Immunity Bonds

Dr Shaun Conway
The ixo Journal
Published in
6 min readMay 27, 2021

Immunity Bonds are an application of the ixo Alphabond sustainable DeFi innovation, which we propose could finance and incentivise pupulation-wide public health interventions for the next generation of Covid epidemic control.

We recently published an article introducing an initiative in which ixo is a technology partner, to create the next generation of Covid sense-and respond technologies for Precision Public Health and decentralised epidemic management. This is the evolution of a global digital immune system for humanity.

In this article we describe how the ixo innovation of Alphabonds, which implement a novel risk-adjusted bonding curve automated market-maker, can be used to finance and incentivise people to use these technologies and to promote the uptake of Covid public health interventions. We give the example of a hypothetical user story of an airline implementing an incentivised employee health intervention for Covid.

Incentivising results

Outcomes-based payment mechanisms pass on to investors and program implementers the financial risks and rewards of allocating capital and of achieving verifiable results.

This systems-based approach aligns the incentives of all stakeholders towards cooperatively achieving a desired future outcome state.

A well-established example is Outcomes Contracts in the healthcare sector, which pay providers on the basis of health outcomes achieved –such as a reduction in the annual incidence of hospital admissions for a preventable health condition.

The Immunity Bond Mechanism

The ixo Immunity Bond mechanism offers a programmable, autonomous, trusted and decentralised way to implement outcomes-based payment systems, with an initial focus on Covid programs.

Immunity Bonds can also be configured to incentivise people to participate in public health interventions, such as immunisation campaigns, and to work cooperatively towards achieving specific intervention targets and outcomes.

We have envisaged how Immunity Bonds can be configured to automatically distribute rewards, such as tokenised credits when target populations achieve specific health goals, or to every user who continues to actively use the applications and services of a next-generation epidemic response system, which we introduced in a related article.

Goals and rewards for receiving credits are configured by Immunity Bond implementers, to apply at the individual level, community level, or system-wide. Making this suitable for almost all use-case settings, program phase, or target population.

Users of a personal immunity app will have a secure wallet to receive, send and exchange their credits. The rules for who is eligible to transact with these credits will be configured by Immunity Bond implementers, according to their context and use-case.

Implementers also choose what rewards to offer in exchange for credits. From cash incentives and prizes, to access privileges.

Credits are issued in the form of standard crypto-tokens. Which means this mechanism can also be integrated within a universe of decentralised applications. For instance, using Credits to vote on governance proposals, within DAO applications.

User wallets may be programmed with a demurrage function, which burns tokens from the user’s wallet at a constant rate, if they have not used their credits, or don’t maintain usage of the applications and services.

Alphabonds are simple to set up and deploy from standard templates. They can be scaled rapidly through replication. The configurability of the underlying Alphabond blockchain mechanism makes Immunity Bonds adaptable to many potential use case applications and user experiences.

A User Story

Flywithus airline wishes to lower the incidence of new Covid-19 infections amongst all its employees. Both to reduce the costs of absenteeism, as well as to protect the health of customers who use their services.

Flywithus implements a range of Covid prevention policies and interventions. Which includes paying for employees to receive free Covid immunisations anywhere in the world and additional healthcare insurance benefits for early diagnosis and specialised treatment of new Covid infections.

The costs of immunisation, implemented together with the epidemic management platform, are expected to be far lower than paying for medical care and the consequences of passengers becoming infected by an employee. Flywithus sees the economic benefit of transferring part of the averted costs into prevention incentives.

Flywithus privately issues an Immunity Bond, to mint Covid Credits, which can be exchanged for their brand of Airline Miles.

Each day that a Flywithus employee uses and interacts with the personal immunity app, they automatically receive a variable allocation of Credits into their Wallet.

The quantity received and current exchangeable value of these credits varies, depending on a number of market dynamics and feedback signals, which are reflective of the success of the underlying program in achieving its targets and preventing new Covid infections.

An employee may choose to exchange their credits at any time, for Airline Miles. Each exchange is calculated at a spot ‘price’ or ‘reward ratio’ of Airline Miles per Credit. Based on the sigmoidal shape of the token bonding curve, which determines that rate of exchange. Early adopters will receive a higher reward ratio, as they enter at the flatter part of the curve. Growth in membership over time and consistent usage of the application grows the liquidity reserve pool of tokenised Airline Miles. As the exchange ratio –price– increases, this makes each user’s Credits more valuable.

All current participants are therefore collectively incentivised to get their peer employees to join the program and then to regularly use the application.

According to the Hook Model, users are more likely to get into the habit of checking their wallet balance (and using the app), if they expect to see variable rewards.

During a period of increasing Covid incidence in the general population, Flywithus decides to implement an additional intervention, requiring all employees to conduct twice-weekly Covid rapid self-testing. Employees use the personal immunity app to log their self-test results. As a reward, for each week that all employees collectively achieve >90% compliance, Flywithus deposits a system-wide bonus award of 10 million Airline Miles into the Immunity Bond reserve pool. This makes all participants richer, by growing the incentive pool. Users see positive growth in the spot exchange value of their credits –more miles for each credit. They also see the awards of additional credits rewarding them for using the app.

Later, during a period of general relaxation of national Covid interventions, employee usage of the app starts declining. This unwanted effect automatically feeds a signal back into the Immunity Bond, which implements a risk-adjusted bonding curve Alphabond mechanism. Shifting the bonding curve shape, to adjust upwards the algorithmic price (or reward ratio) of Credits for Air Miles.

The bond preserves a higher reserve ratio in its liquidity reserve. This increases the value of Credits. Catching the attention of app users, who are now individually incentivised to continue using the app and performing actions which earn more credits. And collectively incentivising all employees to promote program adherence, shift the curve positively and receive community-wide performance rewards.

Under the hood, this continuous issuance of Credits and exchanges with Airline Miles is priced and transacted by the Alphabond automated market-maker. Each time Flywithus deposits tokenised Airline Miles into the bond, this mints an algorithmically calculated variable number of Credits. These credits are automatically allocated and transferred to employees, by the app. Each subsequent transaction is priced at a higher Airline Miles cost per bond token. The Alphabond reserve pool of Airline Miles grows over time, if the rate of issuing Credits is lower than the rate of Credits redemption.

The future of Immunity Bonds

We see the Immunity Bond system operating as a dynamic marketplace for program implementers to transact with user’s attention and behaviours. For instance, using application platforms to exchange information and rewards for measurable and valuable health outcomes –or indeed any other verifiable outcomes. Whilst gaining intelligence and collecting data, in ways which do not infringe on people’s privacy rights, or impose on people’s freedoms.

We believe the Immunity Bond mechanism has the potential to become a major driver of system-wide positive change. Based on empirical Social Physics evidence from MIT, which has demonstrated the effectiveness of transaction flows which simultaneously pass trusted information, together with financial rewards, through social networks. These systems have the emergent property of changing the state of entire networks over time, which will manifest in social change that could shift the future course of the Covid-19 pandemic.

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Dr Shaun Conway
The ixo Journal

Seeker of serendipity. Inventor of the ixo Protocol for The Internet of Impact.