Definition ∞ Risk simulation involves the computational modeling of various potential scenarios to assess and quantify the impact of different risks on a system or asset. In digital finance, this entails creating virtual environments to test protocol resilience against market volatility, smart contract exploits, or network attacks. It aids in proactive risk management and system hardening.
Context ∞ Risk simulation is a vital tool for developers and auditors in the digital asset space to evaluate the robustness of decentralized finance protocols and new blockchain designs. By modeling extreme conditions or adversarial actions, teams can identify vulnerabilities before deployment. The ongoing refinement of these simulation techniques is critical for enhancing overall system security and stability.
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