Clear DefinitionsBridge Insurance
1 min read
Pronunciation
[brij in-shoor-uhns]
Analogy
Like cargo insurance that compensates a shipper if goods are stolen or damaged during transit between ports.
Definition
Financial products that provide coverage against losses arising from cross‑chain bridge hacks, smart contract bugs, or mismanagement of locked assets.
Key Points Intro
Bridge insurance mitigates risk for users transferring assets across potentially vulnerable bridges.
Key Points
Underwriting: Assesses bridge security posture and historical performance.
Claims process: Defines triggers (e.g. hack event) and payout conditions.
Premium model: Prices coverage based on exposure and threat level.
Reinsurance: Pools risk across multiple insurers to cover large losses.
Example
A user pays a small premium in ETH to insure a $50,000 transfer on a popular bridge; if the bridge is exploited within 30 days, they receive compensation.
Technical Deep Dive
Insurers perform their own bridge audits, monitor on‑chain metrics, and set reserves. Smart contracts escrow premiums; oracles feed hack events. Payouts are automated via parametric triggers or governance votes.
Security Warning
Coverage limits and exclusions (e.g. force majeure) may leave gaps; read policy terms carefully.
Caveat
Insurance premiums can be high for novel bridges; cost‑benefit should be evaluated per transfer.
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