Governance members of decentralized lending protocol Aave (AAVE) may consider risk-based insurance packages as part of its safety module system, according to a discussion during a community call held on Jan. 8.
- The community call was celebrating Aave’s first anniversary since its mainnet launch, and covered several topic relating to protocol upgrades
- The safety module proposal was put forward by members of research firm Delphi Digital, who said that a market-based solution would improve upon the current safety module system
- Part of its Aavenomics upgrade, Aave’s Safety Module is a decentralized insurance fund that protects investors from events like hacks; it has amassed over $375 million in funding so far
- The analysts reason that a built in option to ask the investor whether he or should would like insurance coverage for a lower interest rate could result in better capital efficiency and measurement of insurance demand
- As a result, coverage for different assets would depend on the risks associated with it, as opposed to having a one size fits all scheme
- They go on to say that the product could help AAVE as projects like Cover and Nexus Mutual also release decentralized insurance products