Decentralized Insurance. Part 3: World Computer
Part 1: Why Decentralized Insurance
“Ethereum 1.0 is a couple of peoples’ scrappy attempt to build the world computer; Ethereum 2.0 will actually be the world computer.”
Vitalik Buterin, 2018
We’re far from that.
Or, we’re far from what people imagine thinking of such a thing as a ‘world computer.’ Perhaps, it would have been something as big, fast, and powerful as Skynet, VIKI by USR, or a similar sci-fi attractive machine.
So far, we have something less romantic: something remarkably cumbersome to get actual use of, very slow and expensive. It costs us tremendous gigawatt-hours to run. Even despite we hear it’s ‘secured as nothing before,’ the hacks and shady manipulations end up in millions of EUR lost to some mysterious hackers.
And still, it’s just great.
It’s the first tool ever capable of ‘computing’ and executing the algorithms independently from businesses or governments. It’s a universal and resilient interface for interconnecting financial instruments, products, and tools.
And it’s just plug-and-play the insurance.
Permissionless and inclusive
Conceptually, the decentralized insurance has an inclusive nature and allows everyone to join any of two camps — to be a risk carrier or a policyholder. The only preliminary requirement to participate is to own a particular crypto asset.
Joining a risk pool will have financially beneficial since you’d join the revenue stream at the cost of taking a particular risk. The crowd-funded reserves would have its governance model and a community.
Buying a policy is way more comfortable than traditional insurance products since the decentralized protocol automates onboarding. The more protocols are connected, the sleeker user experience is. Besides, the insurance policy is simply cheaper since no manual work involved neither an army of middle-men.
Claims processing, optimised
Listen. And understand. That terminator is out there. It can’t be bargained with. It can’t be reasoned with. It doesn’t feel pity, or remorse, or fear. And it absolutely will not stop, ever, until you are dead.
© Terminator, 1984
Not that dramatic, but the idea is that the world computer works with objective data, observable, and measurable. Like Terminator, it’s a programmable and deterministic machine that resolves the claims based on the transparent algorithm.
Amongst the transparency, this computer has got one more advantage — the universal open API that enables a seamless connection of financial applications to the claims processing.
It’s a financial lego!
Decentralized Insurance brings composability and stacking to the financial and risk applications. Their bits and pieces connect each other and exchange events, data, and assets.
Terminal (https://terminal.insure) is one of a few early concepts offering fully decentralized insurance experience to its customers.
People can insure against the financial loss caused by the trip delay or cancellation locking some crypto assets. When (if) the delay occurs, the underlying smart contract performs automatic *X payment to the protection holder — no claiming, no forms required.
While the Terminal page looks like a traditional insurance page, the building blocks underneath have nothing to do with an insurance company. The contracts in Blockchain take care of multiple duties, such as:
- Cryptographic vaults with programmed governance instead of bank account
- On-chain self-sovereign risk and risk underwriting of each train
- Decentralized oracles based on various railway APIs for the train status
- Blockchain transactions instead of bank transfers
- Crowd-funded crypto vault with an incorporated interest-earning instead of ‘re-insurance’ company
Terminal is just one of the potential implementations out there, and more will come.
