IDEAS home Printed from https://ideas.repec.org/p/cdf/wpaper/2025-5.html
   My bibliography  Save this paper

Major Conundrums and Possible Solutions in DeFi Insurance

Author

Listed:
  • Zhou, Peng

    (Cardiff Business School)

  • Zhang, Ying

    (University of Surrey)

Abstract

This paper empirically explores the early development of insurance projects in the decentralized finance (DeFi) industry, which is based on disruptive technologies like blockchain and smart contracts. A brief history of DeFi is narrated, stressing four risks of DeFi (volatility risk, cyberattack risk, liquidity risk, and regulation risk) and its co-evolution with traditional finance. First-hand evidence is collected from informed industrial practitioners through two semi-structured focus group discussions. Consensuses are reached on why the DeFi insurance market is underdeveloped and incomplete (the liquidity conundrum, the actuarial conundrum, the verification conundrum, the scale conundrum, the yield conundrum, the exploitation conundrum, the cybersecurity conundrum, and the regulation conundrum) and how the next generation of DeFi insurance can address these conundrums. Further evidence is obtained to quantify the importance of conundrums using Analytic Hierarchy Process (AHP). Building on the qualitative and quantitative findings, a prototypical model of DeFi insurance is proposed.

Suggested Citation

  • Zhou, Peng & Zhang, Ying, 2025. "Major Conundrums and Possible Solutions in DeFi Insurance," Cardiff Economics Working Papers E2025/5, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2025/5
    as

    Download full text from publisher

    File URL: http://carbsecon.com/wp/E2025_5.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Decentralized Finance; Insurance; Blockchain; Smart Contract; Focus Group; Analytic Hierarchy Process;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdf:wpaper:2025/5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Yongdeng Xu (email available below). General contact details of provider: https://edirc.repec.org/data/ecscfuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.