Our very own Jonathan Libby recently sat down with Satoshi Sean in an AMA discussing what Steady State is, the services and features we’ve got planned, and how we plan to shake up insurance coverage for smart contracts. In a wide-ranging interview, Jon and Satoshi Sean dissected large parts of the Steady State ecosystem and how our comprehensive insurance coverage solutions will buck the current trend of underinsured and capital inefficient allocation insurance contracts.
Their discussions covered the following topics:
- Jon’s history with Insurance and DeFi
- Automation in DeFi Insurance
- The different layers of Steady State
- Regulation of crypto
So let’s begin.
Hey everybody, welcome back to the channel. I’m Satoshi Sean.
Today, we have an interview we’re doing, a treat. We got Jonathan Libby from Steady State, a project in an industry near and dear to me (Insurance).
I’ve worked with Insurance, and I’m still licensed for some insurance. I’ve tried to help build some projects with Insurance in the blockchain space and crypto, but nothing innovative has happened in Insurance in the past 100 years. It’s one of the biggest and most regulated industries but not a lot of innovation.
Jonathan Libby (Steady State):
Yeah, you’re right; there’s not a lot of innovation. I’d say the biggest innovation was the insurance-linked security that was released. I don’t even know how long ago!
Jon’s history with Insurance and DeFi
Before we get started about everything, why don’t you tell us a little bit more about yourself and give us a quick overview about what you are trying to do with Steady State?
Jonathan Libby (Steady State):
Mine’s (name) Jon. I’ve been involved with Insurance for about three years. I got a lot of exposure during my years there (Insurance), learning from former executives of the Lloyd’s of London, former CFOs from AIG, being exposed to typical forms of Insurance but also alternative insurance such as captive Insurance reinsurance markets, and to insuretech.
I fell in love with Defi in the fall of 2019. The concept of compound finance just blew my mind. Compound finance generates interests paid by the second or automatically or daily. These reward systems that pay so quickly blew my mind about how capital efficient financial markets can be in DeFi, how it could innovate institutional finance. That love was invigorated back when I found Yearn finance in the original initiation build of the Yearn finance, where a smart contract that you could deposit DAI or USDC would find the highest paying APY on a lending protocol and move the money accordingly. I realized how efficient that could be in a financial market for real-world people.
Imagine getting in a fintech bank that was attached to all these other fintech banks, and by depositing money here, it lends to the highest APY savings at all times, giving you the best possible. That showed me that this is the future. Not only does it pay faster, but it is also efficient and more capital efficient. And I realized I need to find a way to be involved in that space, and that’s how we ended up coming up with Steady State. The goal of Steady State is to turn Insurance into a financial market.
Automation in DeFi insurance
I looked at Insurance, DeFi, and Crypto and found three major problems. During the time of my research, I found that there was no optimal business solution (1). If there was, and a protocol on Insurance, there was often not strong enough liquidity to get them the coverage they need that was optimal (2). Third, if they wanted to (claim insurance), the claims process was very confusing, uncertain, and it was very tough for a protocol to decide whether or not they wanted to get Insurance.
What we are trying to do with DeFi is create an automated smart contract claim system. The automated smart contract claim system is what we believe will solve the insurance problem. We want to look at the risks events that happen, standardize them, automate them, detect when the events are happening, and let a protocol deposit the proof that the event happened.
If it’s approved (by the smart contract), put it in a 10–15 day lock-up that eventually pays the protocol and recovers the lost amount of money. But rather than insure it directly, protocols post insurance policies. If they want $20M, you can take $100 in that policy, and you get paid a premium rate of return on that $100 stake, and they can get a policy up to $20M. The goal of that is actually to drive premium rates up rather than down and for protocols to use this as a new solution to cover their downside, build new opportunities for the community, and also get the effective coverage they need.
You mentioned the word automated …and the claims process to me should be revolutionary simple… With an automated smart contract claim, this is what I thought it should be. If you do everything to where it is approved, then the smart contract should release the claim…So, when you talk about automation, are you talking about something similar?
What we are trying to do currently is build a database through our risk analyst database system, the RAD system. We’ve identified every single kind of hack that’s happened; now, we’re doing a lot of machine learning, linear regressions relationship modeling to identify and standardize what kind of variables happen normally when these events occur.
So, you’re trying to like build an actuary database?
Yeah, the first one in DeFi. We are building that our ourselves… It’s gonna be an open-source, transparent database for everyone to use.
Like a foundation for the new branch of the insurance industry?
Amen. We’re using machine learning and linear regression to find our relationship models and risk premiums. What we are also doing is using machine learning to standardize these events. We want machine learning to detect events in relation to the variables that are happening … We are building some of the first kinds of risks nodes to start standardizing these events.
I had read some stuff while I was researching that you want to have little human error or interaction until the end, like an A.I, which is good. No human interaction makes me nervous…
We think this is an effective measure. So, the payout cannot be immediate.
The different layers of Steady State
You wanna go over the different layers (of Steady State)?
Yeah, so the first layer is the coverage pool. Say a protocol is allowed by the DAO to build post-insurance. We don’t charge a premium; we charge protocols a suggested premium. They charge and pay in whatever they want to incentivize people to stake money because we’re not insuring it directly.
The index pool model is like a pool made up of multiple coverage pools that have a weighted average exposure. Say you have five protocols, we can offer their capital through the DAO into one separate index pool. What this does is, say you put $100 down there if an event happens, your downside weighted now, rather than being 100%, is 20% but your payout is a weighted average variable of all these different payouts.
How do you make this liquid? The Steady Swap exchange is how we make it liquid.
When you want to unstake, it’s probably a 10 to 30-day lock-up for every unstake you want to do. That lock-up is there because they (insurance providers) need to replace the capital liquidity if an event happens. This is why the insurance model is not working well… we need liquidity in crypto.
How do you solve then unstaking and staking liquidity insurance? Provide new capital, that’s how you do it, make the market liquid by providing liquidity to buy and sell at stake, and that’s what we’re doing.
Regulations of Crypto
You are based in the U.S… Insurance is one of the most regulated industries. How is this going to work?
We are still evaluating the process, making sure the U.S. is the best location to do this; we want to build this in the U.S.
It’s hard to figure out if we are fully an insurance product because of the way we are building this out or a brand-new financial market and who’s in charge of us. We are a platform; we aren’t insuring anything. What we do is use the coverage pool and index pool model in the state of exchange to allow people to cover the protocols they want and get some kind of a great value in return for their coverage of the stake
We’re looking to base out of Austin, Tx, ideally. I’m starting to have conversations, and we have some great people on the insuretech side looking to help us build out and make sure it’s (Steady State) as clean as a whistle, and some great legal experts help us evaluate this as well.
That would be smart. I’m talking about the new blockchain stuff the governor just signed.[EO1] Austin’s a good insurance hub too.
You covered pretty much everything I wanted to know about (Steady State).
Are you doing the private token raise now?
My goal was to raise money fast, get the token out there, market first, build later; that’s typical crypto. We have the builders already; we have everything moving on our end, and we’re way oversubscribed on pledging. We’ve only taken a couple of hundred thousand because I had a conviction that this product, if it’s built right, is a tier-one product and tier-one solution in the industry. My conviction is starting to hold true where we’re getting better partnerships, people who want to provide capital as we build, and it’s getting better and better.
We are still in the private sale raise, not because we couldn’t raise the money, it’s because we’re trying to get the best partnerships and make sure this product gets where we know it needs to be. The money is cool, but what I want is people who want to build alongside us and people who can offer more than money, and that’s our goal with Steady State. If the investors aren’t as involved as you, then what’s the point? And if you wanna build a community, then investors are equally involved as a team, and that’s our goal here.
Sounds awesome! Looking forward to checking in on this later this year and see how things are going. If I could have you back on, that would be cool.
Jonathan Libby: Definitely!
Satoshi Sean: Alright, Jon! It was good hanging out with you. It was good to learn about Steady State, everyone take care, and I’ll see you in the next video!
What lies ahead for Steady State?
As one can easily conclude from Jon’s interview, many exciting developments are bubbling at Steady State in the background. To share some teasers with our community, some of the important releases we have in the pipeline include:
- A new website
- A soon-to-be-announced live chat show
- Token generation event
- New strategic partners with tier-1 crypto organizations
About Steady State
Steady State gives DeFi protocols and platforms a practical solution to safeguard their financial future. With the help of Chainlink Keeper technology, our platform aims to eliminate bottlenecks in DeFi insurance by using automated processes, shared coverage policies, and a cutting-edge risk analysis database. Steady State is creating a new paradigm for decentralized insurance by delivering DeFi’s best-ever insurance platform for protocols.
To learn more about Steady State and the impact of our pragmatic approach to Defi insurance, visit us at the links below:
Steady State cautions that statements in this communication that are forward-looking, and provide information other than historical information, involve risks, contingencies and uncertainties that may impact actual results of operations and prospective transactions.