Introducing Provident One: Unlocking insurance for everyone

When we got started with Unpatent, we thought about multiple ways of solving the problem of patent trolls. Some of them extremely futuristic, some of them more down to earth.

One of the things that seemed like extremely down to earth, but that in practice wasn’t, was insurance. We wanted to provide insurance to small and medium companies so they can protect themselves against patent trolls. However, when we started researching about how to become an insurer, we figured out it was a too-complex, too-bureaucratic, too-expensive process for a startup like ours.

During Luis's time at Stampery, one of the easiest ways to timestamp data with the blockchain, I directly experienced how blockchain can make unnecessary processes from the past totally disappear. So we thought: let’s deploy a blockchain insurance fund and we should be fine!

But… Surprise! There are no solutions for replacing traditional insurance models with blockchain-based architectures. There has been a lot of talk about this, yet there are no reusable components ready to achieve this.

What we needed was not P2P insurance, an area in which there are multiple solutions already; what we needed was a way to set up a typical insurance fund, but in a way that we are not the ultimate owner of the money in the fund.

Using Provident One, anyone can freely provide, consume and invest in transparent and fair insurance vehicles. In our model, there are five different parties:

• Holder: The entity that bootstraps the vehicle, parametrizes it for optimum performance and sets the conditions under which a claim can be made.
• Subscribers: Entities that buy protection to receive a service free of charge if a set of verifiable set by the holder conditions are met.
• Examiners: Those who verify the claims reported by the subscribers and its validity in order to claim the required service.
• Investors: Individuals or companies who bet on the funds’ performance and receive dividends when it profits. As the number of subscribers grows, token sales are needed to support Black Swan scenarios.
• Service providers: Entities that can provide a service when a claim is approved.

This new architecture aligns the incentives for all the parties to well behave, and also makes regulation easier since it’s easy to audit.

Very strict regulation usually makes sense if a single party can run away with all the money, and you are suddenly left without any kind of protection that you were paying for. However, with Provident One, no party can withdraw or control the funds. No individual party has absolute control.

We want Provident One to be a community driven effort to create and standardize a set of Solidity contracts that anyone in the world can use to create insurance vehicles that are more transparent, fair and free.

We believe insurance is such an important piece of the world; it helps us prepare for uncertainty and risk. That’s why it is a trillion-dollar industry.

However, the entry barriers are just super high right now; with Provident One, they are nonexistent.

We want to see new insurance companies flourishing and tackling big problems.

Luis Cuende & Jorge Izquierdo, Provident One creators.