Definition ∞ Decentralized insurance offers risk mitigation services on blockchain networks without a central authority. This approach to insurance leverages smart contracts and decentralized autonomous organizations (DAOs) to create risk pools and manage claims, removing intermediaries from the process. Policyholders pay premiums into a shared pool, and payouts for covered events are determined by predefined rules or community voting. It provides a transparent and censorship-resistant alternative to traditional insurance, primarily addressing risks specific to the digital asset space.
Context ∞ Decentralized insurance protocols are frequently featured in crypto news as solutions to the inherent risks of DeFi, such as smart contract vulnerabilities or stablecoin stability issues. The ongoing discussion involves regulatory clarity for these offerings and their capacity to scale while maintaining sufficient capital reserves. Future developments include expanding coverage to real-world assets and improving the efficiency of claim adjudication through decentralized oracle networks.
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