ICO Review: Etherisc - Insuring the Uninsured?

No-one thinks about insurance until a rainy day

This article was first published on FlatOutCrypto. Please follow me @FlatOutCrypto

It’s been a while since I looked at an ICO in any real depth, mainly because most of the 2018 ICO’s have been either overvalued vs market conditions or just bad ideas (probably both in most cases). So when I was pointed in the direction of Etherisc I was a tad sceptical. Now, normally I try to present a pretty balanced review and then end up saying why I did or didn’t invest but with the case of Etherisc I’ll save you the trouble — I am planning to make it one of my largest holdings and the below is more an explanation why. It is one of the first ICOs of this year that surprised me in a positive way because it:

  1. Targets a market I think is a natural fit for blockchain/DLT
  2. Has been in the space for a while (it’s amazing that 2 years in the space counts as veritable pedigree but when you’re competing against people that probably hadn’t heard of blockchain until December 2017 it does count for something)
  3. Is building a platform for everyone to use, not just a specific DApp they control
  4. Have demonstrated transparency and fairness in their ICO
  5. Somehow is going to launch with a tiny circulating supply

What is Etherisc?

My articles seem to get longer each time so I will try and be as brief as possible because there’s a lot to get through. Etherisc, which was founded in July 2016, is effectively building a platform comprising the infrastructure, product templates and ‘insurance license-as-a-service’ upon which anyone worldwide can build DApps to facilitate insurance products. The company has also produced two products and has a further 20+ in production either internally or by community members.

Etherisc’s goal of producing a platform, rather than a DApp is the right approach. In my opinion the really exciting opportunities are the ones which aim to build infrastructure to serve a billion people, not specific DApps which target a million. Why? Because they allow for others to build on their platform. Once you let people build on top you start to see ideas realised that the original team would not ever have thought of. You harness the creativity and imaginations of people worldwide, and in doing so you add value to your own platform.

Why do we need blockchain for insurance?

When I first learned about Ethereum and smart contracts I immediately though of insurance as a prime beneficiary. Why? Because:

  • It is plagued by company/customer conflicts (company is incentivised to resist paying claims)
  • It’s generally an unattractive experience for the consumer (no automatic payments, longwinded processes)
  • Insurance claims follow an opaque and often inefficient process
  • Firms have large overheads and incur costs (e.g. from tight regulation) which must be passed onto the consumer
  • Many forms of insurance are not cost effective for companies to issue (because it relies on economies of scale so smaller products aren’t offered) or companies do not exist to offer it in less developed countries

Insurance is also extremely important. Hundreds of millions rely on it annually for a whole host of reasons and for many the difference between being insured or uninsured, having a good policy or suffering a bad one can be a life altering experience. Finally, it’s (very) lucrative. This is a $4.5tn global industry.

Blockchain may not be able to solve all these issues and certainly won’t be suitable for all types of insurance — but the market is large enough to make it an attractive proposition. Furthermore, my experience of industry companies makes me suspect that many of them will struggle to adapt quickly. Banks may get a lot of criticism for being behind the times, but many of the insurance companies I am familiar with have proved positively archaic.

It should be noted there are some companies which have already started to trial Ethereum based implementations such as AXA. But smart contracts are just one part of the story. An exciting possibility of the decentralisation that it can bring includes the potential to pool capital worldwide to share risks. Peer to peer loans have become popular in recent years and it is easy to envisage peer to peer insurance having similar appeal.

As a result, new insurance products will be possible, products that large insurance firms cannot meet due to them being on too small a scale, too high risk or outside the scope of their regulation. This decentralisation could also remove the conflict of interests between the insurance company and customer — there is no company to speak of and insurance payouts are automatically triggered once the conditions are met.

How does Etherisc work?

Rather than run through the whitepaper or go into a great deal of detail I thought it would be more instructive to focus on two sample products created by or for Etherisc. The first product is Flight Delay which, as the name suggests, is an insurance product which automatically pays out if your flight is delayed by a certain amount of time. Etherisc sold 100 policies to cover insurance to Devcon 3 in 2017. Flight delays are a really easy fit for blockchain because they are easily measured (there is public information about flight times which an oracle (an agent which sources information and then submits that to be used by the smart contract) can take the data from and then a simple calculation will determine if a user should be paid or not depending on the delay suffered. If over 2 hours — the appropriate payout will be made to the customer.

The second product, Hurricane Insurance, is arguably more interesting because it demonstrates the potential of Etherisc as an application. The brainchild of two developers not part of the core Etherisc team, Joel Martinez and Jonathan Gonzalez, this product aims to cater to the needs of people in Puerto Rico following the 2017 Hurricane Maria - the worst natural disaster in the country’s history. Despite the loss of life and damages incurred, insurance payouts have been slow (or not yet realised), leaving citizens stranded, unable to repair their homes or shops.

Their proposed insurance policy was to create a parametric insurance policy which would automatically pay out to customers within three days should a major hurricane hit the island (determined by public weather data). While the payout is limited (up to $9,000), it would provide a lifeline to people in the immediate wake of the disaster.

An alternative example is an earlier crop focused product they designed which could be used in rural Africa. This would allow, as co-founder Stephan Karpischek stated:

“With this model we can do exactly that [offer crop insurance for one or two dollars a month]. We can do very, very small amounts of premiums and operate on an economically very low scale because everything is automated.”

These are the sort of things that get me excited. Blockchain shouldn’t be used to just do what we’ve already done slightly more efficiently. The idea of being enthused that XRP might make transactions a bit cheaper and quicker for large banks is alien to me. But the idea that it could be used to help people who need it and reimagine an antiquated industry is exactly the reason I fell in love with cryptoassets in the first place.

Insurance for crypto?

I have long desired an insurance company who would insure cryptoassets themselves. People have substantial amounts of money in their various wallets. An insurance product for a liquid and easy to steal asset seems a natural fit to me, but I could find no such offering. So when I read the following by Karpischek I was sold:

“We want to provide a wallet that is insurable, so if you lose the assets because of a software bug, attack, or some systemic failure, then you are eligible for a refund.

“What we are proposing is basically a specification, so it’s not a software application. We are saying, your wallet should comply with certain requirements.”

If a cryptocurrency is ever to emerge for mainstream use, this development is one we will need. Coinbase may provide some insurance on your holdings, but creating a decentralised cryptocurrency and then having to entrust it to a company which provides the US Government with all your information kind of misses the point.

Anything else?

Honestly there’s so much I could write about Etherisc, mainly because it’s the first ICO I am genuinely enthused by in months. Things I would note:

  1. Partnerships: Generali Switzerland announced a partnership with Etherisc to develop an ‘innovative retail value proposition’. Hopefully some more details will be forthcoming on what exactly this entails. They have also worked done some work with EY, although I’m unclear on the exact nature of this or how deep the partnership went
  2. Awards: Winners of the Best Blockchain Startup in 2016 (along with Status), most funded project at hack.ether.camp and winners of three other awards in 2017
  3. Industry: Etherisc founded and chair the Insurance Working Group for the Enterprise Ethereum Alliance
  4. Token model: You can read more on the use of the token (DIP) in the dedicated token mechanics whitepaper, but essentially insurers/participants (not the customer) wishing to use the system must stake DIP
  5. Conduct: Partially as a result of the lack of hype around the product, the Telegram has been a refreshing oasis of calm and insights. There is so much good information that has been provided and the team has conducted themselves very well, maintaining full transparency and answering all queries in great detail


The sole issues I have with the product comes at this stage, and my concerns are twofold. Etherisc will have a total supply of 1Bn, which was to be allocated:

  • Public 300m
  • Founders 100m
  • Team/early supporters 150m (The early supporters contributed back in late 2016, at which point the team raised c. 3,000 ETH and 530,000 HackerGold in exchange for RSC tokens. These RSC tokens can now be converted to DIP (the Etherisc token).
  • Foundation 450m

However, with just days to go it looks like only c. 50m (currently 39m have been sold) of the public allocation will be taken. Unsold tokens won’t be burnt and the other stakes won’t be reduced accordingly. This will leave the distribution more like:

  • Public 50m
  • Founder 100m
  • Team/early supporters 150m
  • Foundation 700m

The saving grace is lockup periods are fairly large (by crypto standards) for the most part:

  • Public 50m (60% of these are locked up for 12 months — at token sale you were afforded option of locking tokens up for 12 months in order to gain a 25% bonus)
  • Founders 100m (24 month lockup)
  • Team/early supporters 150m (all of the team tokens are locked for 12 months; early supporters have the option to lock up or not)
  • Foundation 700m (not locked for a duration, but “are legally tied to the foundation’s purpose”) — I think it is doubtful these will be sold off quickly as it doesn’t make sense and from what I gather Swiss foundations are rather tightly regulated

This would make circulating supply at launch a maximum (and I’m being generous whilst I await clarification from the team) c. 100m (20m from public, 80m from early supporters), or roughly at most $10m at current ETH prices. The ICO itself has currently raised about $3.5m. That’s crazy to me. However, a worry here is that listing sites such as CoinMarketCap will see Foundation tokens (not technically locked) as part of circulating supply. This would obviously make the valuation more like $80m. Given how many people rely exclusively on market cap to form investment decisions, it is something to be aware of.

My second concern is that the company might not have raised enough. The public sale will net c. $4–5m. Their slide deck for contributors didn’t cover a scenario where they raised under $10m. The team’s response to this, and I make no real judgement either way, was as follows:

“First, Etherisc has been operating for more than two years now. So in contrast to many other ICOs, we are not starting from scratch and have a working product, and more to follow. Of course the funds planning needs to be adjusted to the actual raise. Note that we are already operating an insurance business with our partner Atlas, and definitely fulfilling solvency II requirements there.”


As I said at the outset, I plan to invest (I always wait until the last day where possible in order to wait out bad news or wider market fluctuations) with the view to hold for a minimum of six to eight months. I would not invest if you only want a quick flip as I think this could be a slow burner — there is no real hype around Etherisc right now. Despite this I am only investing in unlocked tokens as I do not want my tokens to unlock at the same time as the 100m+ tokens that are locked for 12 months and I value the flexibility at more than the 25% bonus on offer.

The one element that I have not mentioned thus far is the team’s ability to execute. In all honesty, this is really hard to gauge from available information for all projects, not just for Etherisc. There should be no doubt this is likely going to be a hard project to execute on as, beyond mere development (which is presumably difficult given the scope), the team will face competition from well-resourced incumbents, a hard path to adoption and potential regulatory challenges. This is likely a project that could take a decade to achieve mainstream penetration and the routes to failure are numerous.

With that said, most projects face similar issues. Worthwhile use cases, industry ripe for challenging, huge financial market to tackle, team that has been around for more than 10 minutes, no discounted sales to VCs or pools, existing products, low effective market cap — bank the unbanked may have become a bit of a cliché but…let’s insure the uninsured?

Disclaimer: I wasn’t paid or asked to write the above, I just like what the project is attempting to achieve and intend to invest. Please follow me @flatoutcrypto

Find my work covering the cryptoasset space at flatoutcrypto.com and follow me @flatoutcrypto