Coverage buyers: Individuals looking for insurance coverage pay a premium into a capital pool. This premium acts as their insurance cost to be 'covered' in the event of a specified incident.

Capital pool: This is where the coverage providers' funds are pooled together. The capital is locked in the pool and is used to pay out accepted claims.

Coverage providers: These are individuals or entities who provide capital to the insurance pool. By locking up capital, they are essentially underwriting the coverage and, in return, they may earn yield or rewards on the capital they've provided, compensating them for the risk they take on.

Smart contract: At the heart of this decentralized insurance model is a smart contract on a blockchain. This smart contract controls the capital pool and ensures transparency and fairness in the insurance process. It automatically executes the terms of the insurance contract, such as facilitating the payout for a claim if the predefined conditions are met.

Claims process: If an insured event occurs, the coverage buyer can file a claim. If the claim is validated and accepted, which is often done through a decentralized decision-making process involving the community or stakeholders, the claimant receives their coverage from the capital pool.

Incentives and governance: Smart contracts often include incentives to encourage good behavior from all participants. For example, coverage providers may be rewarded for providing capital, and those participating in the governance (such as voting on claims) may also be incentivized.