Insurance in Web3: Motivations, Use Cases, and the Future | European Blockchain Convention

[Music] hello hello everyone firstly thanks to the EBC for organizing and thanks for everyone in the audience today for participating I know what you're all thinking a talk about insurance it sounds like a wild ride so I'll do my best to live up to that expectation It's actually an exciting time to be an insurance underwriter at chain proof at the Crossroads of Finance technology and Innovation and I've got a number of reasons to be excited in less than 20 years web 3 has grown to be a trillion doll ecosystem of defi protocols and cryptocurrencies for a context Apple was the first company to sustain a trillion dollar valuation and that took over 40 years despite despite the massive growth it's an industry lacking maturity and Regulatory Frameworks that we see in traditional finance and it's a risk it's a industry facing significant risks hacks exploits and smart contract vulnerabilities run rampant with billions of dollars lost every year to Bad actors that's where chain proof comes in as we recognize the the need for security and trust is Paramount we are incubated by Quant stamp a leading blockchain security auditing company that has secured over $200 billion in digital assets but while code audits are vital they're not always enough and this is where insurance comes in with the first web 3 insurance company to be fully regulated by the Bermuda monetary Authority we're backed by traditional insurance companies such as Soo Japan's second largest insurance company and we're reinsured by Munich re the world's largest reinsurance company today I'm going to talk a little bit about some of the motivations for purchasing Insurance some of the use cases in web 3 as well as take a brief glimpse of what the future may halt so the main concept of Insurance is as old as human existence that of spreading the risk therefore minimizing the risk for a single unit take for instance the 17th century shipping industry one of the early adopters of insurance Merchants were were initially reluctant to engage in long-distance trade as they faced risks like piracy storms and ship brecks and the threat of financial ruin but by offering a Safety Net Insurance changed that as they were able to mitigate the risks and as a result International Trade flourished but how does an how does an industry that has been around since the dinosaurs apologies if the dinosaurs are a controversial subject but how does a traditionally risk averse industry Insurance marry a risk emerging accepting industry how do we underwrite how do we assess risk for new technologies with very little historical data and how do we underwrite terms like smart contracts oracles validators and decentralized autonomous organizations to try and answer these questions let's look at some of the use cases um for for web 3 insurance at the moment smart contracts are the backbone of many decentralized applic ations their reliability is crucial but vulnerabilities can lead to exploits which in turn can lead to significant financial losses according to immuni recent research over $1.2 billion has been lost this year in the first half of this year alone just Mark to contract hacks and exploits that's over 15% more than the same period as last year this is where rigorous smart contract auditing is vital by thoroughly examining the code Quan stamp can secure vulnerabilities before the contract is deployed this helps minimize the risk at this point chain proof can then come in and provide insurance against the hack all of these processes and procedures are regulated by the Bermuda monetary ity regulation brings legitimacy and security to defi regulation ensures that insurance products are trustworthy and that claims are enforceable this means that all Insurance products offered by Chain Proof come with a legal guarantee and that claims are paid regulation enhances credibility and as it encourages better risk management processes enhance security Audits and improves the overall health of the web 3 ecosystem and it regulation also Fosters growth with institutionalsales is slashing Insurance validators stake tokens to participate in consensus but validators can face slashing penalties for technical downtime or malicious actions slashing penalties can mean severe Financial penalties this represents a risk to not only the validators but also to investors as well by securing the underlying infrastructure with an audit from Quant stamp it can mitigate the risk of slashing before it occurs this allows the validator to purchase slashing insurance but also institu investors can also purchase insurance in excess of the underlying primary policy purchased by the validator so just as the shipping industry of the 17th century faced risks like piracy and storms web 3 faces risks of smart contract hacks and uh slashing penalties but the motivations for purchasing remain the same purchasing Insurance remain the same financial protection against smart contract hacks and slashing penalties marketing so Insurance signals to clients that risk management procedures are in place and proper mitigation steps have been deployed and offering regulated Insurance allows users to both institutional and Retail users to operate within a secure and compliant environment so as blockchains continue to evolve and we see broader adoption interoperability and increased automation insurance plans to pay a pivotal role in fostering the future growth of defi by offering a safety net to both small and large participants users are reassured that proper risk uh risk management is in place potentially mitigating any potential um disasters as institutional Capital flows into defi it brings further credibility and stability further legitimizing the ecosystem this Capital reduces volatility and provides and would act acts as an innovation catalyst for new Financial products in defi enabling much more expansion this will include sophisticated players but also the next billion users many of whom will need the next extra guard rails thank you for your time