InChain Set to Provide Assets Insurance at Cryptocurrency Exchanges
The idea of creating an insurance platform for the cryptocurrency industry has been on the front burner for a while. There are plenty of stories telling how blockchain and bitcoin related projects fail because of hackers, insufficient security or simply human errors. All these factors impede the industry’s development, scare people away, and cause mass rejection of the technology.
Therefore it was a nice discovery for us at ForkLog to learn about InChain, a decentralized platform providing users with risk insurance and offering an insurance bonds investment option. The platform is being developed on the Ethereum blockchain, so smart contracts are used to implement the insurance and its service mechanisms.
ForkLog spoke to the project’s founders, Sergei Primachik and Dmitri Lazarichev, to find out about how InChain works and the platform’s launch.
FL: Why did you choose Ethereum for your project?
InChain: We want the platform to be fully decentralized. How do we achieve that? The answer is simple: by implementing business logic with blockchain-based smart contracts. We realize that InChain will be developing, it insurance and investment directions will be expanding, and mechanisms of decentralized management will be improving. So we needed a tool enabling us to change and expand business logic with relative easiness.
Building on this, we have studied what different blockchains are capable of. I’d prefer not to name the rest of the candidates, but eventually we decided upon Ethereum. Its capabilities allow us to handle our tasks. Also, we’ve got a strong development team specializing in Ethereum, and we know for sure that this platform works.
FL: What other projects were InChain members involved earlier?
InChain: Our team includes experts in different areas. Sergei Primachik is an IT engineer who dedicated most of his career to design and process management. Dmitri Lazarichev is a co-founder of the wirexapp.com project. Holding a MBA degree, he’s an entrepreneur with many years of experience in finance and business consulting. There is also Andrei Zamovski, CEO of Ambisafe. He’s been involved in blockchain projects since 2010 creating numerous cryptocurrency products. Andrei is responsible for the InChain architecture. Alexei Matiyasevich has been developing mission critical systems for over ten years now and boasts solid experience in creating blockchain products, from Tether to Bitfinex. Alexei Shakhov is our lead frontend developer. Despite his young age, Alexei has seven years of experience in developing web apps. The team also includes business advisors, PR experts, and auditors.
FL: Cryptocurrency users are especially concerned about the money they keep at exchanges. The recent Bitfinex drama has once again confirmed these concerns are justified. Will your platform help regular users to insure their assets at exchanges?
InChain: Our primary objective is to provide regular users with an option of insuring the risks of losing their assets stored at various web services such as exchanges or wallets. History shows these risks are more than real, and we believe a product providing this specific risk management will be in demand. InChain’s distinctive feature is that the insurance happens fully on blockchain. With InChain the risks are crypto-economic, the liquidity is cryptocurrency-related, the business logic is based on smart contracts, and the management is decentralized.
Importantly, InChain is a p2p-insurance platform, which means the risks are bought and sold by regular players. As such, InChain will let you insure your own risks or buy other players’ risks in exchange for passive income. Catbonds are the most striking example of this mechanism.
FL: What else will users be able to hedge against?
InChain: Initially, there will only be insurance of risk of loss of crypto-assets caused by hacks of exchanges and wallets. Over time we’ll most definitely be expanding our insurance offerings.
FL: How easy will that be for users?
InChain: The process of insurance won’t be any rocket science for users. In short, a user will just have to select the platform he or she wishes to insure the risks on, to specify both the amount to be insured and the insurance period, and, finally, to provide some more required parameters.
The InChain insurance model will automatically create an insurance proposal, which the user will have to either accept or decline. If the offer is accepted, the specified insurance premium will have to be transferred to the InChain insurance fund, and the certificate will be recorded onto blockchain as a smart contract. After that the user is not required to do anything else. When the insured event occurs, insurance settlement is automatically transferred to the user.
FL: Suppose, an enormous number of your clients have fallen victims to thugs, say, as a result of an exchange hack. Will the system be able to handle this huge amount of requests?
InChain: InChain’s insurance portfolio will be balanced to avoid such cases. This means, the insured amounts will be distributed more or less evenly within the portfolio amongst different cryptocurrency services insured with InChain. This will eliminate excessive financial load on the insurance fund in case of insurance payments, since hacking all services at once, or at least the majority of them, would be a quite a task.
FL: The platform offers its own crypto tokens as investment assets. What their cost will be comprised of?
InChain: There are two types of InChain tokens representing investment assets.
Firstly, there are InChain tokens enabling owners to participate in the management, which means decentralized management. This model will cover all key issues of InChain, like insurance fund management, dividend distribution, updating InChain smart contracts, etc.
Secondly, there will be insurance bonds. This is a unique product that came to blockchain from the insurance industry. The purpose of an insurance bond is fairly simple, as it represents the other side of an insurance certificate. For instance, Alice has insured her 10 BTC at Bitfinex, and the certificate cost her X BTC. Apart from the certificate, InChain at the same time issues an insurance bond to the value of 10 BTC. This bond implies a coupon yield, say, Y BTC. This means, an investor is able to purchase an insurance bond and have Y income on it. However, the investor accepts all insurance risks, so when the insured event occurs, he or she may lose not just the coupon yield, but also the amount paid for the insurance bond.
FL: According to the project’s press release, the platform’s key feature is insurance fund investment management via a DAO. Many people find this word scary these days, especially when it goes along with Ethereum. How protected will your project be, and who’s working on that?
InChain: We have thoroughly studied the DAO incident. In order not to run into the same trap we are going to perform mandatory independent audits of our smart contracts’ code with the help of the community.
We’ll be able to enhance InChain’s reliability by using hybrid consensus, where key decisions, like those related to the insurance payouts, will be made by smart contracts only. Only a smart contract will be able to initiate a transaction; yet, in order for it to occur, it will require several signatures of the management board elected by InChain token owners. And even if the smart contract is compromised, an unauthorized transaction won’t be executed just because no one will sign it.
FL: When do you plan to launch the InChain ICO and when we’ll be able to see the pilot version of the platform?
InChain: The ICO is scheduled for September 2016. The project’s roadmap is almost ready. We plan to release the product’s first version six months after completing the ICO.
Interviewed by Tanya Otter
- Suddenly Russia’s Central Bank Sees ICO Investment Potential
- Russia’s Stance Towards Cryptocurrencies Remains Ambiguous
- VTB Bank Officials Say Russia’s Appetite for Cryptocurrencies Overblown by Media
- Bitcoin Price Rockets to New ATH Over $5200
- Russia Seeks to Limit Maximum Amount of Purchased Cryptocurrency
- Ukrainian Parliament to Review a Bill Recognizing Cryptocurrencies a Financial Asset
- Russian Authorities Receive Putin’s “Signal” to Spearhead Cryptocurrency Mining
- Ukraine Presents Cryptocurrency Regulation Bill