GlossaryIntermediate
DeFi Insurance
Decentralized cover against a specific DeFi risk, such as a smart contract exploit, typically paid out through community voting rather than a legal guarantee.
DeFi insurance (often called "cover") lets a user pay a premium for protection against a specific, defined risk — most commonly a smart contract exploit — through a decentralized, member-funded risk pool rather than a traditional, licensed insurance product.
Many DeFi insurance protocols pay claims through community voting rather than a legal obligation to pay a verified claim, a structurally different guarantee worth understanding clearly — see Kaavon's dedicated "What Is DeFi Insurance?" guide.
Examples
- A DeFi user might purchase cover against a specific lending protocol being exploited, paying an ongoing premium for that protection.
- Because DeFi insurance claims are typically decided by a token-holder vote, a claim's approval isn't guaranteed the way a traditional insurance payout generally is.