DeFi insurance protection with InsurAce and Amulet

0:00why do you need defy insurance I'm Ashton Addison from Block West capital for investment pitch media and today on the Crypto Coin Show we have Dan Thompson of insurance and Rupert barksfield of amulet protocol two companies working on defiant Insurance in this ever-growing defy space gentlemen welcome to the show and thank you for taking the time today

0:25awesome I would love to kick off the conversation with just a little bit on your team's protocols and what you're working on and what why you think defy insurance is important Dan I would love to start by hearing a little bit about insurance sure I'm Dan Thompson CMO at insurace.io it's the first first multi-chain Insurance protocol in defy we I record four chains that cover our 20

0:55different chains and all those chains we cover about 140 different prototypes today we've covered about 350 Million worth of assets and have had the largest payout in the history and space with 11.7 million paired out for us to deep packet Insurance in defy and script as a whole is important I mean there's a better the real demand for it and

1:17there's just a huge amount of exploits and lost funds in the space I mean anyone who's been in this state for long enough is likely to have had an event where they had a loss of fun through one way or another and I'm sure having gone through that they would appreciate some type of insurance so that's what our mission is it's to make the space safer make crypto and work through space What

1:39make web threes safer for Everyone by offering these type of insurance products wow that's quite the wide coverage and congratulations on that on payout and supporting people that are in D5 it's you know becoming less and less of the Wild West when people have insurance to cover these various hacks exploits which we can get into sort of the details because there's a lot of

2:03different ways that people can lose money in D5 now Rupert could you talk a little bit about amulet what your team has been working on and your take on defy insurance sure absolutely so yeah on grouper from amulet and the project leader and we know we are a it's basically operating on the Solano system that we work in the wider

2:28Master System as well we launched a little over four weeks ago now it's actually our year anniversary this month at another breakpoint 200 degrees the in short we ensure five different protocols right now smart contract risk on the Solano ecosystem and what we do differently to rather Insurance protocols out there is the way

2:55that we manage our state capital or big assets we actually take State classes for the international State validator that's generating yield and then we pay out our claims that come into the critical using that yield as opposed to the principal State assets and so that differential test from some of the other person the industry but in our view more insurance is better

3:18than less well I think in the industry we've got around 25 of total assets or total ADL all the on chain that's actually insured that's a huge huge you know Chasm of risk and you know if you look at traditional Finance you know Goldman aren't going to do a deal with JP unless it's assured by Lloyds or and I'm going to do a very

3:46deal with somebody else because I'm a another you know insurance broker being involved why tradfi has aren't massively high percentage of insurers versus the amount of local fishes I completely agree there's there's a

4:14lot of opportunity and I feel to grow especially in D5 I feel like a lot of people still don't understand the importance of a defy insurance and you know they everyone sees oh the it's been audited you know by some kind of firm that they don't really look into that either but they're like that must be good enough it must be it must be safe I'll just you know throw the

4:36majority of my life savings into this sketchy protocol because it's been audited by somebody that I didn't check into with you know not thinking well what happens if there was a glitch or something in there and you know where's the insurance can I get a payout afterwards they're still not really thinking about that and Dan you mentioned because it's

4:55it's sorry just a follow-up on that like it's not me usual either right yeah how many times do you look at the auditor for Citibank or back from America or you know whoever it is like you never think about this when you're on their app you never think like oh is this going to be okay like it's surely an issue that now exists in D5 because of the hacks that were happening so the

5:23Auditors came in to say hey this is okay we'd like stamp of approval but then there's grades of the Auditors right there are now good Auditors and less good Auditors there are shady Auditors and you know really super clean and that's really difficult Marketplace to navigate as well definitely great point I mean I can even wants to feather with that as well

5:47I mean I think it's happened who we work quite closely with as well who identify that as something like the third of projects after they've been audited don't make the required updates so it's not just whether or not they've got an audit is the fact that the teams themselves are not following up on the requested the requested changes from the Auditors so the auditor is actually

6:10finding these issues and the teams are just not not necessarily ignoring them but not updating them before maybe they're under pressure to launch on time or they've got a set date or whatever the reason is but there you know there's not enough accountability to team for follow-up and then that puts the onus back on the user to be able to understand the order and

6:28the code to check to see whether those patches be made because the orders don't do a follow-up afterwards usually so you know they own again published and everyone just assumes because of an audit therefore it's it's safe or safer but the really reality is actually most people won't read the audit and they won't check whether or not the actual patches have been been fixed and yeah

6:51a lot of teams are you know have just been extremely lazy about the person not not made the required sort of updates of the project approachable to address the issues that's a great Point down in what it seems like in defense a lot of these projects are you know sort of rushing to launch you know they feel like there's you know if they don't do it tomorrow that the

7:15opportunity will be gone and really not thinking in the long term and it same goes for the people that are putting their funds in to new D5 protocols you know often the yields and the apis will be really high at the very beginning and sort of dwindle down so if you get your funds in the first minute you know before even reading the audit then you're going to get a higher

7:39return and I think it's like on both sides it's like a recipe for disaster that everyone's like we need to launch right now and you know as long as we can put the little audit symbol on our website then that's good enough and I think people are now starting to understand that you know over all the projects that have had hacks in one way or another

8:02Define insurance to actually cover you if something happens is like becoming a necessity yeah 100 I'm like what we're seeing on our side exactly it's not just you know users wanted to buy insurance or finding institutional firms I wanted to buy a lot of insurance and then beyond that it's actually protocols themselves right they want to work

8:27with these large institutions so we're working with at the moment who is working with a huge institutionally firm that but they usually they're in like a color it's quite dark and they wet their Stones I don't know if that gets them into like a an indication of like which phone they might be working with but they you know this that firm was the deploy a huge amount

8:53and they then want to deploy that Capital into another protocol and both of those systems and smart contracts in place and the client is saying like if you've got smart contracted Insurance in place you'll happily do that but you know until you've got that we're not we're not buying a penny because there is you know we read the articles you see the

9:15news and we understand the issues that are are Beyond price risk price risk we can handle but like let's look at you know the risk actually and I'm just going to take them out and it's just a bad something and they can't and Dan you mentioned different ways to cover you know is there sort of different products in insurance and Defy is supposed to be

9:44getting safer yet in the last month in October here it was like setting a record for some of the most hacks and exploits in D5 there's over 700 million dollars was siphoned out of these smart contracts which is an insane amount still but each of the hacks you know there was like a handful of different hacks of different protocols different smart contracts on

10:07different blockchains as well and each of them was a unique situation where you know in one it was a bridge and one it was not really a hack but it was an exploit and there's different ways that people can lose their money how do the D5 Insurance protocols like Insurance sort of cover all these different scenarios you know I feel like in traditional Insurance there's always

10:28like a lot of fine print of like well if this happens in this way then we'll cover you but if something else happens then we don't so how do you sort of cover all of the different potential scenarios in D5 hacks oh it's monster long ago okay so in terms of the actual types of types of products available you know at the moment the vast majority of the

10:54Final Approach is available for smart contract risk and also stable quantity papers you know the demand for things like Market volatility for rug pools or you know Bridge insurance which isn't as no one's really at least I think of that year so there's there is still a huge demand for new products and there are different people working on different types of insurance for

11:18different aspects of the industry whether it's private key loss or sort of your actual physical Ledger being lost somewhere all the way through to the D5 side you know there's been working on nft insurance matter versus transfer game Fighters not everyone's out yet the biggest problem facing the D5 Market in particular is capacity you know we're limited by the amount we can actually

11:39underwrite this isn't actually too dissimilar to natural disaster insurance disaster insurances sort of low frequency High severity now obviously you can't ensure against a you know huge hurricane for example you know you can't ensure everything that's going to be going to be there whereas you know you so I think that this year alone as after Ian was it you know something like

12:04230 billion was done in Damages in less than 100 well around about 100 billion was actually covered through insurance so in the same sort of situation maybe the insurance is always going to be like arguably encrypted same thing High severity you know low frequency on particular genotype types of products in particular exploits now that doesn't

12:27mean there's coverage available for everything which is sad and that's what we were working on however you know that the actual hacks are not going to be slowing down yes there are things that projects can do and investors can do to make them be safer about it and do doing their own research and you know being more secure from the product side you

12:47can let the bug bounties white hat and private you can look at orders you can look at you know how how many different layers of security you add in but at the end of the day for me the hacks generate Innovation they yeah you know some of the bigger hacks are usually some of the more creative way of ease of exploiting and then after that they don't tend to happen again whereas some

13:11of the small hacks seem to be know the same type of hacks that for some reason people just haven't patched up so a lot of the smaller hacks that happen every month seem to be the sort of like cool you know someone can actually just manipulate the core function and change the address to that I would draw was made to this is you know relatively simple bit of code but

13:32yeah it seems to happen again and again and again so on the big side you know even though these hacks are getting bigger because when they do fine because there's just more value in the space right so they yes they do seem to be getting bigger and increasing and October was the largest but at the same time from what we can see in the industry it's not

13:54slowing down the builders and it's not slowing down the demand because of this I mean obviously there are other external factors but the hats are not people's main concern when it comes to investing space you're right and that's great to hear because defy it truly is innovative and you know you can't it's like sales calls you can't just give up if somebody says no

14:19you know you have to keep going keep innovating and keep fixing these problems and eventually it should be just as safe as traditional Finance or even safer because of you know not having these third parties to rely on and having sort of decentralized payouts and you know you're guaranteed protection and I noticed one of the biggest hacks last

14:42month was was on the binance chain and it seems like D5 is growing on you know just as strong on you know ethereum Finance Solana and these other chains as well but one of the I guess still pretty large but the smaller exploits was on the Solana chain with the mango markets exploit and it wasn't really I don't know the exact details but it wasn't like a hack hack it was sort of a

15:08manipulation of the market Rupert yeah you're sort of in touch with the Solana there maybe you know the story and you know could amulet have helped with that yeah so it's a it's a really difficult one and this is you know I'm about you from the question like yeah dude yeah there's always five grades I mean we make our print very big but I'll

15:32print it very clear through this smart contract risk like unless the smart contract is broken then it's not it's not an insurable event and so something like mango markets and we were selling smart contractors we actually since the policy whilst they're we're looking at them but we had a tiny exposure on our

15:59smart contractors Insurance of which we would have been more than happy to be out had there been a smart contract breach what actually happened with somebody like mango is that they actually posted in the community about this floor the manipulation of certain smaller assets could enable somebody to come in and make another token

16:28and essentially liquidate out a whole bunch of contracts and this is exactly what they did and what is difficult about this is that everybody is Laden's a hacker everything's labeled a hack no it's not a hat and actually there's there's certain most of what he's done is not illegal there are

16:55questions about whether or not there are some illegal functions that we did in terms of watching the information on the centralized markets but certainly on a decentralized space as far as I'm concerned I find no means it's a financial advice or anything as a traditional side but it doesn't look like it was a legal thing he essentially was able to use a huge

17:21amount of capital to control the price of the market and make a lot of money from that then he went on to the manga market now created a proposal for himself to hang himself out of the foundation Capital if he gave all that money back and if we the Dow agree to not press charges because he held so much mango at that stage he approved his own

17:47Governance proposal and so it was a whole past really the whole thing but this is the post that they put on the main game office Community they recognized it as an issue we're going to fix it from year before and but they up until that point they didn't recognize it as a big issue and it's not actually that was similar to London UST whereby you know

18:13somebody really needs to do an enormous short and create a huge amount of fun with inside the marketplace and then kick off that retail site with cele to create this yeah the Luna shooting down to zero and usdd pegging essentially everybody knew that this was probably everybody like certainly in the industry we were very aware of it being a

18:42potential issue it was well talked about documented in the forums and community but it was an accepted risk and so far that nobody's gonna do that like it's such a big amount of money you need hundreds of millions of dollars in order to do this attack there are very few individuals as well that could or organizations prepared but one of those organizations did and

19:04They made a affordable amount of money out of it and you can argue like you know they've destroyed multiple lives they've also made a lot of good ones for their investors like it's there's always two sides to a to trade but look we're not talking about trading talking about whether or not an event could be insurable Market manipulation I don't think could

19:30be an insurable event unfortunately and what I think we have to do as an industry is to really start wrapping up packages of insurance to start really protecting people it's not just about smart contract at risk if you're got exposure to a stable coin then it's about wrapping that into it as well and then potentially maybe there's a wallet

19:55custodian risk now you've got a wrap all of these insurances into it downtime with that is the cost of the premium of those insurances versus the amount of yield you're going to create and whatever strategy you're you're going after so it's a it's a tricky balance but the judicial financial industry as I mentioned earlier has been through these growing pains and we will go

20:20through it as well and we're all gonna make it as a kid said yeah and you're right it's it's not something you know it's a it's like a it was known that it could happen but when somebody has a lot of capital and they've sort of game the system in a way that was like it was sort of legal because it was in the what you know it was possible with the contracts

20:43you know and normally things like the Bitcoin blockchain it sort of has you know these 51 attack protections where it's like if somebody has a lot of capital and they sort of use it against the system then it hurts them but you know it's early days in defy and sometimes that happens but I feel like that's you know another scenario where moving forward all the insurance

21:07companies can eventually like make products that could cover that well it's like hey you know this could potentially happen because it's happened before there's a precedent and now we see that's something that we could cover you for because you know the first time it happens we didn't know that was a scenario and now we'll sort of cover you

21:24for that now sorry just to round off on that yeah we you know we're built as a protocol to build out any insurance products in the future now right now we're controlling that kind of flow and we're creating those products because we know what the demand is in an eye for the future of certainly the annular and I think many of the group like

21:50Insurance principles out there is the ability for anybody to create an insurance product and then get anybody to underwrites the risk but like it shouldn't be so difficult to create an insurance product and go through a whole bunch of Brokers and accessories and yellow you should be able to do it with the system I think that is look definitely and I was just

22:11going to ask about that Dan you know compared to traditional Insurance say something happens and you have to call the insurance company wait on hold and talk to them and you know they determine whether you're getting paid or not defy insurance and you know making it a decentralized nature I'm guessing it's a little different you know you probably

22:30they probably don't call you up and you personally approve the claim can you talk about you know why the decentralized insurance is better and how it's different if something does happen and people need to get a claim and get funds back yeah sure I mean it's not the obvious difference is that everything's on chain right so you have your cover on chain so

22:53that you can see that anytime once it's being purchased you can then submit your claim in the events of a loss claim will loss and then that would go through to the essentially the Dallas and to vote on the validity or Proclaim and then the payout So In traditional insurance companies I mean what I think I don't think anyone has been I don't think there's anyone on the planet who's

23:17only ever had good experiences with insurance companies whether you're stuck on a phone or whether or not just hassle or whether or not you're you know you're stuck with a huge deductible or access in the UK so it's you know I think we try and make the process a lot better here it's on chain so it means that as soon as you submit your claim your claim can be voted on by the by the

23:41doubt and anyone who's participating will get rewarded for voting as well that's heavily publicized as a public claim public vote will be information is transparent if required then an expert team would also review and submit a reporter but otherwise yeah the claim is a fairly automated process process that involves the community votes on it so that along with an appeals process is

24:06required but it allows a very transparent and also very fast and efficient system for communication and payouts because in the event of an acceptable claim the pay out so immediate and straight to a nominated wallet so it means that even though yes some details are slightly more public so maybe there's things that you maybe wouldn't want to know like you know you

24:26try and remain enormous with it but at the end of the day you know your wallet will be identified as a wallet the held x amount of capital in a particular protocol and got hacked so there are some publicity concerns around it but at the same time it's a fair fair Judiciary System that allows for a you know a quick payout on the event that you've actually experienced a loss

24:53and you know for example you know with our payout for the UST case and the zpeg there you know the entire thing was the you know first this client is actually an entire ecosystem collapse there were many different sides of it different people would say is that manipulation to people saying it's a rug pull from the Tara team and in the event in the end the

25:17team you know the doubts and did vote to say that it was indeed you know a Deepak event and a legitimate one which means that the consumers were paid out and despite the fact that it was the biggest payout in its basis the rest of the State even then the entire process was completed in less than a month now try and try and go and get some new

25:40high-risk new products the traditional insurers that pay out in a month and you know you'll be you'll be lucky to be still not dealing with it in quarterly a couple years later so what about the that's the real difference sir that's incredible and yeah it's it's a tedious process and even if you know the defy style Insurance can can expedite that and make it less of a hassle while

26:04also making it more transparent I think that's that benefits all so that's great and now you know Dan we don't have a lot of time left but for people that want to sort of look into you know they're using defy and they're like maybe I should be looking into Insurance what is the best way for them to sort of learn more about it and start using it yeah I mean there's a few different

26:28resources online if you can visit either you know RF or I'm guessing ambulance as well likewise you can there are a few good Aggregates out there for checking the difference between Insurance protocols you can look at things like bright Union to compare prices and covers so there are also you know Aggregates out of that and comparison sites that

26:49exist already as well there's quite a few different resources I'd still say you know do you read your research check into the actual policy wording make sure you're understanding what the risks are and maybe just include it in an investor checklist I mean it's just a common sense addition obviously people will have you know checking whether

27:10there's an audit or above ground of your team in public or Anonymous those kind of things does it offer Insurance should be on that list as well definitely I completely agree and thank you so much gentlemen for the insights into DFI insurance I feel like this should be and will be the status quo you know on the next D5 run in the next bull cycles when you know

27:32defy grows exponentially and bigger than the all-time highs of the last cycle because I know that will happen and I think it's best for people to be prepared with an insurance protocol to protect their losses because you just never know I will leave the links to ensure race and Rupert as well I'll leave the link to amulet and follow those

27:55updates in the description box below for the viewers I appreciate your guys insight and best of luck on your team's initiatives and let's definitely follow up in the near future I'm looking forward to speaking about this more awesome thank you Ashton sweet tea thanks Ashley