Insolvency Proof

Asset

Insolvency proofing, within decentralized finance, represents a strategy to isolate digital assets from the potential failures of centralized intermediaries. This is achieved through mechanisms like over-collateralization in lending protocols or the use of non-custodial wallets, ensuring user control over private keys. The concept extends to derivatives by employing collateralization ratios that exceed potential liquidation thresholds, mitigating counterparty risk inherent in centralized exchanges. Ultimately, it aims to establish a demonstrable separation between asset ownership and the solvency of any single entity.