The Ryan Hanley Show - RHS 115 - Jonathan Libby on Smart DeFI Insurance

Episode Date: September 9, 2021

Became a Master of the Close: https://masteroftheclose.comIn this episode of The Ryan Hanley Show, Ryan Hanley is joined by Jonathan Libby, founder of Steady State Finance, the smart Defi insurance company. Listen for an absolute nerd session on all things crypto, blockchain, decentralized finance (DeFi) and what the future holds for insurance.Episode Highlights: Jonathan explains what decentralized finance means. (5:06) Jonathan tells listeners what the role of DeFi will be in the future. (9:00) Jonathan explains how decentralized exchange effects the ecosystem. (13:16) How difficult is it to make changes within the Bitcoin community? (18:30) Jonathan details how to disrupt insurance and implement new concepts. (22:31) Jonathan gives listeners insight on how Steady State Finance operates. (26:46) What’s the process, if a consumer wants to be part of this? (32:49) Jonathan gives an example of what Steady State Finance can offer. (33:45) How did Jonathan get into this space? (36:16) Jonathan walks listeners through how he put several concepts together to build something significant. (38:22) Key Quotes: “I think in cryptocurrency... universal basic income, is for the first time is even actually possible, in a way that you can actually feasibly work, where people can all have a standard of life without sacrificing individual liberties.” - Jonathan Libby “We're almost building a model that prioritizes reinsurance. We move from reinsurance to actually sharing the protocols ourselves as they keep developing. And by us, I mean a deep centralized community, not run by me not run by anyone you know, directly...But, by the people.” - Jonathan Libby “My thought was...let's apply this. I'm like, this is the future. So, I started looking...How do I put together a bunch of concepts together and build something? Eventually, I met a very well known figure in the space, named Tim frost, from Yield app, and Yield app contracted me to build an insurance solution for them, and how to insure their portfolio to defy risk.” - Jonathan Libby Resources Mentioned: Jonathan Libby LinkedIn Steady State Finance Reach out to Ryan Hanley Learn more about your ad choices. Visit megaphone.fm/adchoices

In a crude laboratory in the basement of his home. Hello everyone and welcome back to the show. Today we have an absolutely tremendous episode for you. I hope you're new to crypto blockchain because you are getting the full frontal download in this episode. We are talking to Jonathan Libby, the founder of SteadyState Smart DeFi Insurance. That's smart, decentralized finance insurance. It is absolutely incredible, this conversation, because it really is. It's like we've opened up the window in time and we're able to reach into the future and get a look at how the world operates. And Jonathan's an incredibly smart dude doing some really dynamic,

really interesting things. And this is just one of those episodes that you just sit back and download it. Just let it sink in. There's not a lot that you can actually take action on today necessarily from this episode, but it is absolutely going to expand your mind on what is possible and what is happening out in the world of decentralized finance in general, crypto, cryptocurrency, and ultimately the place that insurance can have in all of it. It's a tremendous episode.

You're going to love it. Before we get there, I want to give a big shout out to today's sponsor, Agency VA. Guys, I've been talking about Agency VA for over a year now. Just had the one year anniversary of my VA. His name is Nat. He handles all our transactional related service requests. He's a big part of our team. Agency VA is a big part of our team. And, you know, looking forward to expanding that relationship as we continue to grow. And, you know, couldn't be happier for the success that Wes and Ben

and everyone, including Lally and everybody, a part of Agency VA. If you are looking for some horsepower to put into your agency to get some people who know what they're doing, who can get to work, who are going to get things done, do it right, do it well, have them well managed, Agency VA is the place to go. Go to agencyva.com. I also want to give a quick shout out to my boy, Chris Langell from Advisory Evolved. Chris has been a longtime sponsor of the show. And really, I just think Advisory Evolved, what they do with websites, the way they operate, how Chris is constantly out in the forefront of not necessarily the showy stuff, right? Like Chris has a tremendous way of improving the advisory evolved website ecosystem with the stuff that's actually going to have an

impact from, you know, visual conversion to ranking to helping ease of business without just injecting crap that you don't need into your website. If you're looking for a new website, if you're looking to dust up your web presence and really kind of put your best foot forward on the interwebs at a price you can afford with a guy you can trust, with a team you can trust, that's Advisor Evolved. Advisor Evolved. Go to advisorevolved.com or just Google Advisor Evolved or Google Chris Langell, you're going to find advisor evolved. And I promise you, you will not be unhappy with your website. All right. With that, let's get on to Jonathan Libby from steady state. Here we go.

Well, Hey man, thanks. Uh, thanks for coming on the show. I appreciate you taking the time. I know you're a busy dude. I know you've got a lot going on. Um, you're in a very dynamic space and, um, I'm just incredibly excited to have you on the time. I know you're a busy dude. I know you've got a lot going on. You're in a very dynamic space and I'm just incredibly excited to have you on the show. Excited to be here. Awesome. So I was referred to you by Jeff Shee, who's been on the podcast as well. Good friend, runs a tremendous organization in quantum. And when he recommends someone, I obviously am very interested because he doesn't, not the kind of guy to mess around. And then when I looked into what you're up to, I was like, well, this is like the coolest stuff going right now. And one of the more, and as we talked a little bit before we went live, you know, I think maybe not tomorrow, but certainly in our future, one of the more, and I don't like to throw the word disruption or anything being disruptive around, but I do think DeFi has a chance to make

a significant and dynamic impact on how insurance operates and how our world operates, frankly. I'd be lying if I said I hadn't bought, I hadn't re-upped my stake of XRP about 15 minutes before we went live because I'm kind of a crackhead. But, you know, first of all, let's take a step back. What is decentralized finance? What is DeFi? When you hear that term thrown around, let's kind of start at the basics and we'll build our way up. I think that's a great place to start. So decentralized finance, often it's called DeFi, is kind of doing everything we do actually normally in finance, but rather than people handling the business, it runs on autonomous code fully. So we have this kind of idea,

we understand how the business works as church professionals in so we have this kind of idea we understand how the business works as church professionals and finance or in any kind of area but a lot of normal people have an idea how things work when they start explaining to your job you realize they have no idea what actually goes on they're doing how DeFi works is it runs on autonomous code where if you put money in you can actually see step a b c and d run naturally on a code system and you can actually know what actually is going on so what this kind of means is it's meant to like remove a lot of how people um a lot of the third party or intermediaries between getting some kind of achievement or input output and kind of like that's kind of what's supposed to be versus tradfi we have to go through

intermediaries to get some kind of solution or kind of solve something rather than that it's supposed to just be one on a one-to-one ratio where someone has an input someone has an output and it just goes there without the third party broker and it's kind of like a really unique aspect in the industry where we've always had that and we're trying to figure out how does it work and what's the value out there because you know if you're a banker okay you're trying to give out a loan let's say you know there's a very direct kind of framework to function on giving a loan. But if you know the framework, work around that. So it's like, OK, well, that's better than code.

But the reality here is there's another value add that's maybe even though it can't be as customizable in the space, it allows you to actually be more capital efficient, where you don't need the overhead. You don't need the people. It's a system that naturally runs. And also another thing that makes it very interesting is that it's tough to control or manipulate. This code, when it's built, often there are keys that show you the way to add more code to the system. Well, what people often do in decentralized finance is they burn the keys for the criteria to add information into the

system to make it grow better. What that means is that there's no centralized authority. Because there's no centralized authority, there's no one to collect the overhead. And because there's no overhead or any kind of costs on that end, it's just a one-to-one ratio, like I said in the beginning. And that's decentralized finance as a whole. You know, bank lending. Rather than going to bank to receive the assets,

people find capital on one end and someone lends money here. It takes a lend and they provide APY, you know. And because of that, not low cost, you can actually get higher returns compared to traditional financial markets. Yeah. And you know, isn't it, you know, the other part that I think is interesting about that is the opportunities

that it presents both on just taking the lending, just that as one kind of microcosm of this, of decentralized finance, it, it opens up the market for micro lending. It opened up lending to people who may otherwise have been, you know, unable to hit certain triggers. And it provides maybe someone like me who, who, who doesn't, I'm never going to go going to have enough money to create a traditional lending facility. I could actually put some of my assets into a pool that is then lent out to, I could pick a risk tolerance and then be part of a

lending pool. And now I'm able to capitalize on a capital that would have just been sitting in a bank account otherwise. And that to me, I hate, again, I don't want to use too many buzz terms, but like the, the, the democratization of that in its, in its untarnished form is incredibly interesting to me. I mean, it just, to me, I, it's hard for me. So I'm like way down the rabbit hole, not as much as you, but without owning a, a definance or crypto business, I'm, you know, this is like my, I just think it's so interesting. I can't see how once you start down this path, how at some point in handicapping the timetable to me feels kind of impossible, but I can't see how we, this isn't the eventual where we go. Yeah, absolutely. Um, you know, the question is, is it going to be like the future for everyone or is it just like FinTech is

going to take over a portion of the market, make things easier for access, but find its niche within how things actually work? And that's the real question, you know, of what it's going to be and what it's going to look like. The biggest, the most coolest thing about DeFi, as you dive in, is it's kind of the weird marriage of traditional finance nerds like you and me with developers and code knowledge. And it's kind of creating and creativity. I think it's one of those kinds of things where we can kind of combine these

two kinds of concepts of autonomous code, financial nerds, creativity. And I'm seeing a lot of people building a lot of unique concepts that aren't possible in traditional finance that they're applying and really challenging the way how financial systems work and proving how there could be a better solution. The reason why decentralized finance i believe is a future for sure is um it really allows people let's say let's start with third world countries i think in first world countries it's great there's a lot of corruption in banking models and in currency i remember a story where turkey's currency raised

and the inflation raised by 40 percent decreasing the value and dramatically in the value of your assets could you imagine having 100,000 in the bank now it's worth 60,000 a day later out of nowhere? It's incredibly disruptive. You know, one of the key aspects, this isn't necessarily native to DeFi, but it's very much used in the DeFi system is stable coins,

where it's one coin with a derivative value that's staked to another value constantly and can't move. You know, Nigeria is one of the largest users of Bitcoin, even more than USA. And these stable coins, what they are is it allows people to actually keep stable value in their funds, be able to transfer it naturally. And another problem is because, you know, if you want to exchange your assets, you are often stuck in the area you are or whatever location you're in.

With the internet and these stable coins, you can now access digital very easily from Nigeria, say in Thailand or or the usa naturally creating a more global market and actually increasing maximum market share allowing durable countries to move up way faster and allowing us as like in personal partners to actually have more access to new opportunities in there yeah it's really amazing i well so my mind i love this conference this is gonna be one of my favorite so for my first thought is, imagine if the ruler of your kingdom could just drop like, let's say, $1.9 trillion on the ecosystem in a snap of his fingers and tell you it's because of a disease. And, you know, and then do another six just for why not. So, you know, this is like real world

hitting everyone. Second, you know, I was one of the things, one of the cryptocurrencies that I follow quite closely is Cardano. And one of the things that initially caught my eye, and since reading into it, I know more of the nuances, but one of the initial stories that caught my eye about Cardano was how Charles Hoskinson, the founder of Cardano, was working towards applying it to the African continent, which if you don't necessarily understand what goes on there as a listener, if there's a currency, and if that currency is controlled by whatever the country is, it is often highly centralized, and it's all grouped into whoever like the few controlling entities are. And the rest of the country is left. They're still trading like sticks and shit. And what's happening and what Cardano is one of its early missions was to be able to do just like you said, provide a base layer of transactability to people boots on the ground you know i can actually pay

you for the milk that i need and you can pay me for the bread and like being able to now give a stable currency to all these people so okay so that's the cool part what really is going to be fun is when we can blockchain um http protocols like web protocols because right now they can still use the internet to kind of create geographical barriers to crypto and it's like as soon as we can figure out i know there's some projects that are working on it but like as soon as you bring down that layer and you put the actual internet onto a blockchain that is not able to be centralized or or have these you know these artificial barriers to it holy shit i mean that's like a whole nother level i think a great example of that is um there was recently subpoena on uniswap

so uniswap is a decentralized exchange where people can post tokens and trade it's like it's like a it's a broker that runs totally automatically, which is amazing. And we do have it's called, you know, Cardano is looking to do it. Ethereum has done it. Algorand is looking to do it. Polygon is built on Ethereum. It's like a decentralized Internet where no one can control, you know, anyone can build on. And that's what people are building on these protocols.

You know, it's we're building on it. And what we kind of saw is the power of like building on a non-controllable system. Let's say you can it's like you control the the output you can't control the input within the ecosystem and i can go into that as well by regulation if you want to but um uniswap built a whole entire system on the ethereum network on decentralized code it's open source publicly available to anyone um they recently got a subpoena saying you're basically launching securities, the unregulated securities out and then anyone have access to them. Well, the problem was the government couldn't shut down Uniswap. They built this code on this ecosystem that just can't get shut down.

It's naturally there and it's running on all this autonomous code. They burned the keys to running the system. So all Uniswap had access to was an HTTP front layer landing page to enter the app. And all that had to happen was somebody did make a new website in another country, copy that, pop it and place it there. And it's running again. You can't actually stop the system. So when you say, real quick, before you go any further, because I think this is an important thing to clear up for people. When you say like, it's running on a deep, i i would love for you to explain how it works like the distributed network works how they can't take it down right because because because i think for

people who are listening to this and maybe still not familiar with a lot of this stuff that doesn't make sense you just pull the plug or delete the server right like how is it that that can't happen so i'm'm not the foremost expert on, say, blockchain as a base layer. But you're better than probably 95% of the people listening. So go right ahead. So kind of what Ethereum is. So I think there is kind of like some major asset classes that are competing. You know, I think Bitcoin is in a world of its own

where it's trying to compete itself with a score of value, but the rest are trying to take over market ecosystem. So it's Cardano, Algorand, Ethereum, and Polygon, which is based on Ethereum and a lot of other, a lot of Solana, Avalanche can go, can go on. And kind of what these guys do is they built a code or a system basically where there is, it's called a blockchain, where all the information information the system is all

information they would have access to and basically how it grows is rather than people have manually like one group or one central agency has to grow a system out like the internet is think someone's to go and build a website in the system or expand it whether it's kind of a layer kind of what happens is they build a layer that's naturally valuable or customizable and people go in and implement and grow it naturally. And you have to often have access. Now, originally you're like, say, well, I have to have access to like a native token to implement and then use it. But a lot of these, you actually have to anymore, where it's an autonomous system that runs where a framework is given. And that framework is code. We deal with JavaScript, Python, and a theory of image

solidity. I don't remember what Cardano is, but it's like in a code and you say this code and you can enter anything in here and because no one can is in charge of that layer you know it's like no one can shut it down so if you i can input a code or do anything i can plug it there no one can just like go off and say that code's invalid pull it out if i did that on the internet, I have a website attached to me. I have a domain. I have like a license. I have all these different things. They can know where the code is,

attach me the code and then wipe the code out and go to like some kind of a centralized group to destroy it. If I build my domain on Google and build that out, they can go to Google and say, this guy violated this grid. With Ethereum, there's no way to really actually, and there is, okay, I can go into it,

but like on the initial layer, you don't know what it is. It's not like KYC necessarily. Now there there is okay i can go into it but like on the initial letter you don't know what it is it's not like kyc necessarily yeah there is and i can go into that later but on the system itself you can't just go perform and figure out who what someone is and because of that anyone can place anything and you can't just pull it off and and because you can't just pull it off what that means is like anyone can post anything or do anything in the system network internally and no one can uh no one can stop them unlike the internet where anyone can't pull it off now you can control and figure out where people are and it's called off ramps but i can go into that and that's where you start really figuring and there's also ether scan metamath transactions i can go

into actually how it's very easy to figure out who everyone is but it's also at the same time kind of complex but yeah yeah and the reason you can't just pull it off is because you have 20 000 100 000 different computers that at all times exactly and the computers are anyone who holds the token and you have to get everyone who has a token to be like take that off and it's almost impossible and that's actually the great point i forgot to add that's actually the perfect conclusion is the people how you can pull anything off is you have to get a large you have there's that native token that you have to have in the system like i said whether it's ada for cardano ethereum for ether and uh basically you have to get a majority of people that want to like agree to pull something or implement something new

into that system yeah and it has to be a universal agreement the group that does this best i would say is the bitcoin community uh where is taproot where it comes to be a universal agreement. The group that does this best I would say is the Bitcoin community Where is Taproot where it comes to that? It's almost impossible to change. Yeah, they just recently implemented this new system called Taproot From what I understand, you know, it's in Bitcoin. It's very actually hard to use as anything other than the golden rock I would say and but what did they try to do is they um they're allowing transactions they build a thing called tavern i still have never actually sat down and read like really on the nature of what tavern is which came out like months ago i really should have um but um basically they had like a 60 consensus like everyone is involved with bitcoin community

somehow to agree to something engage bitcoin guys getting these bitcoin guys in front of anything is impossible yeah so they agreed to it and basically allows transactions to lose more flow more freely within the thing they're trying to build called lightning network that is something that really goes on top of bitcoin that's supposed to compete with the ethereum concept and cardano and what these guys are doing as well where you can actually build on the bitcoin network and put transactions through on bitcoin um and that was one of the great examples of like it this is the first change i I think, in like eight years or something crazy like that. And the thing was built in like 2008, which tells you like how impossible it is to change anything.

It's just going to get harder and harder as this Bitcoin gets distributed to more people. Yeah, you know, the thing that, you know, they call it FUD for anyone's listening, and it's basically just trash talking and nonsensical stories. There's a lot of gaslighting that goes on. And, you know, I, when I, again, I, I'm probably way too down deep into this rabbit hole for my own good, considering my limited technical knowledge. But, you know, again, the more I researched the technologies, the more I understand things like, like Solana coming out with proof of history, right? So you have your proof of work, proof of stake. And now here's another network that has something called proof of history, which is able to even take proof of

proof of stake, which I won't get into all the different details, even take it a step further. And all we're just continually moving to the idea that in order for something to change, the whole group or a massive portion of the group has to agree to it. And each one of these evolutions makes it harder and harder to rig that change in any way that isn't an agreed upon part of the network as it was set up. So like there's a set of rules for that network and, and it's, and you can operate inside those rules as much as you want. And what all these iterations and new attempts of doing is, is just solidifying the security of that network so that you can't have someone come in and just all of a sudden debit themselves a million dollars for no reason.

Wait a minute. That's not how the system works. And 73% of the people in the network say that it's not so too bad, so sad. And that to me, I look at that and now I kind of want to, I want to transition a little bit and we can go down these rabbit holes again as much as you want, but I want to transition that a little bit to insurance because you think about how, I mean, that freaking way that insurance, I have a hard time because I live in traditional property casualty insurance world and to run a traditional property casualty insurance business, you have to operate by those set of rules. oh my God, like, look at what they're doing and the way data is passed and how it's held and how easy it is to spread risk. And this is what we're doing in insurance yet. You know, we're still using AL3 download systems in order to transfer inaccurate and oftentimes antiquated data bytes between, you know what I mean? Like I just look at it and I'm like, this is insane that this is how we operate. I know that's not, you're not operating in that

same space. Like you're, you're doing something slightly different, but it just, this to me, if there isn't like right now, every major property casualty insurer in the country should be finding people who think the way you do, who have your type of expertise and putting them on staff. And even if they're not doing anything, they should be researching and testing and talking to people and starting to build these networks. What's up guys. Sorry to take you away from the episode, but as you know, we do not run ads on this show. And in exchange for that, I need your help. If you're loving this episode, if you enjoy this podcast, whether you're watching on YouTube or you're listening on your favorite podcast platform,

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You got to have it. If you want to disrupt insurance and implement a lot of new concepts, you have to understand insurance and you also have to understand the space and you have to combine it. It really is. You can't have one or the other. Like, you know, what I built, you know, started originally as, you know what i built you know started originally as you know we had a parametric framework parametric insurance framework built under a captive insurance model and then i like implemented the idea of the insurance and security which is a brand new concept you know

and in cat insurance and cdos credit false fault models like the whole thing it's like you have to you're not you're paying these guys to think give them a problem and you tell them solve this and if they do their job they're passionate if you're paying these guys to think, give them a problem and you tell them to solve this. And if they do their job, they're passionate. If you get the right person, they'll create some crazy solutions. You're like, oh my God, you know? And that's kind of like why you hire these guys. It's like, they're the strategists. You can think 10 years ahead of what it's going to look like and actually bring your

company forward. Yeah. So let's talk about steady state. Oh man. What's going on? What, what is it to, you know, give us the lowdown. Um, steady state. We are so under these layers, let's call it theory.

Okay. Cardano's not there yet. They're heading there. And Solana's heading there as well. And Avalanche just started. Um, there are these things, people build these decentralized code businesses on top of these networks and they're what we simply are is we're providing insurance to these businesses for different kinds of risks specifically catastrophic risks now catastrophic risks like we actually

normally understand them are you know hurricanes lightning storms earthquakes but there's a new kind of catastrophe risk we understand to be a cat event, such as technological risk or cybersecurity risk. We actually don't, we forget those are catastrophe events. The biggest risk right now in this industry is the code is still early. This industry is still early and it's like the wild west. Remember when we had the internet and probably you, Brian, I were like on the cusp of that when we were young, but like people with like phishing attacks and viruses and scandals. This is where we're at right now in this space. It's a wild west, you know,

if you're not careful, you can get in serious trouble, you know, and what we're doing is basically the risk you're exposed to is if you build this decentralized code, if there's a bug in the code, someone can take advantage of that, say, steal the money, okay? Or if there's a, you can black that exploit.

And like, if the coders themselves make a mistake on like some kind of a poor decision on like the infrastructure you can black exploit that and people who provide capital to build these networks these systems are totally exposed okay and these kind of events we're trying to start starting to share for protocols how the industry currently works is there is no insurance for protocols and it's $145 billion industry just on Ethereum. And it's probably heading to a trillion dollars, probably in a year or two.

I wouldn't be surprised because a year and a half ago it was like $10 billion, maybe less. So it gives you an idea of how quickly it's scaling and growing. And there's no sign of stopping. And so basically what we're doing is we're starting to show these protocols for catastrophe that risks and uh currently how the industry works

right now is i'm a retailer if i want to get there's no insurance protocols and the retailers have to get insurance and if i i can use like 50 protocols okay i can use like 50 business models in this new industry you can work in like 50 businesses rather than being attached to one i i'm involved with 50 60 protocols protocols. I'm running capital, actually using them, growing my stake in all of them. And basically, if anything gets hacked, rather than the business being responsible for writing the code or the people in charge of that area, I lose the money. And if I want to get insured for that, I have to go to mutual systems. How it works in these mutual systems is incredibly fundamentally flawed, where people like you and me, Ryan, say provide capital into a pool to insure people.

And I get insurance in that pool. So I want $100 insurance. Okay, now let's say one of the users, okay, viewers wants $100 insurance, and you and me provide $50. If this is the weak repunt criteria to pay them out, if the event happens, we have to vote, right? Or whether or not we pay him our money. It's kind of an odd system, mutual model, and there's no regulation to provide what we want to pay out. And the current model right now is the current model, the approval rate for a payout is 18%. No one's going to trust that model on insurance. And so businesses aren't trusting that either. What we're doing is all

these events that we're trying to cover for have historical evidence of what kind of loss you're expecting. And the events you want to look at can be tracked on on-chain public data. So we've actually just partnered with one of the biggest players in the game, Chainlink. We're integrating, sorry, we're integrating with Chainlink and we're working very closely with them. And basically, they have this concept called the Keepers Network. What it does is it tracks all this on-chain data that's going on constantly, all these different protocols, and when it finds whatever it needs, it'll actually bring the data to the smart contract that you're looking for. And then from here, we have this network now

from the tech events almost automatically what's going on. We're using parametric insurance for protocols where you agree to a value payout pretty deep bed and we agree to establish criteria. The keepers never goes out for those criteria. And when it finds the event, it brings it in and it starts bringing a payout for claims process. It's almost completely automated to the protocol. So rather than humans intervening

and voting on the decision, it's run by technology and humans evaluate the technology to make sure it's correct. Now, the other problem we have with insurance, this is kind of the, yeah, automated insurance is innovative, very cool. How actually, but the problem we have also is we are not like a $500 billion insurance fund. How do you provide business insurance?

And that's the other key problem with today's day is how do we actually provide capital to ensure these protocols? Well, the parametric model, how we're kind of building it out initially is, you have a predefined level of pay value of payout pre to the event, often it's the average loss. You need about 23% of the actual protocol size value to be able to fully cover 90% of hacks on the protocol, as it was already calculated.

And so basically that 20, 30%, they say they process it rather than you, I can insure them as a business initially, because we don't have the capital. People can stay capital. Say you have Aave. Aave is a lending program on the centralized finance on the Ethereum network. Aave is willing to pay a 20% rate of return in their own native token, let's say, up to that $30 million policy. Let's just say something crazy like that. So if I, as a user, take 100 USDC to cover their downside, I can receive a 20% rate of return off. So buying the risk, basically, buying the risk of a business, take 100 USDC to cover their downside, I can receive a 20% return on offer. So buying the risk, basically buying the risk of a business, they're paying me in business stock, which is a whole unique aspect to it. And but the problem here now with this, Brian, is my upside is 20% in moving value, which is great, actually, in my opinion.

But your downside is 100% on a USD value loss because it's parametric. If the payout happens, it's going to pay out. And so what we're doing rather is actually rather than trying to like argue like what are the odds of payout because we're always doing that when you buy a bond, you're buying a structured debt, you're deciding your loss and betting on a chance of it happening. We're trying to control your loss. We're buying from CEO credit default swap models to these things called index pools. It's just a derivative pool with weighted exposure to multiple different insurance pools on the coverage side. So if I have a pool, say, with 5% exposure to 20 protocols, and the premiums here are really high, by the way. The APYs are here are stupid high. And with the blue chips, the Aave's, the Compound's, the ones that are really long-term, the Googles and the Apples of the future, their APYs on accumulation are very well.

And so basically, we're building derivative pools with like weighted exposure to multiple different kind of parametric coverage pools, say 5% to 20 pools. If an event happens during these pools, rather than losing 100% of value, it was 5%. And say my upside is say 20% again

of 20 native tokens being accumulated naturally during the duration period. Our long-term vision is to make this a top 100 DeFi index pool, structured pool with 1% exposure. The odds of one protocol file for insurance in the system is like 5% in a top 100, which is you're taking a 5% chance at a 1% loss.

Two, you're taking a 1% chance at a 2% loss. Let's say Black Swan, five protocols filed for insurance on this network. You're taking five chances. You're looking at 5% loss of your principal, but your upside is a 25% return, 20% and 100 tokens being paid out to you. You're accumulating. We're actually trying to turn insurance

into one of the most natural accumulating products you can buy while controlling your downside risk. This is gonna be one of the best ways to accumulate blue chip tokens in DeFi that are the future of the industries. And while also controlling the downside. We're looking to take this structured product model going on the KYC compliant blockchains

and actually looking to sell that and bring institutional finance in. And our long-term goal is to take these fees, collect them naturally, and then build an insurance pool that floats over off all of it. So what you actually see is this is more of a reinsurance model than an insurance model for building it out. But the goal is to pick the fees,

collect them, and then build an insurance pool that floats off. When the insurance pool floats up, it'll actually keep the APYs high for the stakers while reducing it for the protocol. So essentially, if I were to... Well, that was a lot, right? No, but it's awesome. I followed like 90% of it. So essentially what you're providing, if I were to put this back into analog terms, is you're creating an insurance company in which the dollars that normally would be invested by the company and reaped by the company are invested into the products in which you are actually insuring. And then the people who that you're actually

getting to reap the investment dollars out of those, out of those entities in sorts, right? Kind of like that. Yeah. We can almost create insurance where business can buy their own risk and then profit off of it. Again, I know, I know it's a lot for, for you guys listening at home who haven't done a lot of the research, maybe you don't understand all the terms. Um, and I'm certainly not going to ask you to stop and define them because go do the research. Um, but I just, I can't like, I come back to it. I'm like, I can't see how this isn't where we're going. Like, I can't see how, you know, how this isn't the path forward. Now, one of the things, one of the questions, like, do you guys, do you guys have a token? Like, do you have consumer, consumer, could a consumer like me buy Ste state to start to get into to start to get

into these pools and start to be part of this yeah so we're gonna have a release we're releasing product in q1 2022 we're about 30 percent through our build out and we're gonna be a test net probably november december um you know and so once we're all set you know we're planning to use our token with product with utility value in Q1 2022. And basically, yeah, you can have our tokens, whoever holds our tokens, one of the nice value is you're collecting the fees, a portion of the fees for the whole system, which is really nice. So it's naturally like, you know, automatic paying, you know, a dividend, but also in the same time, you know, using these systems, these models and state pools, it's where we're almost

building the first turning insurance into like in this space but the first insurance in the space but also like building the first bond market because these structured products yeah that's what i was going to say it's it sounds it sounds like a like a hybrid insurance slash bond product like there's yeah and the long-term goal is to build an insurance pool that flows over the network okay you know as we get like we can 40% collateralization to all the pools in our system. What protocols can do is they have like an insured payout, let's say 50%. And then they have like a floating payout on the, like a natural insurance pool in the

floating rate that like receives, that only promises say 10% of value. So then we're only receiving the business 10% premium, let's say on, on the 40 million, which is actually 2% of value. So then we're only receiving on the business 10% of premium, let's say on the 40 million, which is actually 2% or whatever. But the people who stake capital will still get their high APYs because you're paying the full on the collateralization. And so you can get full collateralization

on this people's taking capital, still receiving those APYs, but us receive a lower one, which makes it much more attractive for the business. What this will do long-term is as we keep floating, it'll create scarcity on the stake. What this will do long-term is as we keep floating, it'll create scarcity on the stake.

And then people will start trying to buy and trade these on these index pools on a, on a discount and premium value on a secondary market. Similar to that system, you know, fixed income system, but at the same time it's insurance and longer term, we create our goals to create a short-term long-term scalable model to ensure protocols, you know, and actually we're almost like building a model that prioritizes reinsurance. We move from reinsurance to actually ensuring the protocols ourselves as we keep developing.

And by us, I mean a decentralized community, not run by me, not run by anyone, you know, directly, but by the people who actually want to be involved in the space. And when you have that token, that native token risk, you can be a part of that community and help develop it in the future. We're planning to build fintechs that work with DAOs. This new kind of concept where this DAO community, how often is a fintech, okay, and then that runs everything. Whereas in this community, fintechs have to fight to receive these tokens to get a stake in the business. And then these fintechs are going to take these products long term and want to go into kyc kyt group blockchains and we want to take these products and sell them as new asset classes across a whole new industry the traditional finance because honestly these structured index pools are a concept they clearly understand on a financial model but you get exposure to defy in a way that makes sense yeah yeah how did you get into this defy yeah just do what you're doing right now How did you get into this?

DeFi? Yeah. Just do what you're doing right now. How did you get here? How do you, how do you get to this, to this level where you're, you know, I mean the, the statistic, you know, talking about derivatives of, you know, definanced, you know, what is essentially a, a, a bond product. You know what I mean? We're, we're talking about layers on layers that we're, you know, what is essentially a bond product. You know what I mean? We're talking about layers on layers that we're still seemingly years away from, but, you know, how do you get to this space? Like, how do you get to this point

as far back as you feel is relevant? I mean, I fell in love with DeFi in the fall of 2019. One of my professors was, he ran a product called Pool Together. Pool Together is a no-loss lottery savings account where I put money into a savings account and I receive like everyone, every week, everyone sees like some of the rewards of all the aggregated APY. What they use was Compound.

Compound is a new lending protocol that pays interest by the second or by the hour, which is in banking, you get it annually or semi-annually. How do they compete with by the second or by the hour, which is in banking, you get it annually or semi-annually. How do they compete with by the second? And basically all those generated EPYs pay out the winner every week and they receive rewards. So it's like a savings account where your money is never, you never lose money, but then you have a chance on top of that receiving like extra million dollars randomly one week, you know, and people do when that's crazy. And then, and then from kind of what interested me is compound finance where i saw the interest that paid by the second as a finance town like how

is that even possible that's doesn't gemini run off compound finance i think a lot of people use compound and all that you know they're very secure systems they're very effective and they're very uh they're very up to like code standard interest just normal in any industry so they're very solid so i think uh gemini uses it i bet a lot of people use it um comp is a very good token again i think these are blue chips of the future uh the new blue chips of the future but uh uh yeah so comp it's like um i i immediately looked like i thought this was a scam you know there's no way interest paid by a second right and then i found that oh crap it's not a scam what blew my mind and really brought me to defy you know it really was another product built called Urine Finance.

Urine Finance, what it was originally, it has a lot of uses now. It's like an ultimate hedge fund for anyone to use basically, I would say, on this decentralized node by anonymous people. But what it was kind of like really built out to be initially was basically a smart contract, where if I put my USDC or my stable coins into the smart contract, it would find the highest APY every second between Aave, Compound, Synthetix, and other lending protocols and naturally move my money at all times between all these narrative systems and find the highest APY possible in all these bankings. And my thought is like, if you put that on a bank, what would happen? Okay. If you put that to a bank, like what,

it would force these guys to think how the hell did we get these APIs up or how the heck do we get these APIs up? You know? And my thought was like, let's apply this. And I'm like, this is the future. And so I started looking, how do I put all these concepts together and build something. And eventually I met a very well-known figure in the space named Tim Frost from Yield App. And Yield App contracted me to build an insurance solution for them and how

to insure their portfolio for other DeFi risk. Tim Frost is a very, very, very well-respected person in the industry. And I was very blessed to know the guy. He's a great mentor. And basically they liked my solution. They thought it was like, this is typical insurance, like an alternative insurance, but combined with Deied and combined with all the like derivatives and like oh crap this makes sense actually and they're like let's go for it and then we ended up going that with our first client and our first partner and we're very excited to work work alongside

each other to the uh yeah the future of insurance that's awesome That's, that's very cool. I, uh, you know, this, this would be, if I, if I, I mean, you're what, like 25? Yeah, 24. Fuck you. Uh, if I wasn't like, if I wasn't, wasn't like, if I wasn't 40 and deeply invested in the standard insurance space, this is absolutely where I would be. I think, I think this world that you are playing in is just so intriguing on so many levels in the, the, the, the, you know, you know, the, the, the freedom that it provides the people, the opportunity, the, the, you know, I, um, redistribution of wealth in a non-communist standpoint, right. In a very capitalistic opportunistic standpoint. I mean, I see this.

It's incredible. I think in cryptocurrency, universal basic income for the first time is actually ever possible in a way that actually can actually feasibly work where people can all have a standard of life without sacrificing individual liberties. And I have found that very attractive. I'm a big believer in trying to find the best ways

to create global equity. I think if you sell poverty and a lot of different kind of like wealth disparities, I think you solve a lot of problems in the world. I think history proves that and crypto for me is that solution. Where in one sense, you and I no longer have to attach to one business,

whether it's Goldman Sachs or Liberty Mutual or Walmart, let's say you can now work in whatever industry you want and get paid and work in industry you want but also you know you're paid for the value you produce there isn't and the money like this is these are money legos so like say i get i work with this one network okay it's one protocol and then i use all work knowledge of the protocols all my tokens get get to this other protocol and it gets naturally grown and then i get like the protocol that's going to be income and then the rest gets grown to a growth account grows like say 20 percent annually which is not crazy in this space and then like and then like that 20 percent the growth on that moves into

the growth accounts it's like this new space is if you're willing to be creative you can disrupt everything and i i still really encourage you, Ryan, to look into it and really do some things either ways that contribute to be involved because there is so, what this space really is, all these concepts we do in finance, whether it's insurance, PMC, title,

health, life, alternative parametric, all these different concepts are going to be put into a decentralized sphere at one point. So it's like, if you know these concepts, willing to be a little bit creative, you can build a billion dollar unicorns because there's already a billion dollar industry in this space. It's not crazy. And I think it's going to get crazier as we keep progressing. Yeah. I mean I, I, I don't have my head wrapped around it, but, you know, a completely, but the property casualty space, particularly in, let's say personal lines,

auto home, things like that. The, the idea of starting to decentralize those risks, starting to categorize them, better understand what they are. And the, the, the other thing too, is, and this is the part that's interesting to me is like, is like, why I, what I don't, what I find here, the concept that I was toying with, and you could even tell me if this is bananas, right? I'm the word, this is just what I was thinking about. I was listening to some podcasts and they were talking about different concepts. And I'm always thinking about what is, what is blockchain? And I that term, but what we're talking about, this decentralized

autonomous code, what can this do for property casualty? And I started to think to myself, you know, rating is such a problem. And oftentimes it's because, let's take a less standard account, like a roofer, right? Let's take a roofer, tougher to place limited markets. The roofer is forced to go through multiple hoops, oftentimes paying a drastic premium because of the risk that they have. Well, what if that risk was, was able at the base layer, not at the reinsurance layer for the huge players, but at the base layer, at the small reinsurance layer for the huge players, but at the base layer, at the small business level, you could spread that risk out over five or six carriers,

or as many carriers as we're willing to take a layer on that business. How much more competitive could the pricing be? How much more reasonable could it be? How much faster could it be delivered if one of those carriers didn't have to take the entire chunk, which today would be impossible based on current systems. But in a decentralized manner, you could easily chop up those risks or just buy into, carriers could buy into a roofer pool and run off basically the same concepts that you're talking about right now. And there's an enormous opportunity there because now I don't have to be scared. You're talking about cat events, right? I don't have to be scared about one of your guys rolling off a roof,

breaking his neck and dying and having that destroy my year because that risk is actually going to be distributed over five or seven different companies at the base layer at the primary layer versus, you know, the only time you get into any kind of distributed risk in this capacity is when you get into the, you know, you're into umbrella layers that are, you know, tens of millions deep, you start to chop it up. But, you know, the full risk of a million dollar death is taken on by the comp carrier on a roofing account. And I just, you know, to me, you know, this is one idea, you know, one thing that I was thinking about, like, how does this space start to just get, how does the decentralized finance and, and blockchain and all that kind of

stuff, how does that start to impact the property casualty world? And just the idea of being able to buy into pools of risk, maybe as an agency, I want to, I want to go be the roofing guy and I'd buy into the roofing pool because now I'm actually incentivized to write people into that pool because I'm, I'm staking my, you know, what I've bought into in that roofing pool. So now, I mean, there's just all kinds of concepts there where you can start to distribute the risk, lessen the burden of any one major disaster. And what hopefully the idea would be is quicker placement, processing, distribution of information,

and ultimately a diversified catastrophic loss. Once we separate the concepts of stock as a security and tokens as a security, you know, and really start separating that and tokens give them a new value add, I think everything you said is just absolutely possible. Our concept connects with tokenization. There's a guy I just recently met,

not going to disclose his game, but he's talking about DraftKings, GameStop. I'm going to be talking about Barstool, where they're building tokenized DAO systems within these kind of ecosystems using loyalty rewards. And I'm thinking like what you're saying. Combine these pools, which I want to get invested in these systems to make sure that they're doing their job right.

Get a portion of their tokens, get an infrastructure and actually evaluate them. It's suddenly crap. They're incentivized to make sure that this is running as as possible yeah right i think you're seeing it right and what it's going to look like and it's going to get crazy um you know i love it when i hear stories about kids like like 10 14 to understand this like i met a kid who made uh 400 000 nfts last month he's 14 i'm like wow like you know they get it it's like we're just catching up with brian you know yeah you know it's crazy another industry yeah i'll say real quick that demands disruption

and you can immediately look at is title insurance why do we have title insurance if there's a blockchain you can like associate an id to every person i think that is um one of the most easiest industries in insurance and pnc or real estate to disrupt is title uh i think one of the easiest use cases is what what's the point to say you own something you can literally attach an id to that on a public layer yeah that's the issue exactly i think what you're saying all these you can just you know, they've never been done before, right that didn't exist and concepts that didn't exist and the way to maneuver around. I just think there's so many barriers. All the barriers that are keeping what we're describing from happening are up here. And it's having the storytellers.

It's having the use cases. It's, it's, it's podcasts like this, where 90% of the people that are going to listen to this man, they're only going to understand 25% of what we said, but, and that's, yeah, but, but that's good. Right. We need to expose more people to these concepts because, you know, like, you know, I look at some of the things that happen in insurance and people call them disruptors. And I'm just like, that's bananas. That's not a disruption. A disruption is when, you know, the idea of what it takes. I mean, you probably know.

But if I were to describe to you what it takes to purchase an insurance policy today, just all the steps, all the different things that have to happen to get an insurance policy, you would shit yourself. You'd be like, that can't be 2021, what we're still doing today to get insurance. When it's like, there's just a whole better method. It's just going to take time for it to leak down to the lay. And when we start as adoption continues, it's why I just, I hope things like Bitcoin and Ethereum and Cardano and some of the networks that you talked about, I hope people continue to build on them. And what I really hope is we don't get the over the pendulum swing over regulation into this space that hinders what's actually happening. Because to me, it's one of the most exciting things. You know, it's the most exciting technology

that we've seen since the early 90s with the internet. I mean, it's certainly it. It is. This is the new internet. When people tell you, anyone that tells you that like this is the future, blockchain, DeFi, NFTs, or it's like people telling you telecommunications,

internet was not going to destroy telecommunications you know it's this is the next step it's it's we have like for people that told me that i'm like you have history to prove it's like we you were wrong here telecommunications internet something you're right now like you're not okay let's stop being skeptical and really explore why and ask a question like you're saying open the minds and ask why yeah personally i think that it's an even bigger jump than that and this is kind of how we'll close but i uh i see it more like the manhattan project than i do the internet like you know i mean to me this is that that generational jump that you know when we went from nuclear power not existing no one could even imagine it to what we got after the Manhattan Project I look at what's happening is that right now like this is this is that big a leap in my opinion it it just it is that powerful

if things are happening granted we're like we're like this we're like in the coin flip of the baseball game like we're not even in the first inning yet like of what's possible but but that being said um i'm i'm excited man i'm excited that we had a chance to meet i'm i'm gonna be following along with what you're doing i'll be buying some tokens as soon as you get those out you know you want to sneak me some on the side i'm cool with that you can be like hey ryan's a cool guy um no it's probably against like every regulation that exists but i'm not against that if you're in um but no uh dude i'm just i appreciate you taking the time i'm really glad that jeff introduced us and uh hopefully we'll have a chance to connect again in the future great to be here close twice as many deals by this time next week sound impossible it's not with the one call close

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