Tidal Finance — Research by Cryp2Gem
DeFi Insurance Simplified
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PROJECT: Tidal Finance
FOUNDED: Spring 2020
WEB PAGE: tidal.finance
FIELD OF INTEREST: Decentralised Insurance
SHORT DESCRIPTION: A cross-chain smart contract DeFi programmable insurance protocol.
GOAL: To fill the gap in the DeFi space, where there is only 3% of the total value locked (TVL) insured while the demand is high as the exponential growth of the DeFi products was witnessed in 2019/2020. Tidal will be an alternative insurance protocol powered and governed by its users, helping to encourage more people to participate in the DeFi ecosystem and crypto investments because of insurance itself. Tidal is about to become the most efficient cross-chain smart contract insurance market.
CHAIN /TOKEN TYPE: Polkadot ecosystem / Substrate
(token type unknown)
DEV ACTIVITY: Github profile is not available
*Chad Liu, Co-founder and CEO. Chad has finished a Mathemitic University in Peking and Petroleum Engineering on Texas University where he worked for 3 years as a researcher and developed a data analysis model. For the past 16 years, he has been working in the energetic field as a data and financial modelling expert as well as business development analytic for companies like Schlumberger, QRI and IOC. His active position is with AU21 Capital where he works as an investment opportunities researcher and financial analytic.
*Dan Raykhman, Co-founder and CTO. Dan has vast experience with FinTech systems and platforms, trading technologies, financial products and digital assets. Dan was working as a Principal in photonic instrumentation company DataRay, Inc for 8 years in the 90s. Afterwards, he worked for more than a decade as a CEO in a FinTech company CTN Systems developing online trading systems for the FOREX market and almost 6 years as a Senior Director in a Curex Group providing financial services. Some of his previous working experiences are Overlay Capital, where he helped to built currency trading and hedging services platform; Arc Fintech developing crypto trading platform; CTO position at Alphanode Capital crypto investment and financial advisory firm; Co-founder of Fungible Network blockchain platform for real-world asset-backed tokens; RFO Capital helping company management and building cryptocurrency aggregation platform.
He was also briefly working in a Galaxy Digital blockchain investment company. Dan has two active positions as an advisor of an AbacasXchange decentralised exchange (DEX), where he is involved since 2018 and CTO position at CurrencyPI consulting company for FinTech and crypto technology solutions. His position at Tidal is not yet mentioned in his LinkedIn profile.
You can listen to a podcast interview with Adam Torres and Dan Raykhman discussing cryptocurrency and crypto-economics.
*Valeria Kholostenko, Head of Strategic Partnerships. Valeria is an expert in developing strategic partnerships and marketing strategies. She is currently involved with many projects from Polkadot Ecosystem including Reef, Centrifuge, Plasm, Phala and now Tidal. The numerous Polkadot projets in which Valeria is involved is not surprising, as she is also working with Parity Technologies, helping with Substrate adoption as well as funding and incubation of startups. She had a position as a CMA and Advisor at LUKSO working with digital brands and tokenization. Her working experience also includes a position of Head of Development and Global Community at ConsenSys New York. This was her gateways to blockchain technology in the middle of one of the most bullish years in crypto history — 2017. Social marketing at Socialbees, sales and business development manager at Prizma.ai and portfolio growth director at The Sandpit are some of her other past experiences. Valeria was amongst Top 100 Women in FinTech in 2019.
You can learn more about Valeria, here: brandexperience.design
»It all started in early 2020 when DeFi protocols were starting to attract more and more investors. I would read about DeFi in the news and as an Investor at AU21 Capital, a leading crypto venture capital firm, and one of the major concerns I had was how secure these protocols were. From a fiduciary standpoint, I could not risk losing LP money to projects that had no past track record or audit, especially new projects. As a former engineer with Math and Engineering degrees from top tier universities, I realized that the real reason why the DeFi industry and Total Value Locked (TVL) could not grow more quickly was that institutional capital did not have high enough risk tolerance to pour large sums of money into projects that were not at the bare minimum insured. There was not enough insurance to cover the platforms in the DeFi market to solve this problem. A key component to increasing institutional interest in DeFi would be increasing the efficiency of insurance offerings for DeFi.« said Tidal Co-founder Chad Liu. (source)
PRODUCTS AND USERS/CUSTOMERS: No products and users as Tidal is in the early building stage.
COMPETITORS: Etherisc, InsurTech, Nexus
*nexusmutual.io is the most renowned blockchain-based tokenized mutual risk-sharing platform. Nexus is offering smart contract failure cover. Run by users, operating within the Ethereum Ecosystem.
*etherisc.com has introduced a community based decentralized insurance protocol (DIP) to collectively build insurance products. The Etherisc community has already built some products like a flight delay automatic payouts and designed prototypes for crop and social insurance. Operating within Ethereum Network Ecosystem.
*yinsure.finance from yearn.finance, a non-KYC decentralised insurance alternative where insured users receive coverage on the monetary value of assets they insure. Developed by Andre Cronje for Ethereum Ecosystem.
*medishares.org a decentralised insurance marketplace for mutual insurance on Ethereum chain. Rebranded to Mutual DAO.
*pal.network B2B insurance solutions on Ethereum Network. No current activity.
*vouchforme.com (InsurePal), decentralized social insurance based on community P2P approval
*foresightdefi.io is building an insurance solution designed for everyday cryptocurrency investors that are based on smart contracts collective community intelligence.
Companies like Tierion and Cognizant are also building products that are used by some insurance companies. Cognizant partnered with 14 insurance companies in India to create a blockchain-enabled shared database for example.
There are many other non-tokenized startups building insurance solutions using distributed ledger technology. Teambrella provides P2P insurance services teams, lemonade.com is offering decentralised offer renters, homeowners, and pet health insurance, fizzy (AXA’s subsidiary), a flight delay insurance tool, etc.
PARTNERS: Tidal is coming to form Polkadot Ecosystem. It is not unusual for the projects building on Substrate to make alliances amongst each other. There is not much information available on the existing or future partnerships from the Polkadot Ecosystem other than the image on their website showing the Tidal’s connections. Tidal might be partnered with Web3 Foundation, Parity and Substrate which is not surprising as they are building on a Substrate, a Parity Technologies creation while Web3 Foundation and Parity Technologies are the entities behind the Polkadot project. The other mentioned startups all come from a Polkadot Ecosystem — Plasm, Moonbeam and Acala. There is Chainlink as well which might be used for data feed oracle services.
*PeckShield – Blockchain Security Auditing Service that has developed a Digital Asset AML Platform to track crypto-asset movements, dark web data included. Also designed DappTotal Blockchain Data Analysis Platform for real-time blockchain data monitoring. There are more than 4200 DApps listed. Performed audits on more than 2300 customers. PeckShield will help Tidal to develop secure and quality decentralised insurance marketplace and smart contracts insurance.
*Haechi Audit — renowned smart contract auditor company. Smart contract audit partner.
*bluzelle — a Web3 data layer. Tidal wants to use bluzelle’s data network as scaling decentralised data storage solution. Bluzelle is built on Tendermint while Tidal is building on Substrate. Just recently Bluzelle expanded and entered the Polkadot Ecosystem with the integration of Substrate Framework. Such collaborations are now possible. Bluzelle is now becoming an essential data layer for Web3. Truly interoperable decentralised, scalable and secure data solution.
“Tidal Finance is positioned as an insurance platform that can enable further adoption of DeFi on Polkadot. To work with such a great platform and team gives further strength to our Web 3.0 database solution” said CEO of Bluzelle Pavel Bains.
*Crust — a TEE (Trusted Execution Environment) based incentive layer protocol for decentralized storage, decentralized computing layer and decentralized cloud ecosystem. Tidal will use their technology for data storing in a secure and decentralised environment.
“Crust Network provides innovative technology that can benefit any decentralized marketplace including the insurance marketplace we are building at Tidal Finance.” said Founder of Tidal Finance Chad Liu.
*Finance.vote — a consensus layer and a governance platform for DeFi.
»Finance.vote will support with the integration of its decentralised identity tokens and quadratic voting technologies in their pool creation process, providing specialised votes to Tidal Finance’s auditing partners and a wider pool of proven smart contract engineers in the crypto space. This process will allow for far greater decentralisation of the smart contract auditing process and the rapid formation of insurance pools that will keep pace with the rapid innovation in the DeFi space.« (source)
Tidal is making great partnerships with choosing trustworthy data networks. By choosing several they will host their data on more storage providers which will be a security backup precaution. This will also allow its insurance marketplace to be safe and scalable.
Partnering with major auditors in the blockchain space also essential for Tidal. It will be interesting to see more collaboration with other parachains from the Polkadot environment — like Plasm and Moonbeam for example.
INVESTORS: There is currently a presale ongoing.
Tidal did announce that Genesis Block HK, Kenetic Capital, DFG Group, Roger Lim’s Noe Global Capital (NGC) invested. You can find interviews with all the VCs on the Tidals Medium blog.
TOKEN USE CASE AND REVENUES:
The TIDAL token will be used to reward pool creators, liquidity providers as well as early insurance buyers. The main use of TIDAL tokens is for governing the protocol. There will be incentives for staking the tokens for the payout assessment process, pool settings auditing and governance tasks such as voting on protocol guidelines, updates and payout token distribution.
Insurance Pools Issuance Fees will go into the Treasury Wallet, which will be used as a form of the fail-safe reserve fund, as well as the majority of the Protocol fees. A portion of those fees will go to the TIDAL token holders.
TOKEN METRICS & FUNDRAISING INFORMATION: currently unavailable
ROADMAP: currently unavailable but TBA soon
Telegram 1k members
Twitter 650 followers
Tidal has just started its social media activity in October 2020. They have only published some interesting articles on their blog. There is also not much documentation available at this early stage.
The global insurance is probably one of the biggest markets and industries. The insurance system is outdated, takes a lot of paperwork and manpower which involves high expenses. Like most industries, insurance companies are looking into digitalising and technological solutions — InsureTech.
Every company is looking into the best and most cost-effective tech solutions and distributed ledger technology (DLT) is one of those. The DLT insurance market and the startups building insurance protocols and solutions are in demand. The blockchain InsureTech is expected to grow from $64.5 million in 2018 to $1.39 billion by 2023 and more than 80% of insurance companies are planning to adopt blockchain InsureTech solutions or have already done so.
How can blockchain disrupt the current outdated insurance system?
Blockchain has automatically executing smart contracts and a full history of transactions. It also solves the user’s ownership of data and allows immediate access to the databases, even off-chain data with the help of data feed oracle providers. That makes DLT a perfect technology for insurance systems as it can help to detect and preventing fraud, correcting errors and accessing the global insurance database. All with automatic algorithms. The processing of incoming claims can be processed much faster as well, which could reduce costs even further. Some unique and very important additions to existing systems include automatic claim management, P2P insurance pools, reinsurance verification, fraud detection and on-demand insurance as mentioned in the ConsenSys report.
There are also lots of hurdles that need to be overcome, such as regulations compliancy of DLT InsureTech protocols, governance and privacy issues, scalability and security. Those are still the common blockchain issues and solutions to those who are work in progress. With each new innovative protocol and network developed one new piece of the puzzle is added.
The insurance industry is adopting blockchain technology. Some of the world’s biggest insurance companies have formed a consortium called B3i where DLT is used for »creating a better insurance industry«. Insurance giant Allianz SE has been testing a range of blockchain applications and is also developing a tokenized blockchain ecosystem. IBM, PWC, Guardtime, AXA and other giants are actively working on their insurance blockchain solutions.
There are several other startups mentioned in the »Competitors« section in this article.
What can Tidal offer and why could they become an essential alternative to existing InsureTech solutions?
Tidal is going to be the first interoperable tokenized insurance protocol. The pioneering cross-chain insurance solution on the market covering both Ethereum Network as well as Polkadot Ecosystem with its Parachains. Only that presents an enormous potential for Tidal. Not only because of the currently unexploited blockchain insurance market and DeFi space but also because of the vast InsureTech growth and adopting of distributed ledger technology amongst the global insurance industry in general.
Based on the DeFi Pulse there is currently more than $13,5 billion total value locked in DeFi. That is ten times more than 6 months ago and constantly growing. Currently, $235 million active smart contracts are covered by Nexus Mutual insurance which is the biggest insurance startup in the DeFi space. That represents not even 3% insured DeFi smart contracts value. Meaning the majority of value locked in smart contracts on the Ethereum Network is uninsured. This is only the Ethereum Network we are talking about, while the Tidal is cross operable and will offer Parity and Substrate based Parachains from Polkadot environment insurance as well. If they enable the currently third-largest Tendermint/Cosmos ecosystem, Tidal will be the most versatile insurance tokenised blockchain solution.
So Tidal insurance marketplace will be based on a assets and protocols insurance pools for Ethereum or Polkadot ecosystems. Insurance pools, consisting of a sole or several assets or protocols, will be determined by specific setting such as coverage duration, the leverage ratio as well as risks. Each pool will be presented with an Insurance Coverage Token (ICT) which can be freely traded on the open marketplace. As for pools liquidity, the automated market model (AMM) algorithm will be integrated as in Uniswap, Balancer or PlotX. Liquidity providers will be able to invest in pools that suit their risk to reward ratio and earn high returns by providing liquidity. All the governance will be determined by the DAO representing the TIDAL Token Holders to achieve transparent operating of Tidal insurance protocol. You can read more about Tidal Insurance Pools in this overview article the team published on their blog.
The core Tidal team has vast experience from several fields covering engineering, developing, financial trading, crypto and marketing. Valeria Kholostenko is well connected within the Polkadot Ecosystem and could make many important partnerships possible. With the growing demand for the InsureTech and insurance blockchain solutions as well as DeFi products and smart contracts adopting, it is a perfect time for Tidal to come out of the stealth mode. Nexus is a good example of a growing insurance protocol project.
There is not much content published about the Tidal project and there are no official documents like the whitepaper or token economics paper. There is yet much to learn about Tidal but Cryp2Gem is excited to grasp as much knowledge as possible about Tidal. We are looking forward to all the yet to be published documentation. Cryp2Gem team is interested in the blockchain disruptors of the outdated insurance industry and Tidal might be one of those.