Decentralized Insurance in Defi: An Application on Insuring Financial Products

The decentralized finance (DeFi) ecosystem is an environment where financial services are provided using decentralized technologies such as blockchain and smart contracts instead of traditional intermediaries. While the absence of intermediaries offers many advantages, it also brings significant disadvantages, the most critical being security issues. As a digital ecosystem, DeFi faces threats such as hacking attacks and smart contract errors, which can undermine trust. This study focuses on insurance activities aimed at enhancing ecosystem safety, emphasizing the role of trust. Pioneering insurance platforms were examined, and a financial asset insurance transaction was conducted using the Nexus Mutual platform. The findings reveal that although DeFi insurance can significantly reduce user risks, high Ethereum transaction fees and limited protocol liquidity reduce its accessibility. To address these challenges, offering insurance services on alternative blockchains and integrating them into centralized exchanges is recommended.

Journal

EGE ACADEMIC REVIEW

Year

2026

Volume

26

Issue

1

Pages

145-160

ISSN

1303-099X

DOI

10.21121/eab.20260110

WoS UID

WOS:001667241500010