. No one else has been underwriting vault risk for as long as we have.
Risks faced
A vault inherits risk from every protocol it allocates to.
Smart contract exploits in any protocol holding vault capital
Oracle failure and manipulation in the markets a strategy depends on
Liquidation failure that leaves bad debt for depositors to absorb
Governance takeover at an underlying protocol
Leveraged liquidation and unrealized loss on looped strategies inside the vault
Depositors, curators, and infrastructure providers all face their own risks when it comes to vaults. For depositors that are personally risk adverse, Protocol Cover is available for leading protocols such as Morpho and other listed markets. OpenCover provides a wide range of vault cover as well. Nexus Mutual works directly with curators and infrastructure providers to structure Bespoke Cover to protect their users against smart contract hacks, liquidation failure and more.
Contact us to embed cover in your vault or to protect your positions
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