Cozy Finance

Cozy Finance, Inc. operates as a risk management platform tailored for the decentralized finance (DeFi) sector. Founded in 2020 by Tony Sheng and Payom Dousti, the Seattle-based company aims to provide tools that mitigate the inherent risks of the DeFi space, such as smart contract failures, hacks, and exploits. The founders brought significant relevant experience to the venture; Sheng previously held roles at Multicoin Capital, Decentraland, and Google, while Dousti co-founded the crypto-asset marketplace Rare Bits and served as Director of Product at FanDuel.

The company's core offering has evolved into what it calls "Safety Modules." This product is an automated, on-chain emergency fund that protocols can establish to protect their users. Unlike traditional insurance which requires individual users to purchase policies and file claims, a Safety Module is designed to automatically protect all of a protocol's users up to a predefined limit, offering a more transparent and trustless method of protection. This is particularly aimed at DeFi protocols, DAOs seeking to protect their treasuries, and funds looking to underwrite risk for yield. The business model appears to be centered on facilitating these protection markets. While setting up a module is free aside from gas costs, the protocol generates yield for those who supply capital to the protection pools from the fees paid by those purchasing protection.

Cozy Finance has positioned itself as a developer of risk-management software, enabling anyone to permissionlessly create protection markets for various DeFi protocols. These markets cover predefined events, such as a stablecoin de-pegging or a protocol getting hacked. For instance, after the Euler Finance hack in March 2023, an active market on Cozy V2 was triggered and paid out to protected users. The platform supports flexible funding options for these safety modules, allowing projects to finance them directly, allocate a portion of their fee revenue, or incentivize user contributions with rewards. Since its inception, Cozy Finance has secured a total of $17.1 million in funding over two rounds from investors including Electric Capital, Variant Fund, Dragonfly Capital, and Polychain Capital.

Keywords: decentralized finance, DeFi, risk management, smart contract protection, on-chain insurance, crypto risk, permissionless protection, Safety Modules, protection markets, Tony Sheng, Payom Dousti, DeFi security, yield underwriting, crypto asset protection, blockchain risk, protocol security, treasury management, stablecoin depeg, hack protection, exploit coverage