Please describe your proposed solution

Of 438 participants in the Cardano ecosystem system, 80% experienced a financial impact from rug pulls. In another survey, excluding rug pulls in the questionnaire, out of 135 participants in Cardano, more than 50% experienced general scams with financial impact, including wallet draining, escrow, discord hacks, impersonators(a), and other malicious attacks. The total losses declared by the participant in the surveys were roughly 2 million ADA over the span of 2 years.

There's an <u>evident gap in risk management</u> within blockchain ecosystems, ranging from social engineering scams to fraudulent websites with blockchain coding (known as wallet-drainers) and even keylogger malware on smart devices. We aim to bridge this gap by providing financial protection and awareness to our holders. Below, we elaborate on our proposed solutions.

1. Insurance

Insurance Crypto Products are needed for the ecosystem to compensate those who suffered financially and prevent victims from starting with nothing or burdening the community’s good faith with gifts to reduce the loss. For this to be achieved, an insurance ecosystem needs to be created.

Cardano is ready for a mutual pool or an insurance pool. Those who’ve been around the existing ecosystem can vouch that communities are self-insured, and they pay damages to loyal members who suffered losses either due to negligence, an impersonation attack, or sometimes an extreme payout during a discord hack. However, not all are lucky enough to receive community compensation. The onboarding to be a loyal member is no easy feat. It’s a continuous presence on social media platforms that builds up the digital identity and self-brand for the general community to welcome the members. This self-insurance by communities and the digital identity aspects are traits we wish to utilize during our underwriting.

> Why an insurance pool?

Contrary to a traditional insurance fund, an insurance pool is a collective arrangement where, in our case, multiple NFT and Token holders or Crypto Projects will share risks and resources. Instead of a single entity maintaining a reserve fund, contributions from various participants are pooled together to create a larger fund that can be used to pay claims or cover losses and finally pool in resources.

<u>Insurance pool success</u>

The formula for a successful insurance pool is quite simple. Going back to basics, the insurance premiums (inflow ADA) should be equal to or greater than the losses or claims paid (outflow ADA). Processing costs, licensing fees, and everything else related to the machinery of insurance are just overhead, and managing that part of the business is an art in itself; it's a main drive for going forward with this proposal.

As this will be a mutual pool, it is not meant to be profitable or even have the possibility of being bankrupted. The Project will collect premiums, pay claims, and return the surplus to the policyholders, aka pain holders. The operations cost will be on a separate budget part collected part of this fund. The proof of concept, or our MVP, will be designed to manage to target 2000 active policyholders for an entire year.

2. Awareness and Cyber Hygiene

An effective defense against crypto attacks is awareness of the latest and ever-developing crypto scams. Slowing Pains' ecosystem will be advantageous compared to previous awareness campaigns, as the project will systematically and methodically collect data on users and scammers. Therefore, policyholders and general followers will be provided with awareness campaigns, short courses, and perhaps innovative games to help educate them on how best to navigate the ecosystem system. Also, if scams are inevitable, best practice campaigns are ado to reduce risk – some suggestions are having multiple wallets to distribute risk and a dummy wallet when testing new Dapps to avoid wallet drains. Rational investing vs FOMOing in.

A KPI will be tracked to see if people learn and avoid losses. This will be a continuous development with solid methods pinpointed to reduce an individual's risk and exposure. It is to be tested and launched.

3. Emergency Response Team (ERT) 24/7 ( to reduce loss)

A 24/7 response channel or general support line must be available for users experiencing an attack or general support line. This service doesn’t exist yet. Therefore, Pains will create and manage the ERT. This feature is indeed available in most active projects in Cardano. However, it is sporadic and not organized with KPIs.

A real example of our ERT team being used:

A known member had his entire wallet drained, nearly 90,000 ADA in NFTs and Fungible Tokens. One of our team members was able to retrieve almost all NFTs worth 50,000 ADA by quickly purchasing them back at a low offer in market placement. We plan to expand our skills and quickly share awareness.

Premium

Premium income will be the main source of revenue and the goal is to end up with profit after paying operations, business acquisition, and claims.

• Initial processing fees and NFT royalties: The first source of income will be processing fees, which can be paid by buying our NFTs (high royalties -&gt; 20% to 30%). In our collection, different NFTs provide different limits and coverage.
• Second is renewal premiums - via staking
• To renew the policy, we plan to request our policyholders to stake a certain amount to receive a certain amount of cover (the price matrix is under development).

Processing Claims and Onboard Policy Holders

For Onboarding users we shall offer a couple of options to KYC, we will choose the route which is less intrusive, however the option to full KYC will also be given and rewarded for with higher limits.

Here is the link for a our form (draft) it also includes a sample of our **<u>Policy Wording Terms and Condition </u>**embedded within the from.

https://form.jotform.com/240972863934468

The below is the approval structure for reviewing a submitted claims,

The claims approval process begins with the insurance moderators, who are responsible for verifying that the submitted claim adheres to the terms and conditions of the policy. This process is set to be further streamlined and automated through integration with smart contracts (SC) in the future.

Please define the positive impact your project will have on the wider Cardano community

The project will positively impact the Cardano community by providing insurance services that address financial losses due to scams, rug pulls, and wallet-draining attacks. This initiative aims to mitigate the financial impact of these attacks on the Cardano community, increase awareness about security, and create what we believe is the first blockchain-native, sustainable insurance ecosystem.

The success of this project will be evaluated through several methods, both quantitative and qualitative:

1. Quantitative Measures:
2. The number of insurance claims processed and resolved.
3. Total ADA value compensated to policyholders.
4. Number of policyholders actively covered.
5. Growth in the insurance pool: Reflected by the number of participants and total ADA.
6. Qualitative Measures:
7. Feedback from policyholders regarding the value and effectiveness of insurance coverage.
8. The Cardano community's awareness of crypto scams and security practices: measured through surveys and engagement with educational campaigns.
9. The effectiveness of the emergency response team in responding to incidents and reducing losses.

Outputs and opportunities from this project will be shared through:

• Public reports detailing the project’s progress, metrics, and impact.
• Educational campaigns to raise awareness about scams and best security practices.
• Partnerships with other Cardano projects to amplify the insurance coverage and promote security in the ecosystem.

The vision is to participate in an insurance ecosystem where insurance buyers and sellers can meet and transact securely. To this end, one of the project's key goals is to create a product that empowers existing Cardano users to invite family and friends into the ecosystem, offering peace of mind that they are protected and won't have to face undue financial loss or poor experiences in this permissionless world.

What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?

Motaz Bukhari (Project lead)

Motaz has 17+ years of experience with an Electrical Engineering degree and a minor in Mathematics from Colorado State University. He started as an Engineer with Saudi Aramco, quickly progressing in 7 years to become the Engineering Supervisor of SAFANIYA plants. He then shifted careers by joining Gulf Re (now Arch Capital Group) as an Underwriter Trainee, advancing in 5 years to the Property and Energy Underwriter role. Later, he moved into reinsurance at WillisRe, focusing on treaty placement, and 3 years ago, he joined Guy Carpenter, concentrating on product development in the Middle East.

Over the last three years, Motaz has been part of a team that introduced three different Cyber insurance products in the Middle East. These products include two tailored for SME and large enterprise cyber insurance and one designed specifically for retail cyber insurance.

Motaz has a solid understanding of the challenges involved in building a team and developing new products.

Approach to Validate Feasibility

Pilot Study: We plan to conduct a pilot study, providing insurance coverage from May 31, 2023, to January 1, 2025. This will enable us to identify potential insurable losses within the Cardano ecosystem and refine our claims processing and payment capabilities.

Data Collection: Over a year, we will gather data from at least 2,000 policyholders, creating a robust dataset to understand common risks and further refine our approach to insurable risks for retail and small business customers.

Pricing Model Testing: We will test our pricing models by analyzing collected data to ensure our premiums align with the expected risk and claims.

Governance Testing: During the pilot phase, we'll assess our insurance company’s internal processes to validate the efficiency and accountability of our governance model and establish a transparent governance structure.

These strategies, combined with our team's extensive experience (Fida insurance) and innovative approach to using blockchain technology, will help ensure that we deliver our project with the highest levels of trust and accountability.

What are the key milestones you need to achieve in order to complete your project successfully?

Milestone 1: The Development of General Marketing, and Social Media Marketing + Promotional Campaigns

<u>A. Milestone Outputs</u>

• Marketing Collateral
• Creation of comprehensive marketing materials to support brand engagement and outreach
• Launching targeted promotional campaigns on Social Media through Platform X.
• Crafting engaging social media posts.
• Developing informative email newsletters.

<u>B. Acceptance Criteria</u>

• Monitoring key performance indicators (KPIs) to assess the impact of marketing activities.
• Regular KPI reviews to track progress towards goals.

<u>C. Evidence of Milestone Completion</u>

• Increase in the number of Insurance <u>Policy Holders.</u>
• Growth in the number of Followers on our social media accounts.
• Improved engagement metrics from social media activities.

Milestone 2: Streamlining the onboarding and claims processing.

<u>A. Milestone Outputs</u>

• Selection and integration of a Customer Relationship Management (CRM) system, such as Salesforce or Jotforms, to streamline insurance onboarding processes.
• Development of CRM product-related training programs tailored for employees and insurance moderators.

<u>B. Acceptance Criteria</u>

• Successful completion of CRM selection and full functionality of API integrations.
• Effective integration of Jotforms or Salesforce demonstrated through tests within the onboarding and claims management workflows.

<u>C. Evidence of Milestone Completion</u>

• Confirmation of CRM system and API integrations being operational and meeting planned specifications.
• KPI onboarding processing speed and claim processing
• Delivery and implementation of training programs for employees and insurance moderators, ensuring they are fully equipped to utilize the new system.

Iro of the Registration

The below link will direct you to our form, it also include the frist Product (policy wording)

https://form.jotform.com/240972863934468

Milestone 3: Development and Launch of Pilot Product 1: Individual Insurance Cover.

> This product will focus on first-party losses for individual policyholders, covering a range of incidents such as impersonation scams, wallet drains, and coding errors. The primary objective is to gather data to accurately pinpoint insurable losses and determine the premium required to sustain the insurance fund.

<u>A. Milestone Outputs</u>

• Drafting the official Individual Insurance Cover <u>policy document</u> to provide a clear and comprehensive guide for both clients and staff.
• Creating a targeted <u>training</u> program for Insurance Moderators focused on the specifics of the Individual Insurance Cover policy.

<u>B. Acceptance Criteria</u>

• The Individual Insurance Cover should be fully developed and ready for launch in the retail market by July 2024.
• Verification of training effectiveness through assessments provided by the project to the team and Insurance Moderators.

<u>C. Evidence of Milestone Completion</u>

• Documented launch of the Individual Insurance Cover in the retail market, with specific details and dates confirming its rollout by the set deadline.
• Insurance Moderators demonstrate proficiency in understanding policy details and client support through successfully completing the training program.

Milestone 4: Development and Launch of Product 2: Small Business Insurance Cover

> Designed to cover small businesses, building on cardano the first, this product aims to protect companies from their first-party losses and liabilities. Coverage includes scenarios like poor minting experiences and the mismanagement of digital assets. The data collected will help us assess the risks specific to small businesses and establish appropriate pricing.

<u>A. Milestone Outputs</u>

• Creation of the official Small Business Insurance Cover policy document to define coverage terms and conditions clearly.
• Ongoing data collection related to loss claims to refine policy accuracy and effectiveness.
• Development of a comprehensive training program for Insurance Moderators specific to the Small Business Insurance Cover policy.

<u>B. Acceptance Criteria</u>

• The Small Business Insurance Cover should be fully developed and ready for launch in the retail market by August 2024.
• Verification of training effectiveness through assessments provided by the project to the team and Insurance Moderators.

<u>C. Evidence of Milestone Completion</u>

• Confirmation that the Small Business Insurance Cover will be available in the retail market by the specified deadline, with detailed launch documentation.
• Insurance Moderators demonstrate proficiency in understanding policy details and client support through successfully completing the training program.

Milestone 5: Development and Launch of Product 3: Parametric Insurance for the Masses

> Catastrophes are borderless, and so is Cardano.

> We will bridge the gap globally with parametric insurance built on Cardano for the masses to improve on the inefficiencies of the insurance market.

> This innovative product leverages blockchain technology to offer parametric insurance. Triggered by external data from oracles, such as an earthquake, it enables automatic payouts to policyholders without the need for lengthy claims verification processes. This will streamline insurance processing and elevate efficiency, collecting valuable data to understand large-scale risks and pricing needs

<u>A. Milestone Outputs</u>

• Crafting the official Parametric Insurance for the Masses Cover policy document to outline the insurance parameters clearly and comprehensively.
• Designing and initiating a pilot program for the Parametric Insurance Cover in collaboration with FIDA Insurance to test and refine the policy under real conditions.
• Creating and implementing a training program for Insurance Moderators specific to the new Parametric Insurance Cover.

<u>B. Acceptance Criteria</u>

• The Parametric Insurance for the Masses Cover should be fully developed and ready for launch in the retail market by November 2024.
• Verification of training effectiveness through assessments provided by the project to the team and Insurance Moderators.

<u>C. Evidence of Milestone Completion</u>

• Documented launch of the Parametric Insurance Cover in the retail market, with specific details and dates confirming its rollout by the set deadline.
• Insurance Moderators demonstrate proficiency in understanding

Final Milestone: A Report in PDF format with our learned experiences and our plan to create a final retail insurance product with its operational ecosystem ready to manage a $100 million fund.

Who is in the project team and what are their roles?

The current team consists of the following members (and growing):

Rodolfo Hansen (Lead Developer)

Rodolfo has cultivated a rich and diversified career, currently linking the technology and insurance sectors. As the founder of Fida - operating since October 2022 - he has melded his technical skills with his interest in blockchain architecture to focus on innovations within the Cardano blockchain, particularly in insurance applications. Preceding his role at Fida, he has been a stalwart presence at Philips since May 2019, where, as a Principal Software Architect in Quality &amp; Excellence, he has spearheaded efforts to enhance software quality and delivery efficiency across the organization.

Lara Bonasorte (Operations Manager)

Lara has excelled in operations management across multiple blockchain and DeFi platforms. At The Ape Society, she implemented a comprehensive support system, providing real-time technical assistance in multiple languages and ensuring seamless community engagement. She played a pivotal role in the successful launch of Levvy Finance, one of Cardano's fastest-growing DeFi platforms. In addition, Lara oversaw the deployment of a CIP-68 asset conversion system, enabling users to customize their NFT metadata in real-time, which significantly enhanced user engagement and platform functionality.

Bob Corn (Emergency Response Team Lead Investigator)

Bobcorn has extensive experience reading blockchain transactions with a unique attention to detail. He has publicly documented countless investigations into scams, alerted communities about DeFi exploits, and exposed malicious actors all through his official X account. Bobcorn is proficient in using Tap Tools, Cardano Scan, and Pool.pm, with expertise across most Cardano dApps and interfaces, making him a highly knowledgeable and reliable figure in the blockchain and DeFi communities.

Shay Henderson (Discord security and Emergency Response Team Member)

Shay has a strong foundation in computer science, specializing in software engineering and knowledge of cybersecurity. He has deep expertise in blockchain technology, particularly Cardano, and is also knowledgeable in Ethereum and Solana. Shay excels in Discord technical management and troubleshooting, bringing significant experience from her active involvement in Web3 communities.

Larissa Morais (Co-Founder of Pains and Marketing Manager)

Larissa has extensive expertise in marketing and graphic design, with a proven track record of crafting compelling visual narratives and impactful brand strategies. She combines her creative skills with deep knowledge and experience in mental health propagation and support, serving as the entire brand face of PAINS. Larissa has effectively raised awareness and fostered a supportive community around mental health initiatives through her marketing acumen and graphic design prowess.

Caleb Montiel (Insurance Moderator and Data Maintainer)

With over four years in the insurance industry, Caleb has developed skills and expertise that align closely with Pains' goals. Caleb has thorough experience in systems management, sales, and leadership and extensive insurance knowledge that will significantly contribute to the team's success.

Matheus Bonasorte (Head of Community)

After founding his marketing agency, Atlas Social Media, almost two years ago, Matheus has excelled in working with companies worldwide in the most diverse blockchains, such as Sui Network, Cardano, and Ethereum. He has gathered diverse Community Management experience after working for Atlas SM, Unbothered Wolves, and most recently, Better Web3, also located within Cardano, offering Publicity Consulting, Direct Marketing, and Social Media Management. Matheus will work alongside Larissa for the Pains brand excellence.

Please provide a cost breakdown of the proposed work and resources

Software and Training Costs

• Jot Forms Enterprise: $8,500 annually, includes comprehensive training (quote confirmed).
• SalesForce Enterprise: Approximately $10,000 annually, pending the final quote.
• Insurance Moderator Training: Included in the costs above.
• Profila https://www.profila.com/ (still under discussion - Web3 data maintainer on Cardano, competitor to Sales force and Jotforms.)

Marketing and Promotional Campaigns

• Digital Presence Maintenance: $6,000 annually for social media advertising and upkeep of website and social media channels (Discord, Twitter, etc.).
• Dubai Summit Participation: $8,000 covers attendance for four team members, including booth setup.

Insurance Operations

• Underwriting and Analytics: $15,000 for an estimated 100 hours of professional services to develop three insurance products and their models.
• Policy Processing: Approximately $5 per policyholder, totaling $10,000 annually for processing 2,000 policies.
• Claims Processing: Up to 1,000 claims processed at approximately $10 per claim, totaling a set fee of $10,000.

Additional Systems and Initiatives

• Pains Point System: A $5,000 one-time fee for a reward system designed to monitor and enhance moderator and claims team performance within Discord.

Development Team Compensation

• Product Owner: $10,000 for full-time involvement (200 hours).
• Architect: $5,000 for 80 hours of work.

Additional Considerations

• ADA Price Fluctuation: Additional costs due to ADA price changes or the need for more professional services and contracting, totaling an additional ADA 30,000.

Total Funding Requirement

• At the time of calculation, the total funding requirement stands at ADA 200,000.

Funding and Capital Allocation

• It is important to note that the Catalyst fund will exclusively cover processing and backend fees and expenses, not claims or losses.
• We are allocating our own capital of ADA 65,000 to cover potential losses during this experimental phase.

There is no dependency besides contracting existing services.

How does the cost of the project represent value for money for the Cardano ecosystem?

The cost of this project represents significant value for the Cardano ecosystem for several reasons:

1. Preventing Financial Losses: The insurance products will mitigate the financial losses from scams, wallet drains, and coding errors. This protection helps individual users and businesses continue to engage in the Cardano ecosystem confidently, preventing the attrition of users and projects due to financial loss.
2. Boosting Trust and Security: The project fosters a culture of security and trust within Cardano by creating an insurance ecosystem. The comprehensive coverage and quick claims processing will help instill confidence in existing and new users, thereby encouraging further adoption and development within the ecosystem.
3. Collecting Valuable Data: The project will collect essential data about the types and frequencies of risks faced by users in the Cardano ecosystem. This data will help refine the insurance offerings and establish accurate pricing models. It will also be valuable for other projects, enabling them to understand risks better and improve their security measures.
4. Catalyst for Innovation: By introducing an insurance feature on the blockchain, the project opens the door for further innovation in decentralized finance. The Parametric Insurance Product leverages blockchain technology, setting a precedent for automated and transparent claims processing that other projects can build upon.
5. Marketing and Expansion: The marketing budget is strategically planned to increase visibility and attract more users and projects. This will accelerate the expansion of the insurance ecosystem and boost its impact.

Overall, the project's costs are an investment in securing the Cardano ecosystem and fostering its growth through innovative financial products.