With all the hacks and exploits plaguing decentralized finance (DeFi), you'd expect insurance to be a booming sector. But as highlighted in a recent thread by DeFi analyst Ignas (@DefiIgnas), it's far from that. Nexus Mutual stands out as the primary player, holding a total value locked (TVL) of $144 million, while competitors like Cover Protocol have faded away.

Ignas points out that the math just doesn't add up for most users. Insuring yields around 4% at a cost of 1.4% to 2% isn't appealing, especially in a retail-driven market. Instead, many protocols are opting to create their own insurance funds—Aave, for example, has a $1 million deposit insurance pool.

What's intriguing is the performance of Nexus Mutual's token, $NXM. Unlike most altcoins that have struggled, $NXM is up year-to-date and has doubled since 2023. Trading at a fully diluted valuation (FDV) of $138 million, it remains relatively undervalued. Ignas suggests keeping it on your "RealYield watchlist," as real yield refers to protocols that generate sustainable returns through actual revenue rather than inflationary rewards.

The thread sparks discussions on why insurance hasn't scaled. One reply from @Cryptoyieldinfo notes that true insurance needs billions in reserves, which is tough in DeFi. Ignas responds that the challenge lies in achieving capital efficiency for those reserves.

Another user, @deepcryptodive, explains $NXM's price action: it behaves like Ethereum (ETH) due to its minting process, sometimes used as an ETH proxy with better yields than plain staking.

As institutions warm up to DeFi, this could change. Larger capital inflows might demand robust risk management, boosting demand for protocols like Nexus Mutual. For now, it's a niche but promising area worth monitoring.

If you're into blockchain and looking for sustainable plays beyond hype-driven meme tokens, Nexus Mutual offers a glimpse into DeFi's maturing infrastructure. Check out the full thread here for more insights.