Cozy Finance

Cozy is an open-source protocol for automated and trust-minimized Protection Markets. Protection Markets allow you to provide and receive protection against predefined conditions like a loss of funds due to a smart contract hack. Anybody can create and use Protection Markets.

Cozy is an open-source protocol that enables investors to participate in automated and trust-minimized protection markets.

Protection markets mitigate the risks often associated with investing in decentralized financial (DeFi) markets and applications. Because DeFi application protocols might seem more vulnerable to hacks and exploitation than traditional financial instruments for some investors, Cozy provides a platform for protecting assets against losses programmatically. Investors with confidence in DeFi application security can use the Cozy platform to earn interest by supplying assets to a protection market.

The two key components of a protection market are:

1. A money market with a liquidity pool of digital assets.
2. A trigger contract that specifies a condition to protect the assets in the pool against.

There are three main ways to participate in a protection market:

1. As a protection market developer, you create the trigger contract that protects assets if a specific trigger condition—such as a sudden, sharp decline in value—is met in one or more protocol markets.
2. As a protection market supplier, you deposit assets to be used in a protection market pool and earn interest from borrowers who pay for the having their deposited asset protected against losses. If you think that a market is not likely to lose funds—that the trigger condition is unlikely to occur—you can use Cozy to earn interest by providing protection.
3. As a protection market borrower, you deposit collateral and borrow against it with a reduced rate of return in exchange for protecting your deposit against the condition defined in the trigger contract. If you borrow from a protection market and the trigger condition is met, the collateral you deposited remains safe and any outstanding debt is cancelled