Phoenix Cover

Phoenix Cover is a Web3 insurance protocol that covers individuals up to $100,000 USDC in the event that their funds are stolen when interacting with a smart contract. Our mission is to bring consumer confidence back to Web3 and empower a community of traders, investors and hodlers.

Web3 is dying due to scams and fraud

Web3 is struggling right now and it’s largely due to the prevalence of scams and fraud. The consumer financial protection bureau, which covers all of consumer finance, reported the biggest complaint across all consumers from 2018-2022 was scams and fraud in crypto. That’s 4 years of data demonstrating how destructive scams and fraud are in this space and to consumer confidence overall.

In 2022, consumers lost $5.9bn to scammers. The consumers have no way to protect themselves and are leaving Web3 for alternative investments. If we don’t do something to protect the consumer, the market will continue to struggle.

Why has no one done anything about this?

There is no one else trying to tackle this problem right now. The on-chain insurers like Nexus Mutual and InsureAce have succeeded in insuring Web3 risk at the protocol and systemic levels. This provides protection for the protocols against hacks, but it does nothing for the risks consumers take everyday interacting with the blockchain.

To put this in perspective, we look at the analogy of car insurance. If Nexus Mutual were a car insurance company, they would be providing insurance against the failure of Volkswagen. We’ve discussed this at length with countless customers and the resounding feedback is “I don’t care about Volkswagen, I care about someone stealing my car!”.

While the existing players are all looking at the systemic risk, there is an imperative for someone to step up and take care of the consumer risk in this space. If we don’t step forward and do something now, we’ll soon see the end of Web3 as we know it.

What does Phoenix Cover propose?

We propose an insurance protocol that inspires confidence in Web3 by taking risks off the hands of the consumers. The way to create this protocol is to start first by modelling the risk, putting measures in place to effectively manage fraud and implementing a system that combines the first two factors with a payment mechanism suitable for Web3 users.

The risk modelling marries actuarial mathematics, data science and Web3. The kind of factors we look at are wallet history, transaction data, wallet vulnerabilities, protocol security, browser security and a lot more besides.

After the risk modelling the most importance piece is the management of fraud. This involves first looking at the psychological motive of the fraudsters, the methods by which they can commit fraud and then mechanisms to prevent the fraud from taking place. Beyond that, we must also manage the fraudulent claims using a collection of Web3 intelligence tooling, chain analysis and fraud detection tooling to insure only legitimate policyholders are being paid out for their claims.

The third component is a suitable payment mechanism for accepting premiums from policyholders and issuing payouts to successful claims. Although this might appear like the easiest part of the puzzle, community feedback varied widely on how it should be implemented. The Web3 crypto natives wanted to pay in $USDC or $ETH. The folks who entered crypto in the last 1-2 years, the so-called ‘Web2.5’ people wanted to pay with credit card. As an insurance company we need to be careful to manage exchange rate risk and for that reason will be launching with USDC to start, but we will be able to accept payment in a variety of currencies with integrations to services like Coinbase commerce (image below).

As a consumer what can I get?

You can buy a policy that covers you in the event that your funds are stolen when you interact with a smart contract. You can run into malicious smart contracts in many places, for example signing in to a website, trading a token, listing or minting an NFT etc.. We will expand the scope of our policy over time to capture more and more risks from consumers.

The limit on the policy will be selected by you, the consumer. The initial upper limit will be $100,000 USDC which means that at current market rates you can protect ~50 ETH or a floor price BAYC NFT.

As a risk investor what can I get?

To provide insurance to the masses we must have insurable capital. This creates an opportunity for risk investors to generate ‘real yield’ which comes from the premiums paid by the consumers. The risk investors are putting up the capital to protect the community and then benefit from that protection via a return. We are forecasting initial returns as >10% APY. There will only be a limited number of spots open for risk investors as we’ve already received significant interest.

Team

We are a team of 4 working to bring this vision to life.

Nessan Harpur, CEO, has a background in consulting, cybersecurity and startups. Nessan led projects in cybersecurity and compliance for multiple Fortune100 and Fortune10 clients. In Web3, Nessan built a crypto mining data center in 2018, consulted with Web3 anti-fraud startups and NFT marketplaces. Nessan incubated this vision at Entrepreneur First in London in 2022.

Daniel Nayrouz is the head of growth, co-founded several Web3 projects aiming to make the space safer and more accessible, including a DAO-led analytics platform and a data monetization app teaching users how to prudently manage assets on-chain. Prior to this, he worked as a business developer for the DeFi protocol Bancor, where he presided over the influx of over $500m worth of liquidity to the platform and curated a community-centric marketing team to foster strong synergies between Bancor and other token-holding communities.

Yann Peter Neacsa, CTO, is a seasoned computer scientist with a strong foundation in software development and blockchain technology. As a King's College London graduate and co-founder of Draft, Yann brings exceptional technical expertise and entrepreneurial experience to the table. His background in building core infrastructure, data pipelines, and DeFi trading strategies ensures Yann is well-equipped to lead the technological vision.

Michael Weaver, CRO, with over a decade of experience in the insurance industry, Michael brings a wealth of knowledge and expertise to the team. He holds an MBA from Loyola University Chicago and is a Chartered Property Casualty Underwriter (CPCU), Associate in Risk Management (ARM), Certified Insurance Counselor (CIC), Construction Risk and Insurance Specialist (CRIS), and Certified Risk Manager (CRM). These designations reflect his deep commitment to continuous learning and staying up-to-date on the latest industry developments. Prior to co-founding Phoenix Cover, Michael held senior leadership positions in several leading insurance companies, where he gained extensive experience in underwriting, risk management, and claims management.

Why Grant Funding?

We are building a protocol that will serve the existing community and lead to future community growth. Any funding we raise via grants will be put into the following:

• Software: access to tools and services which will accelerate our risk modelling e.g. Etherscan, Alchemy and Infura. One day we want to run our own node but until then we are using their APIs.

• Smart contract auditing: a critical concern for us is the safety of our capital. We plan to launch using a Gnosis Safe and continue to build out the smart contract infrastructure that will underpin our insurance protocol. The smart contracts will allow us to optimise for speed and transparency with policyholders and investors.

• Growth/marketing: grant funding will go into helping us spread the word amongst the community. We will also put some funds towards launching a series of community initiatives that will provide education, improving the security of our users and ultimately result in reduced premiums for participants.

• Insurable capital: a portion of the grant funding will augment the pool of insurable capital with which we can protect and insure our users.