Chainlink integrate with Etherisc and Nexus Mutual to dive into how smart contracts can revolutionize the insurance industry

By Selena On Mar 15, 2020

Chainlink, much like Tezos, has been one of the few altcoins to show signs of strength during what has been a prolonged crypto winter. The cryptocurrency reached a new all-time high of $4.89 just over a week ago.

Chainlink early days

Chainlink completed its ICO in the peak cycle of 2017. They raised a modest sum, comparatively to other projects, of $32 million. 30% of this went to the platform creators and team. Chainlink is built on top of Ethereum but claims to solve many of the issues that Ethereum has struggled with.

While Ethereum’s smart contracts occur on-chain, Chainlink’s platform aims to bridge this gap by providing the option to retrieve data off-chain. This happens via the networks “oracles,” which can extract data via API’s or Data Pools.

Following integrations with @etherisc and @NexusMutual, we conducted a deep dive on how #smartcontracts can revolutionize the #insurance industry. Read about current challenges and how to start building decentralized insurance products today. https://t.co/MG1kIuVqaV

— Chainlink – Official Channel (@chainlink) March 13, 2020

Decentralized insurance protocol Nexus Mutual integrates Chainlink oracles

Nexus Mutual, a peer-to-peer risk sharing tool built with smart contracts and Blockchain technology, has stated that they are currently using Chainlink price reference data contracts for decentralized pricing for your multi-currency capital group.

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The integration allows Nexus Mutual to perform daily updates and rebalance the minimum capital requirement (MCR) by recalculating the value of each capital asset (currently ETH and DAI) in the multi-currency group. Use the Chainlink Data Reference Price Contract. Taking advantage of the DAI/ETH price reference contract, available on the mainnet, will bring Nexus Mutual safe and reliable on-chain valuations to ETH and DAI by accessing a network of aggregation tools. Decentralized data pulls prices from all leading sources of liquidity into the market.

Hugh Karp, the founder of Nexus Mutual, said:

“We are delighted to be working with Chainlink to enhance our security against liquidity attacks. Security is an important aspect of what we are doing; that’s the core of our product. me and necessary to provide the best options for our members.”

Integrating the present and future of Chainlink

One of the key components to operating Nexus Mutual safely and reliably, easily verified by all its members, is maintaining the minimum capital requirement (MCR) requirement on the Blockchain. Minimum capital is an essential value to each other because it affects the level of coverage that can be written on any particular smart contract system, and is also a limited level of restriction. It is essentially the level of capital that needs each other to operate.

Because MCR is essential for calculating quotes for new insurances and rebalancing capital groups, it is necessary to manage risk and to maintain profitability in the face of price volatility. For this, Nexus Mutual needs a safe and reliable price feed for ETH/DAI prices.

Chainlink’s price reference contract was born, because they not only provided high decentralized prices, guaranteed necessary collateral in the capital group of Nexus Mutual (currently DAI), but also sourced from the set. Leading liquidity providers and provide them transparently. By tapping into exact market prices, quotes reflect more accurately the current risk distributed within the capital group. Besides, members are always up to date on the risks present in the system, thus better equipped to make more informed governance decisions.

In addition to the recent integration, both teams are exploring how Nexus Mutual can provide coverage for Chainlink’s price reference contract in the event of contract failure. While their reference contracts have been highly decentralized and secure, this will provide an additional level of security for many DeFi applications currently leveraging them for essential smart contract functions.

Sergey Nazarov, Co-Founder of Chainlink, said:

“We are glad to work with Nexus Mutual by supplying their mutual with highly reliable and accurate price reference data secured by our decentralized network of price oracles. This allows their mutual to tap into true market prices when valuing their on-chain capital pools, ultimately bringing more security to their members.”

How can smart contracts reduce asymmetric information, create trust, and revolutionize the insurance industry?

The safety nets provided by new forms of digital insurance products will:

Providing new risk transfer products to the population that is not currently covered.
Unlock the participation of less sophisticated users in the mass adoption of cryptocurrency-based products and services.

These ideas are similar to the predictions given below by Renat Khasanshyn, co-founder of a decentralized insurance platform, Etherisc, and an industry leader on the intersection of insurance, smart contracts, crypto-economics, and more.

Prediction 1: By 2022, new autonomous and semi-autonomous insurance products will be available to consumers.

Parametric insurance models are entirely or primarily arbitrated directly by data.
Transfers processing requests from central entities to decentralized protocols.

Prediction 2: By 2025, we will see at least five decentralized insurance cooperatives (DAO) and non-custodial risk groups (Open Finance, also known as DeFi) allow participants:

Share risks with colleagues.
Transfer risk to risky capital markets (traditional capital markets and cryptocurrencies, such as reinsurance and linked securities, such as disaster bonds (CAT).

Prediction 3: By 2030, we will witness re-foundation of existing insurance products with the digital agreements used today through:

Upgrade traditional insurance to first digital insurance with unprecedented privacy, transparency, and verification.
Replaces auto-centralized digital insurance contracts with different levels of decentralization, thus eliminating single points of failure and significantly reducing compliance and direct and indirect adjustment costs, at the same time reduce premiums to increase affordability for uninsured populations.

To understand the basis for these predictions, let’s dive deeper into current issues and emerging solutions in the insurance industry.

New insurance model

If the smart contract is fully connected with full security, many existing insurance models can be replaced by smart contracts, while other new models can be launched.

Internet of Things (IoT)

IoT devices include sensors and actuators that collect readings related to many external incidents. Some common measurements from IoT devices are speed, location (GPS), sound, precipitation, electricity, magnetism, distance, pressure, and chemical composition.

A car insurance smart contract can use IoT sensors to monitor driving activity, collision dynamics, and road conditions to determine discount rates and accident requirements.
Large equipment equipped with internal sensors can monitor system failures and trigger payments for defective defect warranties or automatically request maintenance.
Smart appliances data can resolve complaints based on the identification of fire, flood, emissions, or any other internal damage.
IoT wearable devices and other biotechnology sensors can be connected to health insurance policies to enable checking and calculating discounts based on exercise habits, weight, and heart rate.

IoT data can be sent to smart insurance contracts to determine if an event has occurred. If specific circumstances arise as stated in the smart contract, payments can be automatically issued to the respective parties.

Web API

Insurance smart contracts can use data available from notable web APIs to trigger different types of policies.

Life insurance contracts can access death certificates, cremation records, obituaries, and police reports to confirm death and distribute property to the parties involved.
Flight and train insurance may use the transportation schedule to issue payments for late or canceled trips.
Crop insurance can use weather data, GPS, or drone images to validate weather patterns and issue payments.

Etherisc is an example of a newly launched decentralized flight insurance product on the Ethereum testnet Ethereum, using Chainlink’s decentralized miracles to connect to flight status data through the web API of websitestststst.com. Check out Etherisc’s recent blog to learn more.

Decentralized insurance

Smart contracts can be used to develop revolutionary new insurance products, such as micro-insurance, peer insurance, and decentralized autonomous insurance groups. Decentralized insurance provides joint responsibility for coverage, flexibility for product designs (such as a new pay-per-use model), and access to uninsured markets.

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