Risk, Reward, and Resilience: Building Insurance Primitives in DeFi

Risk, Reward, and Resilience: Building Insurance Primitives in DeFi


Insurance stands as one of finance’s foundational primitives—an essential scaffold that undergirds every major market from commodities to credit. Since the 1600s, no vibrant financial ecosystem has thrived without a robust insurance mechanism: market participants demand quantifiable measures of risk before committing capital.

Yet in decentralized finance(DeFi)’s first wave—lending, exchanges, derivatives—insurance remained an afterthought, implemented in rudimentary forms or absent altogether. As DeFi targets its next inflection point, embedding sophisticated, institution-grade insurance models will be critical to unlocking deep pools of capital and delivering enduring resilience.

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Modern insurance has a long history. In the 16th century, Gerolamo Cardano’s early treatises on games of chance pioneered probabilistic thinking, framing uncertainty

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