Types of DeFi Insurance

No matter how good a system is, it may have some minor issues. An automated finance solution is great, such as decentralized finance. But in this automatic process, some problems can occur. If there is any problem in the principle on which the transaction will be completed automatically then it can cause fund loss for many. This automated process can become vulnerable not only to coding but also to various issues like hacking, theft, etc. So it is important to bring it under insurance. In the last post, I discussed DeFi Insurance with you, and today I will discuss its types. There are at least four types of decentralized finance insurance. DeFi insurance products are designed to address different risks and needs within the decentralized network. Today we will try to know briefly about these four.

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a. Smart Contract Cover:
This type of insurance provides coverage against losses resulting from vulnerabilities, and bugs in smart contracts underlying the DeFi network. It reimburses users for their losses up to a predetermined limit in the event of a smart contract fault or vulnerabilities.

b. Protocol Cover:
Protocol cover suggests insurance against losses resulting from protocol failures or governance attacks. It protects users' funds deposited into decentralized finance protocols, including lending, borrowing, decentralized exchanges (DEXs), and liquidity pools.

c. Asset Cover:
Asset cover provides insurance for specific assets held within the DeFi network. protocols. It safeguards users' funds against risks such as theft or price volatility.

d. Governance Cover: Governance cover protects users' voting rights and governance tokens in DeFi protocols. It reimburses users for losses resulting from governance attacks or manipulation. It is the final protection system that will ensure their participation in the decision-making process remains secure.

~ Regards,
VEIGO (Community Mod)

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