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

Insurance has long been a cornerstone of traditional finance, underpinning markets from commodities to credit since the 1600s. Yet in decentralized finance (DeFi), it has remained an afterthought—implemented in rudimentary forms or ignored entirely. As DeFi approaches its next inflection point, integrating sophisticated, institution-grade insurance models will be critical to attracting DEEP capital pools and ensuring long-term resilience.

The foundations of modern insurance trace back to Gerolamo Cardano’s 16th-century work on probability, later refined by Pascal and Fermat. By the 19th century, Carl Friedrich Gauss’s normal distribution provided the mathematical backbone for actuarial science. These breakthroughs transformed risk from an abstract concept into a quantifiable metric—a legacy DeFi must now embrace to mature.