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Maximising Capacity & Simplicity for DeFi Insurance Protocols

Whilst the permissionless nature of DeFi development is a major feature, the competition and fragmentation…

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Whilst the permissionless nature of DeFi development is a major feature, the competition and fragmentation it engenders can make things seem rather daunting for the average user, especially if they’re looking to maximise their opportunities whilst minimising complexity.

The team at iTrust have identified this as a potential anchor holding back the emerging DeFi insurance ecosystem and are developing an additional layer to help streamline the sector and support growth. Co-founder, Robert Cooke, joined host, Paul Gordon on this episode of Meet the Founders to tell us more about their vision.

Founder's Journey

(00:42) Robert had an early introduction to bitcoin through a friend trading futures but it was not until 2017 did he get fully immersed in the crypto markets. Before that, he had worked in different industries and verticals from renewable energy to real estate development in Korea, spending five years in the country after college.

The Pain point

(03:15) DeFi Summer came with an explosion of demand for smart contract insurance. According to Robert, a huge pain point with platforms that emerged like Nexus Mutual was that they were limited in the number of premiums they could offer. Then came the nexus community wrapped token which was great for speculating on the price of nexus but wasn’t necessarily good for the company’s operations and the coverage of premiums they could offer. This was a problem most DeFi insurance protocols would face, Rob realised. Thus, the initial idea that spurred iTrust was to take wrapped nexus token, for example, and put it back into the mutual to increase its coverage capacity to ultimately achieve more premiums.

(05:08) Another reason why these insurance protocols aren’t operating at their most efficient is that people hesitate to stake in the protocols, even though they may be holding their token for price speculation. Yet, staking is better for the protocols and would lead to cheaper premiums. Essentially, what I-Trust is filling the void between helping stakers earn rewards while taking away the administrative burden of selecting safe contracts and thus helping the underlying protocol to grow cover capacity and issue cheaper premiums.

Building An Insurance Infrastructure on a DAO

(06:36) A DAO (Digital Autonomous Organization) is a form of cooperative structure that first appeared when ethereum was launched. The idea is essential in the iTrust architecture because the company wants to build a fully decentralized community-driven organization. While there is a need to build some foundational structures as it starts, iTrust aims to be fully decentralized within three years. A DAO would enable iTrust to help multiple protocols build cover capacity and to create a decentralized community that takes ownership of the DAO and help steer its direction.

Currently, iTrust is building the vault structures of Nexus Mutual (the launch case) to build its cover capacity, then onboard future insurance protocols. But eventually, when fully decentralized, iTrust wants the community to build the vault structures that people can stake into.

iTrust From User’s Point of View

(10:32) A user would need to log into the platform with their metamask, after which they would be several vaults they can stake into. At launch, users would be able to stake directly into two vaults, the Nexus index and an iTrust low-risk strategy vault. The iTrust low-risk is the company’s strategy vault including various pre-accessed contracts; risk-assessed, and smart contract audited.

(11:38) As other insurance protocols are onboarded in future, additional vaults would be created. Once there are multiple insurance protocols, there is a possibility of cross-protocol vaults with higher yields across different combinations,

“… a lot of users don’t know what contracts to stake into but if you’re not staking, you don’t benefit from earning rewards across the multiple contracts you can stake against. I think there’s one side of the user’s perspective of just not wanting the administrative burden and having to manage the stakes but also, there’s a lack of understanding as of what you can do and I think that’s where we’re trying to fill with an easy to use, simple direct platform,” Robert explained.

KYC

(15:17) To ensure regulatory compliance, iTrust has KYCed all its team and invested, and would be doing the same for its upcoming IDO (Initial Dex Offering), and whitelisting everyone on the platform.

Rewards Accrual Claiming Mechanism

(16:14) iTrust allows rewards to be accrued over a period, pending stipulations of the underlying of a protocol (like Nexus’ 30-day hit undertaking period), without a time limit. This allows users to accrue their rewards in a lump sum and pay a single gas fee than being required to pay multiple for the claim of several bits of rewards.

Finance.vote Partnership

(18:23) iTrust is partnering with Finance.vote to build its predictions market.
Their idea of a wreck prediction market is one where predictions can be given on the outcome of future contracts that are held within different insurance protocols within iTrust.

Concerning governance, the partnership would enable iTrust to assign accruing meritocratic ratings to actions taken in the DAO in regards to the prediction market.

(19:19) “Let’s say you’re a user who has made a lot of good predictions, you build
a very high meritocratic rating, therefore you should have more kind of “kudos” in the system. So if you create a vault strategy, you could have more merit to say I’m able to do this, look at my history in the prediction markets,” Robert explained.

Community Grants Program

iTrust has a community grants program and a separate vault strategy discovery fund to enable the community to fully participate on the platform. The grants program would be focused on anything within DeFi and making DeFi more understandable. iTrust has partnered with Goodfi, a not-for-profit organisation with the mission of getting 100m people to put at least $1 into DeFi by 2025 for the grants program. More details can be easily accessed on iTrust’s Telegram, social media or Medium.

Perspective on The Industry

Robert believes the biggest hindrances to the growth of the industry is understanding and adoption. The growth of bitcoin and ethereum have propelled them into widely accepted accepts, and with the growth of infrastructure, it is only a matter of time the acceleration to scale occurs.

(25:08) Robert predicts that DeFi insurance products will become baked into DeFi products as a whole. With wider adoption, people would need a safety net or some form of underlying insurance, Robert said.

Paul Gordon
Paul Gordon
Following a 20+ year career in financial markets, Paul first became interested in Bitcoin in 2011 and helped to establish one of the world's first Bitcoin meetup groups, Coinscrum, in 2012 since when he has grown the community to over 6,500 members, hosting over 250 events and introducing many of the leading projects and thought leaders in the industry.  Paul currently produces the weekly Coinscrum Markets video podcast series and is an active investor and advisor to a number of crypto and blockchain related projects.

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