Veda CEO discusses challenges of DeFi insurance amid growing interest

DeFi insurance sounds great in theory. Protocols promise to make users whole when smart contracts fail, bridges get exploited, or liquidity pools drain overnight. The problem, according to Veda CEO Sun Raghupathi, is that nobody really knows if these programs work until they’re stress-tested by a major claim event.

Raghupathi, who leads the DeFi vault infrastructure provider Veda, says insurance programs across decentralized finance are gaining interest from both retail and institutional participants. But interest and proven effectiveness are two very different things. Until significant claims are processed and paid out, the industry is essentially buying a parachute it has never tested.

The insurance gap in DeFi

Traditional insurance works because actuarial tables are built on decades of claims data. Auto insurers know, with reasonable precision, how often a 25-year-old in Texas totals a sedan. DeFi insurance providers are working with a fraction of that historical information, trying to price risk for protocols that may have existed for less than a year.

The handful of notable DeFi exploits that have triggered insurance payouts offer a mixed record. Some mutual-style coverage providers have honored claims. Others have faced governance disputes where token holders voted against payouts, leaving affected users with nothing but a lesson in decentralized governance.

Why Veda’s perspective matters

Veda sits at an interesting vantage point in this conversation. The company, founded in early 2024 by Raghupathi alongside CTO Joe Terrigno and COO Stephanie Vaughan, builds modular, non-custodial onchain vaults that simplify yield generation for applications, protocols, and institutions.

The platform has scaled quickly. A partnership with Kraken resulted in deposits exceeding $600 million across DeFi Earn vaults, serving more than 80,000 users. Those Kraken vaults alone added roughly $100 million since mid-2025.

Across all partners, including ether.fi, Lombard, and Mantle, Veda’s platform has reportedly processed over $16 billion in total deposits. In June 2025, the company raised $18 million in a funding round led by CoinFund to expand its vault infrastructure.

The CEO, who left a computer science PhD program before founding Veda, has spoken publicly about the role vaults play in bridging institutional-grade products with consumer accessibility.

What institutional adoption demands

For platforms like Veda, which now counts Kraken as a major partner, this creates a dual challenge. The vault infrastructure itself needs to be secure and audited. But the broader ecosystem around it, including the insurance layer, needs to demonstrate that it can handle adversity at scale.

Veda joined the Digital Chamber as part of its policy engagement efforts, signaling an awareness that regulatory clarity and industry standards will shape how quickly institutions move deeper into DeFi.

For investors and users evaluating DeFi platforms, the takeaway is practical. Insurance coverage listed in a protocol’s documentation is not the same as insurance coverage that has been tested and honored. Until the industry builds a track record of reliable claim processing, the gap between promised protection and actual protection remains one of DeFi’s most underappreciated risks.

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