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district0x / district-proposals

Proposals for new districts to be built by the district0x Team.
https://vote.district0x.io/
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DP #162 - InsureHedge0x - The District0x Insurance Market #162

Open ghost opened 7 years ago

ghost commented 7 years ago

Name - InsureHedge0x

Purpose

The push for blockchain decentralization has the potential to disrupt how industries transact as well as transform how businesses are organized and function. The potential technical disruption will introduce new forms of income streams once thought impossible into a world where long standing business models are deeply entrenched. This will also introduce a quick rise in unknown and unforeseen market risks that most businesses or entities will not want to be exposed to due to market volatility and new catastrophic events (i.e. blockchain encryption cracked or cryptocurrencies banned).

To solve this problem this district would be designed to help divert risk from businesses or entities by providing the incentives and mechanisms required to combat these new exposures. The goal would be to allow for businesses or entities to divest part of their risk to a market in exchange for a more consistent revenue stream. This can take the form of a P2P hedge or insurance market to help guard against volatile markets or catastrophic events.

Description

By combining a Peer to Peer insurance market as well as a hedging market to help lock in rewards, this district will be focused on serving the needs of other districts, businesses, or entities to smooth their risk curve and allow them to operate under more conservative assumptions.

Inspired by the New Market idea, where those that sell raw goods only benefit if the end product is a success, it will be vital for the seller of the raw goods to ensure a specified amount of profit is made. As an example lets say we are dealing with a barley farmer. The farmer has been offered a partnership with an up and coming micro-brewery that is looking for the perfectly grown crop that meets their unique specifications. The farmer can take out an insurance policy on his crops that states if a drought kills all of his crops, he will be able to recoup some percentage of expected gains. The brewer can also take out an insurance policy on this event considering it is the key ingredient and lynch pin to their new beer recipes success.

As part of this new economy, profits are derived based on the success of the end product, in the case of our example, the success of the new beer recipe. This has the potential to be a large windfall for all involved but also opens up all parties to some uncontrolled (by the entity) risk. Even though the beer is expected to be a success, the farmer also has bills to pay and may not want to take on the extra amount of risk if the beer recipe is not a success. Enter the Hedge market, where the farmer can offer anywhere from part to all of his risk in the beer recipe to a secondary market that will pay the farmer out in cash now for the desired amount of risk the farmer is willing to offload.

Bradymck commented 7 years ago

Could I get an Eth address for this proposal please.