Title: Pricing Crypto Cyber Risk via Staking: Evidence from Decentralized Insurance
Abstract: Cyber insurance has yet to be offered or accurately priced by traditional insurers, largely due to the challenges of pricing cyber risks. Blockchain-based decentralized insurance (DeInsur) platforms have emerged, enabling investors to participate in cyber risk assessment and pricing through staking mechanisms. This study examines whether the staking mechanism in DeInsur can efficiently price crypto cyber risks and predict cyber attacks. Using data from the largest blockchain-based insurance platform, we find that higher premiums are systematically associated with a greater likelihood of claims, suggesting that stakers incorporate risk-relevant information into their pricing decisions. Further analysis indicates that this pricing efficiency is driven by investors’ use of publicly available information and is influenced by broader crypto market dynamics. Our findings provide empirical evidence that staking mechanisms can offer a viable DeInsur solution for pricing emerging crypto cyber risks.
Bio: Zhonghe is a fourth-year Ph.D. student in Actuarial Science at the University of Illinois Urbana–Champaign. Before joining the program, she has obtained a Bachelor’s degree in Financial Mathematics and a Master’s degree in Statistics. Her research focuses on the empirical analysis of pricing mechanisms and investor behavior in decentralized finance markets. She also serves as a graduate supervisor for several research projects on decentralized finance in IRisk Lab.