A new protection scheme is proposed that does not require settings or the settings are simple and the need to coordinate with other protective devices has been removed. The approach can be viewed as a generalization of differential protection and it is enabled with dynamic state estimation. Specifically, the proposed protection scheme is based on continuously monitoring terminal voltages and currents of the component and other possible quantities such as tap setting, temperature, etc. as appropriate for the component under protection. The monitored data are utilized in a dynamic state estimation that continuously provides the dynamic state of the component by fitting the data to the basic model equations of the device under protection. The dynamic state is then used to determine the health of the component. Tripping or no tripping is decided on the basis of the health of the component. The basic approach, the analytics and the requirements for successful implementation of this concept are presented. Numerical experiments are presented to validate the method as well as an example comparison with conventional protection. Finally an evaluation of feasibility is provided based on present day microprocessor capabilities and it is concluded that present day microprocessors do have the computational power required by the proposed approach.