One of the most popular ways for bootstrapping a DeFi project is through Liquidity Mining. Most DeFi projects are two-sided marketplaces for some type of financial service — for example, Compound is a marketplace for borrowers/lenders and Uniswap is a marketplace for LPs/traders. Bootstrapping a new two-sided marketplace is difficult because of the cold-start problem: if there is no demand, there won’t be supply, and if there is no supply there will be no demand. This is where tokens come in handy — projects can incentivize one (or both) sides of the marketplace through distributing their own token to kickstart the demand-supply flywheel.

The idea of Decentralized Insurance has been one of the classic examples for ideal use-cases of blockchain applications. Insurance providers may have incentives to withhold claims for as long as possible, and users have little transparency into the process — leading to an overall poor user experience. The idea of putting these insurance processes on-chain is an appealing one: insurance claims can be programatically & immediately paid out if some conditions are met, and everyone has full transparency on the state of the entire system at all times. For example, someone could buy travel insurance for their flight, and a smart contract could automatically payout if Google Flights reports that the flight was delayed.