Insuring Decentralized Finance
Background
Decentralized finance (DeFi) circumvents traditional centralized financial institutions and performs financial transactions on the blockchain. It is a lower-cost approach, but anonymity and lack of strong regulatory frameworks allow bad actors to thrive. Deploying robust insurance coverage solutions has been identified as one of the main barriers to a thriving DeFi system. Guidelines to good practices will help reputable actors in the DeFi industry remain reputable.
Research Objective and Deliverables
This project will develop robust underwriting guidelines and actuarial pricing methodologies that will enable creating insurance products that adequately cover the risks associated with DeFi contracts and prevent anti-selection and moral hazard. Results will be outlined in a report that discusses product design and describes underwriting guidelines and actuarial pricing methodologies.
Target Audience and Impact
Consumers will have a framework for evaluating the legitimacy of a DeFi platform, and insurers will have a set of guidelines and methodologies from which to create products that insure against the risk of losses associated with using DeFi platforms.
Estimated Cost
$100,000
Estimated Timeline
Approximately 12 months