Recently, introduction of renewable energy such as photovoltaics and wind energy has gained precedence for greenhouse gas reduction and oil substitution. However, due to the power fluctuation of renewable energy sources, voltage and frequency deviation are problematic in power systems. From the background, smart grids are attracting attention. Already, a smart grid based on AC grid is proposed. However, no study on research is presented or published on a smart grid based on DC grid. DC smart grid has been presented by the authors. The DC smart grid is robust to ac-side fault conditions. However, dc faults in the DC smart grid are not considered in previous papers. This paper analyzes dc faults, their transients, and the resulting protection issues in the DC smart grid. Over-current fault are analyzed in detail and provide an insight into protection system design. The effectiveness of the proposed method is performed by using PSIM environment.