Thanks a lot for actively participating in the Tidal Finance AMA held on 22nd March 2021 at the Game of Bitcoins Channel. We really appreciate all your support. This post is a recap of the entire session held with Tidal Finance
We have with us Chad Liu
A bit background about myself - I have a mathematics, engineering and finance background, came to crypto space in 2017 working in a venture fund and fell in love with the space. The amount of creativity, innovation is definitely ahead of other industries. Earlier last year around April, I started this company by realizing the defi space has a high demand for insurance service.
Tidal is an insurance marketplace to connect insurance sellers and buyers to cover smart contract hacks. Tidal offers the functionalities to create custom insurance plans for one or more assets from multiple protocols. The main objective of the platform is to maximize capital efficiency and return to attract LP’s, while offering competitive insurance premiums to attract buyers
Q1. There are already several crypto insurance projects and keeps increasing in number. So why should we prefer Tidal Finance as both coverage provider and coverage requester?
Nexus Mutual and cover are two protocols on the market. Our competitive edge is to increase the capital efficiency. I always like to give an example of how people sell insurance in a traditional insurance world, if you have $1 dollar, and you want to sell insurance. If you only sell 1$ cover (a reasonable insurance premium is pretty low 2% ~ 5%), you are only making a small return by putting all your capital at risk. No one would sell insurance this way. What you want to do is to sell to 20 people, 50 people, and each person buys $1 from you, but at the same time managing the risk of claim payout to make sure you have enough capital to cover the losses. This is how insurance funds make returns. Tidal’s core design is to implement this concept to increase the capital efficiency.
Q2. Any plans in the future to offer not only user level insurance, but also exchange/Institutional level insurance? I'm sure a lot of crypto based companies would prefer to have their assets insured within the crypto sphere for ease & compliance.
For sure. our first focus is the protection on smart contract hacks. because it can be verified and validated. Institutional fund who use defi can also directly buy insurance from the platform too. in terms of centralize exchange it could take a bit longer time to be on the platform. it comes down to if something get hacked can it be verified in a transparent manner.
Q3. What are the distinguishing features and advantages of Tidal for the coverage providers and requesters compared to your competitors?
Like I mentioned above, our design is focusing on how to increase capital utilization, Tidal will launch different risk category pools with multiple protocols inside each pool. For each protocol, and seller can directly stake to the protocols they want to backup and earn premium. depending on which risk level it is in, it will have a different premium price (insurance cost). Just like the healthy insurance costs are different depending on each person’s condition. The pricing model will be released at launch governed by DAO over time. Buyers can directly buy covers from each pool as well.
Q4. Tidal is said to be a next-gen DeFi discretionary mutual cover protocol that allows users to participate in mutual cover pools with varying levels of risk. What type of risks are you talking about?
The risk refers to the hack (payout) risk. for example, if $100 total cover sold, and for 1 year, there is a $10 hack, the risk is 10%. We have a committee formed to evaluate the risk level of the protocol with auditor partners and developers. There are few main parameters we look at protocol - time been on the market, total locked value, auditing status and history, protocol team.
Q5. How does the insurance pool that Tidal Finance has between its features work? Who could create them, what are the requirements for it?
For pool creation will be governed by DAO. at beginning we are launching 3 different risk pools (low/mid/high). with guidelines how to add protocols into these pools. DAO will have the power to propose new risk pools. But there is no requirement for anyone to participate in the pool (buy or sell insurance). no KYC required.
Q6. He said that DeFi would be totally safe and impossible to suffer from scams, but we really understand that it is the opposite, scams are very frequent, so insuring recognized currencies is a great idea, but new tokens are not, or with how much capital backup will Tidal count in case many insurers lose?
Tidal has a thorough process to list protocols that qualifies in the risk pool. e.g. good auditing, non-anonymous team backing up, have tested sometime on the market. The purpose is to avoid scam projects that purposely built to get users money. within these qualified projects, we are ensuring against some hacks that no one could say 100% risk free, as the flash loan attacks happened within multiple well known projects. The risk of attack is still relatively low in this area.
Q7. You say that group creators can launch new groups by choosing any combination of protocols/assets and their coverage conditions, sounds good, but can anyone be a group creator? What are the requirements I need to create one?
Any one can participate in the pool to buy or sell insurance. to launch a new pool proposal needs to be submitted and approved by DAO.
Q8. What is your top 3 things for priorities in 2021? Could you share some plans for the upcoming year?
We are launching testnet and doing a public sale on balancer, mainnet launch in April. After launch our main focus is to increase the cover sold and provide more returns for insurance sellers. I would say if we could sell 500 mil worth of cover would be a great achievement by Q2. we also plan to migrate to polkadot around Q2 timeframe.
Q9. Did you raise funds so far? If so, how did you handle them? Are you planning to do any future raises?
We have finished the private raise couple months ago and it was a great success. it helped us expand our team on product development and business development. as in a few days, we are doing to conduct a token distribution event on balancer for public to participate in acquiring our tokens.
Q10. How do you plan to onboard the initial liquidity needed for your pools and what benefits if user want to be liquidator or provide liquidity?
We will have incentive programs such as liquidity mining and staking to attract liquidity in our pool. as well we are talking to few liquidity providers who are experienced in providing fund to other insurance platforms.
Q11. How do you handle some of the market's challenges and challenges to meet the market's Supply-Demand when building a project?
Supply and demand are crucial to our platform. supply side we are using liquidity mining to attract providers, demand side we are working with different protocol teams educate their community, or the protocol team themselves to be a potential insurance purchaser.
Q12. So far, what major achievements has Your Project achieved? What difficulties and risks did you encounter in the process of project implementation, and what factors prompted you to overcome the difficulties?
We started the project since mid last year and have achieve the alpha version so far to launch. along the way we met few challenges on the architectural design. as in December we made a major change on re-designing the product to enhance the usability and performance. As right now, we are still actively looking for solution to enhance the usability - one important issue is gas cost on Ethereum, we are working with Polygon team to solve this issue.
Q13. What is the most ambitious goal of projects? What is the ultimate vision that your project is trying to achieve within the cryptocurrencies market? I would appreciate it if you could share with us any Upcoming Updates?
The top metric of insurance product would be total cover sold. right now market has over 40 billion assets but only less than 1 billion covered. closing this gap is the top priority for our project. Second would be the return that insurance seller are getting from the platform. for a long term if we can maintain 15% - 20% return without counting the liquidity mining portion would be a good range to attract insurance sellers.
