Onchain Insurance Fund

Definition ∞ An onchain insurance fund is a pool of digital assets held within a smart contract on a blockchain, specifically designed to compensate users for losses incurred due to predefined protocol failures or exploits. This fund provides a decentralized safety net for participants, offering a form of risk mitigation without a central insurer. Its rules for claim assessment and payout are typically governed by the community. It aims to restore user confidence.
Context ∞ Onchain insurance funds are a developing feature in decentralized finance, aiming to mitigate risks associated with smart contract vulnerabilities and other unforeseen events. Their presence can significantly enhance user confidence in DeFi protocols, and their size, funding mechanisms, and governance structures are often topics of community discussion and news coverage. These funds are vital for the long-term sustainability of decentralized applications.