Most “DeFi insurance” still feels like a Web2 insurer running on smart contracts. A small group sets fixed premiums, capital sits in passive pools, and claims often end up in slow governance processes. Meanwhile, billions have been lost to hacks and exploits across DeFi and bridges, as firms like Chainalysis keep documenting.
While past DeFi insurance products have tended to follow a pooled-capital, fixed premium model, recent research shows us a clear shift toward market-based risk transfer. For example, Feng et al (2024) outline how decentralized insurance schemes are evolving from mutualized risk sharing toward tradable risk tokens and secondary markets. Scholarly work Bekemeier (2023) and industry-focused reports Geneva Association (2023) likewise highlight limitations of fixed-premium, pooled models in DeFi and point toward more dynamic, market-driven approaches. Even the BIS (2021) highlights structural deficiencies in the current pooled-capital frameworks in DeFi and implicitly signals the need for more market-driven architecture.
In today’s market, liquidity providers are forced to trust audits (which can quickly go outdated) or follow the capital of top VCs and funds, but these are unreliable indicators for safety. On DEIN, people put their money where their mouths are, similar to Polymarket. When more of a pool’s capital is tied up in active policies, the price of new coverage increases and yields for underwriters rise, which attracts more capital and pushes utilization back down. DEIN builds a native DeFi risk market using mechanics that people already understand: stablecoin-backed pools and utilization-based pricing.
Risk pools with utilization-driven pricing
Each insurable risk type lives inside a stablecoin backed pool. Underwriters supply capital. Users buy protection that draws against that capital.
The key variable is utilization, defined as the percentage of capital currently committed to active policies. The DEIN flywheel works as follows:
- When utilization is low, premiums are low and underwriter yields are modest.
- As utilization rises, premiums increase dynamically. Protection becomes more expensive, and underwriters earn higher returns.
- Higher yields attract new underwriters, expanding capacity, reducing utilization, and naturally lowering premiums again.
This creates a market-based premium curve similar to interest-rate models used in Aave or Compound. Pricing adjusts continuously based on actual demand for protection, not on audit reports (unreliable) or the team’s intuition (more unreliable).
Academic work on decentralized insurance, including recent research from Feng, Liu and Zhang (2024), implies that pooled capital alone cannot efficiently handle risk at scale. They note that decentralized insurance must integrate risk-sharing and risk-transfer behaviors, which requires more dynamic pricing than traditional mutuals. DEIN’s utilization model aligns directly with this view.
Dynamic pricing solves the fixed-premium problem
Early decentralized insurance experiments mostly used fixed or slow-moving premiums. These systems struggled with correlated risks, liquidity shortages, and persistent underpricing. Bekemeier (2023), in a study on DeFi insurability, observed that mutual-style structures often mispriced risk and had trouble scaling because premiums did not adjust to changing risk conditions.
DEIN avoids that problem entirely. The premium curve is transparent, algorithmic, and tied to real pool conditions. If a protocol suddenly experiences higher perceived risk, demand for policies rise, utilization climbs, and premium rates increase automatically. Underwriters are rewarded for stepping in at moments when coverage is scarce, and policyholders get a clear signal of market sentiment.
Claims and Loss Assessment: On-Chain Voting With Objective Data
Pricing only matters if claims are credible and payouts are executed without subjective or discretionary intervention. DEIN uses an on-chain indemnity model for most product lines, where community participants vote on the payout amount based on objective on-chain data. The vote functions as a decentralized loss-adjustment process, not a discretionary claims committee.
- Each pool has a clearly defined incident category, such as a smart contract exploit or protocol malfunction.
- When a claim is submitted, voters review on-chain evidence of the loss.
- A vote of “0” indicates no valid claim. Any other number represents the loss amount the voter believes occurred, up to the policy maximum.
- The final payout is calculated from the weighted votes and executed automatically by the contract, with no manual transfers or off-chain human overrides.
This model retains the core benefits of decentralization while still allowing loss amounts to reflect real economic impact. It ensures policyholders cannot profit from claims, since the payout is tied to the assessed loss.
Aligned incentives for underwriters and users
Because everything ties back to utilization:
- Underwriters earn yields correlated with actual demand for protection.
- Users see real-time pricing that reflects current pool conditions, not static numbers.
- Protocols can track their own risk markets as a live signal of how the market perceives them.
This creates a risk layer that behaves like any other DeFi primitive. Underwriters act like LPs in a lending market. Policyholders act like borrowers of risk capacity. The premium rate functions as the “risk interest rate,” fluctuating in real time.
A native risk layer for a multi-chain world
DeFi is multi-chain, so we made DEIN omni-chain. Pools sit on a hub chain, while policy purchases and integrations occur on connected L1s and L2s. Commitments can be cross chain, but not user funds. This reduces bridge risk and keeps the UX familiar, but also makes DEIN the first mover on nearly every chain in existence. Within minutes of a new protocol going live, DEIN can cover it, regardless of where it is.
Where DeFi insurance must go
The direction of travel is increasingly clear in both academic and industry research. Fixed-premium mutuals are not enough for the scale and speed of DeFi. The next phase requires market-based pricing and composable risk primitives.
DEIN’s utilization-driven pools provides exactly that. By turning risk into something that can be priced, monitored, and supplied on-chain, users and DAOs can stop treating protocol safety as a matter of guesswork and start treating it as a measurable part of their strategy.
If DeFi is going to mature into real financial infrastructure, DEIN is the risk layer it needs.
By Mike Miglio, Founder and CEO of DEIN
Mike Miglio is CEO and founder of
This article is published under HackerNoon’s Business Blogging program.