DeFi risk management protocol UNION raises $3.9 million

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UNION, a decentralized finance (DeFi) protocol building risk management tools, has raised $3.9 million in fresh funding.

The round was backed by Alameda Research, Solidity Ventures, 3Commas, and Black Edge Capital, among others. With fresh capital in hand, UNION looks to launch its protocol in the coming months.

John Liu, chief product officer at UNION, told The Block that the protocol would offer "complete risk management" tools for DeFi.

"DeFi is still growing. It would be disingenuous of anyone to state that they 'know all the risks' of DeFi," said Liu. "We see clear blocks of risk, and the ones we have prioritized are transaction finality (things end up where they should be), smart contract risk (specific to project or dApp), Layer-1 risk (entire protocol fails), Impermanent loss (specific to liquidity providers), collateralization risk (specific to lenders)."

Some other DeFi risks that the UNION protocol is investigating are flash loan exploits and portfolio correlation risk, said Liu.

UNION could be seen as a rival to DeFi insurer Nexus Mutual, but Liu said the two protocols are different on various counts. For instance, UNION is not restricted in a members-only model, said Liu, adding that "we don't need anyone to 'wrap' our insurance product to be KYC-free. We are open, KYC-free."

UNION is expected to launch protection products, as well as a secondary market for its products in the coming months. "We believe that with these products, buyers and writers can offload their risk, which is crucial to the maturation of DeFi," said Liu.

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