AMA Highlights: Shield Finance
By Daniel Dal Bello, Director.
April 30, 2021–5 min read.
Shield Finance is an upcoming multi-chain insurance aggregator allowing users to easily buy protection across a variety of providers.
The success of the solution will lead to increased demand for all underlying insurers and mass popularization of investor prudency.
Holders of the SHLD token have rights to govern the platform and value accrual indirectly from transaction fees via a token buy-and-burn.
In this post, we have compiled key questions and answers from the event.
Hi Dennis, welcome to the chat! I’m very curious to learn more about Shield Finance and the way you plan to aggregate DeFi insurance!
Thank you for joining us today Denis, we’re excited to learn more about what you’re building at Shield. Especially now insurance is becoming an important building brick for decentralized finance.
Can you please start with an introduction about yourself and Shield Finance?
Shield is 1inch for insurance. It’s an aggregator — it shows you packages from multiple insurance providers. Since we aggregate multiple providers, you will be able to find the best insurance for your use case.
- You open the Shield app.
- You select the token that you have.
- Input the number of tokens that you have.
- Tap “Search”.
- We show you the insurance packages from various providers (Nexus Mutual, Cover Protocol, Tidal Finance, and others).
- You select the package.
- We generate the transaction.
- You buy the package.
We will take a fee for the service. 50% of the fees will be used to buy & burn SHLD token — permanently reducing the supply.
I’m a software developer with 16+ years of experience (coding since I was 14 years old). I’ve built numerous startups, including Pintask (a task tracker), Spire (an API integration hub), Moonbase (a derivatives exchange). I’ve also worked as a CTO for Rent Scene (a YCombinator Fellowship company).
Got my first Bitcoin in 2014, converted 95% of my net worth into crypto in 2017, founded Shield Finance in 2021.
Developing a multi-chain DeFi insurance aggregator, what is your take on the current DeFi insurance space?
Has it matured enough for widespread adoption — and what are the key players you’d like to see aggregated with your platform?
DeFi products are already usable (just look at the volume), but they still feel rough around the edges. I think we still need to explain better how it works & mitigate the risks associated with those products.
Regarding key players — we’ll integrate Nexus Mutual, Bridge Mutual and Cover Protocol first, and add other providers later (Tidal Finance, Opium Finance, Hegic, Opyn…).
Given the numerous attempts by various insurance platforms to gain mass traction, they’ve only ever had small “seasons’’ of speculation-driven adoption.
As a whole, the space appears to be slowly inching upwards instead. Why do you think we have not seen an explosion in adoption yet, as with other sub-classes of DeFi?
I think it’s the habit — most crypto-traders are accustomed to taking risks, even though they can be mitigated with insurance. It just doesn’t cross the mind that it’s possible to buy insurance & that it doesn’t cost much. However, we have a plan for it.
I believe we can monopolize the insurance market by integrating with exchanges, wallets, farms. This will require a lot of partnerships, but with our investors it’s possible.
The integration will look like a button: “Buy insurance for this token”.
- When a user clicks the button, we will display insurance packages.
- When the user chooses a package, we will execute his purchase.
Our button will be displayed within exchange/wallet/farm interfaces. The user won’t need to leave the interface. The user will see the button when he needs it the most — when he is fearful about his purchase of this token.
- Alice comes to Uniswap, wants to buy a token — but she’s afraid of hacks.
- She clicks “Buy insurance” within the Uniswap interface.
- Her purchase goes through Shield Finance.
- Shield Finance takes a small fee.
If we have this button — “Buy insurance for this token” — right within the exchange UI, it will remind the user about the opportunity.
Have you been in contact with exchanges, wallets, and farms, and how has openness/interest been in integrating your Shield Finance button with their product?
We’ve spoken with some exchanges, and they said they would like to see it work on our website first. That makes sense, so we decided to focus on building a web app.
It will come in phases — every partnership requires time to discuss and sign. Of course, the more exchanges we partner with, the easier it will be to partner with new ones.
To tie into this, given the big differences between active insurance protocols, e.g. Nexus and Cover in terms of KYC, how will the aggregation work in practice?
For instance, KYC done for Nexus is only applicable to a specific ETH address.
You’re right, Nexus and Cover have very different models. On our app, users will be able to filter insurance offers (for example, they will be able to exclude offers that require KYC).
If the user already has passed the KYC on Nexus Mutual, he can still benefit from browsing the insurance offers through Shield Finance — maybe he’ll find a cheaper offer from Cover Protocol.
Also, we’ll display the purchase & claim rules right on our website, so the users won’t have to look for them in the providers’ documentation.
Will the comparison among different insurance providers also be appearing for buyers to make a quick decision?
Yes, and there will be two ways to see this comparison:
1. A single page with an overview of all insurance providers that we’ve integrated (a comparison table with comments).
2. An inline text within a specific insurance offer (the hint would describe the specific conditions of this offer so that the user would know what he/she is buying).
Multiple insurance projects are launching or in their beta, e.g. InsurAce and Unslashed.
Have you begun any conversations with these teams to have them aggregated into the Shield platform once ready?
We haven’t spoken with them yet, because we want to integrate existing solutions that already work in the first version of our app.
However, we’re definitely open to integrating them as soon as their products are ready.
Do you foresee there being significant pricing issues and differences between cover bought across various platforms? How will you tackle this?
We’re building a solution to this problem.
We’ll aggregate insurance offers on our app, so the users will see the price differences and naturally pick the cheapest (provided that it matches their needs and meets their criteria — e.g. no KYC).
Currently, we’re seeing a lot of successful DeFi aggregator activity on trades, liquidity pools, and loans, a key benefit they provide is aggregating liquidity for best price/yield discovery. Given the homogeneous nature of these functions, this works well.
The insurance space however is more complex with secondary conditions. Do you believe it will be comparable enough to be easy to use? What is the core benefit for a DeFi insurance aggregator and how does it compare to liquidity aggregators?
It is more complicated due to the different models used by current insurance providers.
- It it still possible to show all offers on the same platform.
2. If two or more insurance providers use the same model, it is possible to aggregate their offers a-la 1inch style.
In the future, I believe one model will take hold over others. There will still be small differences between providers using the same model (just like there are differences between DEXes using slightly different formulas), but it will be possible to take care of those differences in our code and to show aggregated offers to users.
So you are anticipating for the insurance offers to become more homogeneous in nature, which would be beneficial for aggregation, but it would limit their competitive element (less USP options?).
How do you feel the DeFi insurance providers you are currently talking to feel about becoming part of an aggregated platform and a more transparent/competitive landscape?
They actually want to be included on our platform. Recently we announced a partnership with Bridge Mutual — they also agreed to share a portion of the fees with us.
Some aggregators have all earnings from referral fees exclusively — while you also describe fees for end-users.
What is your future strategy and how do you plan to keep the threshold for end-users as low as possible?
Could insurance takers not go straight to the insurance providers after finding the best one via Shield Finance?
We’ll try as much as possible to take our fees from the insurance providers, not from users.
If we are successful with that, there will be no reason for the user to go to the insurance provider website directly.
So far we’ve been successful. Need to sign more partnerships to be clear.
As a multi-chain project, you plan to integrate across ETH, DOT, BSC, SOL, and more. That’s extremely ambitious and certainly bodes well for the project.
However, how do you build fast across multiple platforms (both EVM and non-EVM) while maintaining safe development practices?
First, we might not need a smart contract in the simple case of the following where a user who’s trading on BSC just wants to buy insurance for a token that is native to ETH, and only has a BSC bridge.
Here is an example scenario:
- Alice opens the PancakeSwap interface.
- Alice finds the ABC token market.
- ABC is a cross-chain token available on Ethereum and Binance Smart Chain.
- ABC has coverage from Nexus Mutual on Ethereum.
- Alice clicks “Buy insurance for ABC”.
- Shield routes her purchase to Nexus Mutual on Ethereum.
- Alice buys insurance for ABC token on Ethereum while trading ABC on Binance Smart Chain.
- Since ABC is a cross-chain token, the insurance purchased on Ethereum can be claimed even if Alice owns ABC on Binance Smart Chain.
Technical note: Alice will need to switch her wallet to the Ethereum network to purchase insurance on Ethereum.
Second, we will need smart contracts for complicated cases (e.g. buying insurance simultaneously from two different providers using the same models).
Here we will build EVM-compatible smart contracts first, then build for either Polkadot or Solana (depending on what’s going to be popular). We’ll have to maintain separate codebases, but that’s the only way right now.
We’re glad to see Shield Finance’s active Github and development documentation, what is your approach to transparency and contract auditing?
We will get it audited either by Zokyo or CertiK before the launch. Most likely Zokyo — we’re close to signing a contract with them already. Also, they’re our private round investors, so they have an extra interest in ensuring the security of our contracts.
To wrap up the AMA. One final question. What part of Shield Finance are you most excited about?
Protection from price dumps.
We’ll sell options as protection against market crashes. Most people don’t think of options as insurance, but they can be used to protect yourself from price dumps.
An option contract gives you the right to sell your token at a certain price (called “strike price”).
Imagine that you buy a put option for ABC token with a strike price of 0.01 ABCUSDT. That means you have a right to sell your ABC token at 0.01 even if the price is already lower. So you can protect yourself from a market crash by buying this option.
I believe we will see more option contracts for various altcoins in the future.
Hillrise Group supports ambitious Web3 startups with early-stage venture capital and fundamental research.
Shield Finance is a Multi-Chain DeFi Insurance Aggregator that allows users to buy protection against major market crashes.