The DeFi platform for cryptocurrency derivatives Opium Protocol unveiled Bridge Protection, a solution designed to hedge risks when interacting with sidechains.
📣As the importance of side-chains increases in the #DeFi Opium presents Bridge Protection that is decentralised & tradable insurance
With it, the largest and most solid side-chains bridges like@0xPolygon @xdaichain @AnyswapNetwork @pNetworkDeFi get saferhttps://t.co/HWt7hLtaL6— Opium (@Opium_Network) May 6, 2021
The tokenised and decentralised insurance solution is based on the Opium CDS contract [credit default swap]. Insurance can be bought or sold as a token through the Opium Staking service.
Opium Protocol noted that the reliability of the sidechain determines the safety of the bridge that connects it to the mainnet. The so-called bridge contract on the mainnet is responsible for holding assets sent to the side chain.
According to the scheme below, users confident in the reliability of a given bridge place funds in a staking pool to earn fees. Network participants seeking to hedge risks, on the other hand, pay for monthly insurance coverage.
When a user deposits assets into the pool, they assume the risks associated with the chosen sidechain. Withdrawals are possible once a month — on the pool’s rebalance day. The position can be resold on the secondary market at any time.
The insured will receive a payout in the event of a failure or hack of the bridge contract. The staker in such a scenario will lose their assets.
Back in December 2020, the platform launched a service for hedging risks with Opium Insurance for the DeFi sector.
In January 2021, the platform launched the governance token OPIUM as part of its own drOpium liquidity mining model.