In this paper, we propose a fully decentralized and smart contract-based insurance protocol. We identify various issues in the Decentralized Finance (DeFi) insurance context and propose a solution to overcome these shortcomings. We introduce an economic model that allows for risk transfer without any external dependencies or centralized intermediaries. In particular, our proposal does not need any sort of subjective claim assessment, community voting or external data providers (oracles). Moreover, it solves the problem of over-insurance and proposes various ways to mitigate the capital inefficiencies usually seen with DeFi collateral. The work takes inspiration from peer-to-peer (P2P) insurance and collateralized debt obligations (CDO). We formally describe the protocol, assess its efficiency and key properties and present a reference implementation. Finally, we address limitations, extensions and ideas for further research. ​

Citation information can be found on arXiv: https://doi.org/10.48550/arXiv.2212.10308

All code in the contracts/ directory is licensed under the MIT license, see LICENSE.md

The paper, titled Defi_Insurance.pdf is licensed under the CC BY-SA license, see LICENSE.CC-BY-SA.md