Performances
RD Popularity Index
RD Growth Index
Comparison
Follow Updates
Follow Lists
People
About Cozy Finance
Cozy Finance is a decentralized risk management protocol that lets users buy or provide protection for DeFi assets through "protection markets." Suppliers deposit assets to earn interest, while borrowers pay premiums to have their positions protected. When a trigger condition such as a hack or a sharp price decline occurs, outstanding debts are canceled and suppliers absorb the losses. This creates an insurance-like but fully on-chain and decentralized mechanism for DeFi investors.
The core edge is composable protection and transparent verifiability. Any protocol can create a protection market permissionlessly. All funds, trigger conditions, and payout logic are publicly verifiable on-chain, and protection is backstopped by decentralized markets rather than opaque insurers. Cozy has also introduced a "safety stack" (e.g., Cozy Earn) that absorbs losses in layers — first-loss capital, vault coverage, and a disaster reserve — allowing users to see exactly who absorbs losses and in what order.
The market pain point is that DeFi lacks recourse after things go wrong. Traditional finance has guarantees, reserves, and subordinated capital, while DeFi typically focuses only on prevention. When exploits or oracle failures happen, users often have no backstop. Cozy addresses this by providing modular protection, automated payouts, and publicly verifiable reserves.
In the past six months (March to September 2026), Cozy's main developments include launching the Cozy Earn app, which attaches layered protection to lending vaults such as Euler; continuing to operate the v2 permissionless protection markets; and rolling out the publicly verifiable Reserve module. These updates strengthen usability and transparency.
In September 2020, Cozy Finance announced its launch and completed a $2 million seed round led by Electric Capital, with participation from Variant Fund, Dragonfly Capital, and others. The project positioned itself as a DeFi-native risk management protocol, aiming to address the lack of effective tools for users facing new risks such as smart contract vulnerabilities and extreme market volatility.
In October 2021, Cozy introduced Safety Modules, allowing anyone to create on-chain protection markets. Users could provide or purchase protection against specific conditions (e.g., a pool losing more than a threshold of value), forming a decentralized risk-hedging mechanism. This design removed reliance on centralized insurance institutions.
Subsequently, Cozy further proposed the "DeFi Safety Stack," a layered security architecture consisting of Curator First Loss, Bad Debt Protection, and Disaster Reserve, absorbing losses progressively. This architecture brings the concept of structured loss absorption from traditional finance into DeFi, enabling protocols and users to customize risk exposure, and providing standardized, composable infrastructure for DeFi risk management.
These three milestones correspond to Cozy's founding, core product launch, and theoretical framework construction, with long-term significance.
Key progress over the past six months: Cozy Finance officially launched the layered DeFi Safety Stack architecture and, based on it, released the Cozy Earn app. The first lending vaults supporting Euler are now live. Products include: Cozy USDC (depositors get three layers: Curator First Loss, Plus Vault bad-debt protection, Disaster Reserve); Cozy USDC+ (users provide bad-debt protection for higher yield); Cozy Reserve (tail-risk backstop for extreme events). It also published an Euler Vault integration guide enabling atomic bad-debt repayment via the Safety Module, replacing debt socialization. Future focus: expand the Safety Stack to more protocols, launch risk-tranched products, develop Tranche structured products and Protection Markets for modular, composable risk management, and attract protocols needing defensible yield and capital seeking structured protection. Officials stress all protection layers are on-chain verifiable with self-custody; coverage is limited and extreme events may still cause losses.
Payom Dousti: Co-founder and CEO. Previously co-founded NFT marketplace Rare Bits; served as Director of Product at FanDuel, Chief Product Officer at numberFire, and Entrepreneur in Residence at One Zero Capital.
Tony Sheng: Co-founder. Former Principal at Multicoin Capital, Product Lead at Decentraland Foundation, Product Manager at Google (machine learning brand safety), and Business Analyst at McKinsey. Currently an angel investor.