Custody Insurance
A commercial insurance policy underwritten by an insurance company, specifically protecting against theft or loss of crypto assets held by a third-party custodian — an entirely different mechanism from an exchange's self-funded <a href="/en/glossary/derivatives-and-leverage/insurance-fund/">Insurance Fund</a>.
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Insurance Fund
An emergency reserve that an exchange or protocol sets aside and controls entirely on its own, intended to cover user losses during specific extreme events (such as a security breach or cascading liquidations). But its nature is self-insurance, not a regulated insurance product — whether and how much gets paid out is typically at the platform's own unilateral discretion, not a contractual right a user can enforce.
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Proof of Reserves
A verification mechanism that lets users independently confirm, through cryptographic means, whether their own balance is genuinely included in an exchange's total claimed assets — rather than simply taking the exchange's word for it. Its core tool is the Merkle tree, but what it proves is only a snapshot at a specific point in time, not a guarantee that the exchange remains fully solvent at every moment afterward.
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