Christoph Mussenbrock on Etherisc's decentralized insurance

0:00i'm ashton addison from block west capital for investmentpitch media in the Crypto Coin Show and today on blockchain interviews with christoph mussenbrock the founder and architect of ether risk kristoff welcome to this show and it's a pleasure to have you on today thank you so much you're very welcome i'm excited to dive into ether risk in the world of

0:23decentralized insurance insurance protocols and smart contracts there's a lot to unravel in this industry absolutely i would love for you to kick it off for us by just giving an overview and some of the solutions that etherrisk is bringing to the insurance industry through cryptocurrencies and blockchain exactly yeah the main the main idea is that

0:46we want to build an open platform where people and teams all over the world can build their own insurance products and we provide the essential building blocks for this we provide something like an operating system which consists on off-chain and on-chain components so we have a complete on-chain smart contract suit where people can use and so it

1:13makes the creation of new insurance products on chain very easy because yeah the operating system provides all what you need already and you only need to configure your product as a statistical model and some things like this and the off-chain components also enable you to bring your product to the customer via something like a toolbox for front-end

1:38building and stuff like this and also we can help you and your team with the illegal stuff because we gathered some experience in the last year so people who are struggling with insurance regulations and they can find also support with our solution and we don't have a solution for everything but we have pretty much experience and so it will help teams to build their own

2:02products in much shorter time definitely that's great and with the insurance industry you know i haven't seen it fully encapsulated inside of cryptocurrencies and smart contracts obviously it's a little different than the traditional insurance industry i'm curious when you're found when you were founding the company and looking at the vision of how are we going to deliver these solutions

2:25in a better way using this technology what were the main things that you saw that really needed to be fixed in insurance and make sure you get right with ether risk yeah when we started we had the vision that we create a system which would work completely on chain and which would be composable with other financial products in a way which we cannot have in the traditional insurance

2:48and traditional insurance you can have software systems but for each partner you need a different interface and you need to build everything from scratch on blockchain you have this standard yeah you have these standardized tokens you have standardized default protocols and you have standardized smart contracts which help you to interact with every other smart contract

3:11in a standardized way and that's not possible in the traditional insurance so we think that this alone brings so much benefit that you can compose different solutions and one one building block is insurance one billion block is supply chain one building block are oracles and everything fits together automatically and this is a huge advantage of blockchain against traditional insurance

3:38and financial finance i think that is the main reason but of course there are also some other reasons for example transparency blockchain-based insurance is transparent for both the customer and also the insurance company and also the investors who provides a capital risk capital behind it so it removes this black boxes from the system where people

4:04do not know how their products are calculated they do not know if they get a payout or not and so on so transparency and by transparency we have more fairness and of course then this additional benefit of being able to compose products or together with other defile components definitely the transparency i think is key and there's all a lot of benefits

4:28but it seems you know with all of these obvious benefits over the traditional industry it seems that decentralized insurance and insurance on the blockchain is still fairly early on from what i understand can you give your expertise into how far along is decentralized insurance from actually being adopted you know globally or into the mainstream and why are we at

4:53that point right now yeah of course the main issue is adoption of cryptocurrencies in the general public so you know that many company countries are still struggling with this and they do not know how to how to handle this many essential banks are experimenting with central bank digital currencies but it's all early stage and so in the interestingly enough in

5:21the developed countries so the g8 countries for example they are crypto adoption is still at a lower level but you know for example el salvador they made this step and introduced bitcoin as a legal tender and so that's also an experience what we make that the developing countries so in our examples for example kenya they are making much larger steps toward adoption

5:48of blockchain cryptocurrencies and the like in comparison to the developed countries so we think and that's why we are working in kenya where we have some 17 000 farmers on our system of course they don't use cryptocurrency because they are and they all also do not know that they are using blockchain they just have these tools which enable them to get

6:13transparency on their own product and to see what's happening and that's the difference to the way it used to be before and so i think adoption is the main showstopper currently for decentralized insurance and so we start in the developing countries and we hope that we then show that it's working and then also we know that all these insurance companies

6:39worldwide are very interested in blockchain and they are they would like to put their toe into it but they are still reluctant yeah because regularly regulatory reasons and so on so i think it will take maybe two or three years until the mainstream in the industry will also dive into decentralized finance and also in decentralized insurance and that's the time what we need to use to

7:05build up our position and first of all in developing countries definitely yeah great point there about africa as well and leapfrogging with the infrastructure and being able to onboard into decentralized insurance because they just don't have those other barriers to entry of the traditional infrastructure you know blocking innovation so it's exciting to hear i was reading

7:30into the partnership that you have in africa and with the crop farmers and 17 000 that's amazing i would love if you could elaborate a little bit more on how exactly does this crop insurance work through ether risk what's the benefit to the farmers and how does that work with smart contracts yeah first of all it's a fully automated product so there is no human interaction with the

7:54processing of the policies because both the onboarding of farmers as well as the claims process underwriting process that is all done automatically the farmer will onboard by using a simple feature phone where he can type in a specific code and the code is distributed with seed bags for example maize or soya beans and so he gets a little card with the code you can type in the code

8:22pays a premium also with his phone with an electronic payment system and then he will receive a policy and he is insured for the specific crop and from this activation of this code we also know where the farmer lives and so we can see what type of risk there is and so risk what we ensure is the risk of excess or too little rainfall

8:52so if you know the position of the farmer then we can use satellite data to determine if at the location of the farmer there is sufficient precipitation and rain and if there is not enough or too much too much then we can directly trigger a payout and that is all controlled by a blockchain and the farmer can buy a business feature phone he can also

9:13access his data on chain and see what's happening and that's this is transparency what also helps to build up trust between the farmer and the company very cool i love that automation it's gonna make it so much easier when when you know when the first world countries are able to just automate everything i know that your team is working on you know insurance for many other use

9:39cases besides farming as well maybe you can touch on what are the early use cases for ether risk yeah so the main use case is the so-called parametric insurance parametric means that the claims management so if there is a loss or not that can be determined by databases yeah not by humans but by just looking in a database be it a weather database or wind

10:04database or solar energy database or whatever data you have and you know in these times with iot you have plenty of data and so it's very there are many new use cases for insurance because we have data and so one one example what we have is a flight delay this is a also an insure parametric insurance which where you can protect yourself from the risk of a flight being delayed

10:32we use flight databases and also we have wind database for hurricane insurance for example in puerto rico and these products are being developed now and all of these are parametric insurance so we have full automation of course you could in principle also use human agents then you would still have transparency and composability from the blockchain but you could of course

10:56have a more inefficient process in the claims handling so we postponed that a bit but in principle you can do any type of insurance very cool and speaking of the automation i was looking into the cryptocurrency factors in it and you were mentioning that maybe the farmers don't have to use cryptocurrency but i did see that there is a network token for ether risk the dip

11:23can you talk about how that incorporates into the protocol and how does it benefit everybody in the ecosystem yeah absolutely so the basic idea is that every insurance needs a capital pool the so-called risk pool to cover excessive losses from from premiums alone you would not be able to pay a lot of losses so you need a capital pool and people who

11:49put money in the capital pool will need to stake dip tokens yeah so staking is the main mechanism and people who stake their dip tokens they will also earn profits or run returns from the premiums which are not used to pay out losses and so that's very similar to the traditional insurance yeah then you have also these risk rules but they are of course not on chain but

12:15in a traditional bank account but we put the whole thing on chain and therefore it can be done with much less friction and people can enter the pool or leave the pool in a much easier way than in traditional finance where you need to invest for a long time and lock your capital and so decentralized insurance makes it also possible to use the capital much more

12:39efficiently than traditional insurance at least in the long term so we are currently working on these staking models and the diptop is essentially the token which drives this whole staking process definitely thanks for that kristoff and yeah you mentioned you're working on that right now i know you're already working with all these farmers i would

13:00love to get a glimpse into you know the next six months for ether risk and what are the major tasks that your team's looking at handling and releases into the market yeah so we started in kenya with our first crop insurance product and the idea is now that we developed this product in a way that it can be used as a blueprint for virtually any country which has crop insurance now

13:26the system is always the same you have satellite data you have policies you have farmers which use electronic devices to onboard or to make payments and this can be modified very easily for and used in many different countries and so we will at the next in the next six months we will for example move to other african countries and deploy the product there

13:51in sometimes a bit different context with different payment systems and also of course different type of risks but the principle is always the same and so we want to build this universal platform where we have reusable components which can be used in basically any context and the same of course for other types of insurance the wind insurance hurricane insurance that

14:15are all things what can be used in other countries as well and so the next six months will be this scaling of these basic insurance products and of course introduction of staking and by this also entering in the whole value chain of risk transfer on chain very exciting and if the viewers are looking to learn more about these insurance products

14:43and when the staking comes out and all the other updates for ether risk as well what's the best way for them to get involved in the community and to try out the platform sorry the last difficult to understand to get involved in the community and to try out the platform in the protocol yeah yeah we are currently publishing a series of tutorials so interested teams can

15:04just work along the tutorials and we will also provide in the near future we will provide a complete software development kit where you can just start your own product in a local testing environment with some sample products so you can actually in a matter of a few hours you can start your own insurance product and work on and try to try it out and so

15:27this is to engage the developer community and for the developer community we have also started a rapid development environment which we have acquired in the last six months so that allows you to build also front end for insurance applications in really no time and that's one big advantage that we do not have not only have the back is the on-chain components but we also have a

15:53complete environment for building off-chain off-chain components and so that is something what we hope that many developers will jump on this and try their own for the rest of the community of course we will build first products which they can use for example flight delay is short for launch and also of course at different staking solutions and everybody wants to enter

16:18it's invited to our telegram channels and other outlets we have blogs we have also a forum so if you want to learn about israelis and simply jump on our homepage ethos.com and you have all these social icons at the top and then you can jump on our telegram channel for home blog and so on sounds great thank you so much kristoff i will leave those links as well in the

16:44description box below all the best on all of these decentralized insurance products moving forward and thank you so much for your time thank you so much