ZeFi & Bridge Mutual: AMA Recap
Welcome to the ZeFi AMA with Bridge Mutual!
So, today we have Bridge Mutual here, talking about everybody’s favourite subject: insurance. In the wild west of cryptocurrency and DeFi, we might need it more than we care to think we do, so let’s try and find out how Bridge aims to approach this subject and solve all the related issues around it.
Q1: First thing’s first, could you please introduce yourself, Mike Migilo and tell us a bit more about the crypto/blockchain/insurance experience of yourself and the Bridge team?
Mike: In 2016 I bought my first bitcoin. In 2017 I started a cryptocurrency law firm WolfeMiglio. I’ve been growing the law firm for the past 3 years, and we’ve had clients like NOIA, Gate.io, Akropolis, QTUM, Certik and others. Bridge is my next project, and I’ve moved full-time into its development and growth. I’ve worked on over 3 dozen different projects over the last few years, so I’ve acquired a lot of experience through my clients.
Bridge Mutual is a decentralized, dao-managed, discretionary insurance platform. Basically, it allows users to provide insurance for projects/stablecoins/exchanges in exchange for yields and profit sharing; and it allows users on the other end to purchase insurance for those projects/stablecoins/exchanges.
Q2: We’ve seen a few other insurance projects crop up in the space, such as Nexus and Foresight (whom we AMA’d with a few months ago). How do you see what you do at Bridge Mutual as differentiated from their capabilities or offerings?
Mike: Bridge Mutual is doing a lot of things different from our competitors. Nexus is the largest in the space, so perhaps it would be best to compare Bridge to their model.
Nexus is using Ethereum, which is not sustainable in the long-term because of the way gas fees are calculated. The gas cost of voting is often higher than the reward for voting. When this happens, people don’t vote. If people don’t vote, then claims are more likely to be handled incorrectly. This is why we are migrating over to Polkadot once the parachains are launched.
We also don’t require KYC. To use Nexus, you have to submit your passport and be approved. Also, only white-listed addresses can receive the tokens. Our system doesn’t need KYC because we never have control over the user’s funds, and we never manage how the funds are invested. This will also allow us to easily list on CEXs.
The most obvious difference between us and every other competitor, I think, is we’re the only platform providing insurance for stablecoins and exchanges. Stablecoins have $20B+ locked in value; exchanges have much more. Most of our competitors only insure smart contracts, which is only about $16B worth of TVL.
Lastly, our voting system is by far the most complex voting system on the market. Most systems only have a binary yes/no system. I’d like to discuss more on this, but our voting system is confidential until MVP.
Q3: Interesting background for sure. I like that you are not coming with crypto development background, but more of a trader + lawyer. Do you think your experience in trading allowed you to understand impermenant loss, and all other factors within crypto that might benifit from insurance policieis. Can you tell us a bit more about the rest of Bridge Mutual team? What kind of experiences do they have?
Q3:I also second Skiz’s question. We also had an AMA with a project called PolkaCover which is yet to be released, but built on Polka, like Bridge Mutual. How are you guys different than any other project over there?
Mike: Our team is very diverse, all of the full-time members of our time have been in the crypto space for many years… Lily was a former SEC attorney; Josh is an executive at the Paxful exchange; Luke has been responsible for raising many millions of dollars for other projects; Hartej is the founder of Hosho (one of the first blockchain auditing companies to ever exist), etc.
Q4: Going through the one pager and liking it. I wanted to ask, how did you manage to gather such international team?
Additionally, if this is the final version of the one-pager, do you know that the percentages on the Pie chart don’t add up to 100%? :)
Mike: Everyone on the team are people that I have met and worked with over the last few years of my legal career as a crypto attorney :).
The actual percentages for the pie charts are not flat numbers. For example, the sale allocation is actually 8.65%, not 8%. I’ll have the artist reduce one of the numbers by 1% lol.
Q5: It’s interesting that you mentioned the possibility of users supplying insurance to exchanges. Are we talking purely in the realms of DeFi here, with Sushiswap clones and the like, or do you foresee your project having utility in the CEX space as well? If funds are secured by a DAO, it may be tough to come up with the kind of cover that we’ve seen in the Centralised Exchange space; https://www.coindesk.com/crypto-com-lands-record-360m-insurance-cover-for-offline-bitcoin-vaults
Mike: We will insure CEXs, specifically. Decentralized exchanges run on smart contracts, so they are covered under the category of “smart contracts”. It will definitely be a challenge to provide enough capital to cover all of the assets in the exchange… Users will only be able to purchase cover up to the maximum of the cover available. So for example, if there is $100m in the KuCoin coverage fund, then a max of $100m in insurance coverage can be purchased.
Q6: So now that we know the differences and you said that one advantage is that you don’t require KYC, how can you be sure that some “bad players” won’t, for example, create various accounts to make a specific vote on X thing pass?
Mike: So the term for this is “Sybil Attack”, when a person creates a large number of fake accounts to sway an outcome. In our system, 1 ETH address is not 1 Vote. Voting power is determined by the number of tokens being used to vote. There are incentives, punishments, and totally unique systems in place to balance out the voting system and to prevent gaming the voting.
Q7: Interesting… the incentive for a CEX being that they don’t pay a large lump fee or premiums for the insurance like with traditional insurance, but rather through smaller fractional shares of trading fees and the like, or have I misunderstood the summary I read?
Mike: CEXs don’t have to self-insure, but they can. The platform is p2p and p2b. So technically. binance can take out insurance on itself using our coverage pools. But also, individual binance users can take out coverage for their holdings on Binance.
Q8: Can you tell us more about the no KYC part? Maybe give an example of “John who has 200k USDT and wants to purchase insurance”?
Do you envision a future where Bridge might/will have issues with the governments in Europe and the U.S. due to the no-KYC part?
Mike: Well, in your example, we don’t care who John is.
There’s an ETH address that wants to purchase 200k USDT worth of insurance. He opens the app, picks the assets he wants to cover, chooses the duration and the amount in USDT that he wants to cover, pays the premium, and his policy becomes active. Whenever he logs into the app using his address, he can see all of his active covers and make a claim on them at any time.
Regarding the regulatory concerns, sure. It is impossible to innovate in this international, high-tech industry without walking a fine line or operating in gray zones. The team has two top-tier attorneys that have significant experience with regulatory compliance for crypto projects. I’m very confident in our legal position at the moment.
Q9: Are the systems and the methods to prevent gaming the vote confidential?
If not, can you please share some with us? If it is, will we get to know them later on as the work progresses on Bridge?
Mike: Unfortunately they are confidential. Other projects could easily copy us if I explained how it worked. We are solving things they haven’t figured out how to solve yet… In order to insure our own success, we won’t reveal anything confidential until the MVP is launched.
Q10: To what degree does insurance have scope to cover the degeneracy of DeFi? For example, if you’ve got a decentralised stablecoin, and then one day the WARONRUGS twitter account tweets out “omg their code says they eat babies!!1” and degens panic and value crashes, only for WOR a couple days later to go “nah they don’t eat babies lol”, how much can or does insurance factor in reasons for value loss?
To give a slightly more serious example, what would happen if someone made a bogus token with the intent to rug, and they and a bunch of friends purchased insurance safe in the knowledge that it was going to rug? What stops (temporary) black swan events or people gaming the system?
Mike: So the only product that covers anything related to price is the stablecoin coverage. Stablecoin coverage protects price crashes, but only if certain conditions are met. One of these conditions is duration. So for example, the price must fall under a particular threshold, and stay there, for 14 days straight. Then, the policy will be claimable.People can make fake/scam projects and attempt to rug it and profit from insurance… This is just a simple case of buyer beware. We’re making a decentralized protocol that gives people a lot of utility and abilities, but we can’t protect people from their own lack of due diligence or regard for their money.
The only way for people to get insurance on a project is if someone else provides coverage for that project. Also, anyone can add any project they want to the system at any time, without permission or approval. If people rush in to back a new project they’re excited about without doing DD or checking for accurate audits, and it gets pulled, they will likely get punished.
To try and change the space for the better and curve this from happening, as part of Bridge’s business model we will be using our auditing partners and funds to independently audit the code of popular/upcoming projects, and publicly publishing the aggregate security scores on our platform. This should help people make more informed decisions with their money.
Q11: Cool. Is there a specific uniform threshold for that, since stablecoins ideally don’t sway too many percent off their value? Like, if it’s 3% off for 14 days (nothing in terms of fluctuation for a regular token), is that cause for enough alarm to activate the payout?
Mike: Definitely more than 3%. 3% can be easily corrected. We’ve seen coins recover from as much as 70%.
We’re playing with the idea of letting people set their own threshholds (the lower the threshold, the lower the cost of the premium). For now we haven’t decided.
Q12: We have seen a fair few audits recently not catch various critical errors, is there any specific procedure for if something happens due to issues that weren’t caught in a publicised audit?
Mike: No. The space overall isn’t careful enough. A top-tier audit costs between $10k to $15k. Projects have millions of dollars in their vaults and are only spending $10 to $30k on a couple of audits. It’s really bad practice. There’s no reason this space should be so reckless with all this money, it’s part of why the space lacks credibility. One of our missions is going to be to set new standards for how things should be done. All insurance protocols should be actively auditing other projects. All projects should be paying for more than 2 audits. All projects should be audited both before and after they are deployed. If a project is audited and still gets hacked, it will still benefit from coverage.
Q13: Interested to hear more about the DAO itself, and the 3-phase voting process meant to ensure accuracy in claims. Could you tell us a bit more about that please?
Mike: The only thing I can tell you about the voting process is that the first phase is a vote among policy holders of the same asset. The second phase is a vote between coverage poviders for that asset. The third phase only comes into play if either the claimant or the token holders collectively appeal the previous decision; in which case it moves on to the third phase of “trusted stakers”.
Whatever decision is made is final. Many of our competitors have “Advisory boards” that can completely veto the decision of the community. This is not real decentralization. The projects like to say that that the community can vote who will be on the advisory board, but in reality the board will obviously be decided by the token whales and founders. These systems are inherently flawed, no select group of people should have the ability to change the decision in a true decentralized system.
The DAO will launch in Q2, details on how we’re modeling the DAO are confidential for now. You guys ask the hardest questions.
Q14: You sent a form last night for private sale/presale in our group. Tell us more about it.
Mike: Yeah, the amount of interest is actually insane…
About $3m in requests from just the community. Our sale is only $1.6m. Plus we have $2m in requests from our previous rounds, before the sale was officially open.
I haven’t checked the community list today, it may be more than $3m now. But yeah, if anyone is interested, please apply, but please make sure you leave a detailed reason for why you deserve an allocation.
Q15: How is this round different than the previous ones? and the official listing?
Mike: This is the tail end of our private sale round. So the community members who get in here will have the same exact terms as the private investors who got in at the beginning of this round. Before the private round there were two very small angel and seed rounds, but those have been closed for more than a month.
There won’t be any public sale happening. After this closes, we’ll launch MVP then we’ll do TGE/launch/listing at the same time.
Q1: great AMA! Is insurance for personal wallets something that you at Bridge Mutual are considering for the future?
Mike: We’ve been thinking about this for a long time now, but it’s way too difficult to prove that a wallet has been actually hacked or stolen. There’s no way for the community to do their due diligence on something like this. Perhaps later we will find a way to implement this, but it isn’t a top priority.
Q2: Hi, good AMA thanks, wondering what is in your opinion the most crucial thing that blockchain-based insurance needs to work properly?
Mike: The insurance protocol itself has to be safe and secure. If that gets hacked, the whole system collapses. This is why we need insurance companies to insure each other, and why these other competitors in the space are actually important and welcomed by us.
Q3: Are there any incentives either than selling insurance policieis being worked on for token holders? I still don’t understand the need for the token itself tbh.
Mike: DAO governance :)
Q4: How will you help Non-crypto users who find it difficult to understand BRIDGE MUTUAL project ?
Mike: Anything this deep in the space will be difficult for non-crypto users to understand. As the space grows, mass adoption will slowly take place. But it’s a slow process.
Q5: And also another question, where do you get the data used to assess the our claims? Is it from a specific oracle like Chainlink, or do you go from a market aggregator like CMC or Coingecko, or how?
Mike: Claimants can upload pictures/videos/texts for all the voters to see. Also, when something is hacked it typically creates a large buzz on social media and on news sites, so it should be very common knowledge and easily verifiable. For stablecoins, we collect price data using APIs and oracles.
Mike: Hey guys, I have a very important call that just came up, we just ran over the hour. I will answer the questions later after this call, but this requires my attention. so sorry about that.
On this note, we end the recap of this wonderful AMA.
Thank you Mike from Bridge Mutual team for your presence with us today.
More questions were left due to the urgent call that came up, so keep up to date with the questions and answers on our group: https://t.me/ZendettaFi
To keep up to date with the Bridge Mutual project, please give them a follow here:
Originally published at https://medium.com on December 8, 2020.