Blockchains can be used to Solve Difficult Class Inequality Problems
We can empower communities to write their own authoritative record of history. TandaPay is not just an insurance policy but a censorship resistant record which gives communities a voice.
TandaPay’s architecture is really different
I’ve spent over 800 hours this year researching, writing, rewriting and refining contents for blog posts on peer-to-peer insurance. Up to this point there has been a lot of technical details about Bancor but very little talk of use cases beyond cannabis. This post and other future posts will reverse that trend which hopefully my readers will find refreshing.
I’m temporarily abandoning Unity so that I can focus on a much simpler architecture called TandaPay. TandaPay does not use Bancor and it doesn’t carry a balance forward from month-to-month. At the end of a month all accounts on the system are reconciled. TandaPay has the following features:
- Every dollar collected in premiums is paid out in claims.
- Any leftover funds are returned to policyholders as rebates.
Both are hyperlocal architectures, meaning that your group policy is composed of people you know and friends of friends. How they differ is in relation to how they manage reserves. Unity is an architecture for low-liquidity insurance. TandaPay is an architecture for insurance with zero excess reserves. Both Unity and TandaPay use blockchain architecture. Neither were created to compete with traditional insurance products by providing similar coverage.
Blockchain is incredibly inconvenient to use for insurance. Attempting to use blockchain to provide insurance coverage is very difficult because coordination costs are very high. These costs are worse than the friction imposed by the traditional financial system unless you are offering coverage for illegal or grey market activities. If you want to use blockchain for insurance you must rethink all previously held beliefs about insurance to come up with new products for new untapped markets.
In their own words, other blockchain insurance projects are trying to “replace the insurance entity with code.” I don’t think translating the complexity of traditional insurance frameworks to code running on the blockchain is going to help anyone. To their credit, I think Etherisc has the right approach by focusing on parametric products, but I have my doubts as to every other project in the space. My approach is radically different.
TandaPay gives communities the power to record history
Rather than spend time talking about the technical details of TandaPay I want to jump directly to its use cases. If you want to get a non-technical overview of how TandaPay would work then start with this post. TandaPay can be used to address societal issues where minority voices are being suppressed. It has a practical application in covering the cost of deductibles for auto and home owners insurance. It has a social application in that it amplifies the speech of individuals within marginalized communities. Assisting communities to cover the cost of a deductible is just one way TandaPay can help people to work together.
TandaPay is not insurance. TandaPay is speech. The goal of TandaPay’s social agenda is to provide communities an authoritative publishing platform to combat harm by authorities who have habitually misrepresented their history. TandaPay gives these communities the ability to create their own record of events. Giving communities their right to speak in an authoritative way is the first step to combating class inequality and social injustice.
Considering that there is no available data published about police brutality, maybe we should consider giving communities the power to publish their own data:
There are nearly 18,000 different police departments in America and they are not great about reporting or sharing data. Even some surprisingly basic questions are hard to answer as the head of the FBI admits.
“We can’t have an informed discussion because we don’t have data. People have data about who went to a movie last weekend, or how many books were sold, or how many cases of the flu walked into an emergency room. I cannot tell you how many people were shot by police in the United States last month, last year, or anything about the demographics.” — James Comey
The best numbers on police misconduct come from a researcher named Philip Stinson. Sinson accumulated over a decade’s worth of data by setting up 48 google alerts in 2005. His stats are truly chilling. Out of thousands of fatal police shooting since 2005 only 77 officers have been charged with murder or manslaughter and to date only 26 have been convicted. While the truth is many police shootings are justified 26 seems suspiciously low.
TandaPay allows communities to publish their own definitive record of history. This record is tamper-proof and permanent. By giving marginalized communities this ability, we can guarantee that present and future narratives of history will not be monopolized by those with political power, social status, or financial wealth. This makes TandaPay relevant to solving real problems in the real world. Since we don’t currently have any cryptocurrency apps that provide useful services to average people, I think that this makes TandaPay very valuable.
Below are two edited phone conversations, conveying the valuable insights I’ve gained by working on this architecture. I’ve left it in this form because I want to provide a candid representation of how I think about TandaPay. From the very beginning many of us had hoped that a tamper-proof permanent record could radically alter society. Our aspirations haven’t changed. What has changed is our ability to implement those aspirations as real financial products. We started years ago with an optimism about what blockchains could do in the future. Now we speak concerning a realistic understanding what blockchains can do today.
Excerpt #1 — Police brutality insurance for the citizens of Baltimore
TandaPay can be used to insure against police brutality allowing communities to create an official record. The goal is that this would decrease the number of police brutality incidents that go unreported, thereby providing a check on this type of abuse of power.
Joshua: I was considering some of the social reform aspects of TandaPay. You can take a look at that document I sent, but one of the things I realized … okay, here’s a crazy idea. What happens if you allow people to insure stuff that they don’t believe is insurable? So, one of the crazy ideas that I had is police brutality insurance.
Joshua: Think about it this way. There’s a link that I put in the document for a NPR news story about a group called the Gun Trace Task Force. It talked about Freddie Gray, So-
Ryan: I remember Freddie Gray, yeah…
Joshua: So, right after he got killed, all of a sudden the internal affairs department starts to look into the Baltimore PD. They start to pay attention to all of these complaints that people had made over years about how the Baltimore police were basically robbing citizens. Obviously these were not the affluent ones, but they would look at people that they suspected of being criminals, and then they would just basically rob them. So, if you were black and you were poor, they would just like rob you.
So, anyways, the thing is that the community knows who these cops are and what they, you know, they’re not stupid, but they can’t do anything about it because they have absolutely no control or authority over what … Like, who’s going to believe them? You know what I mean?
Ryan: Yeah, in that case they had to bring police in from outside.
Joshua: Okay, but, now we have a brand new weapon. And that new weapon is called a community history, a community record. The reason why these records have authority is because they use the blockchain. These records are permanent, tamper-proof and if they run for long enough they can serve as a good record for how a community feels about what is really going on in the neighborhood.
So long as there is enough eye witness accounts which can back up a claim as valid then claims which get recorded can represent a communities perspective. Its not like people in the neighborhood don’t already know what’s going on. In these communities they already know that the cops are always trying to shake people down. When this happens people open up an insurance claim and they get some form of recompense, maybe to help pay for some legal fees or a trip to the hospital or partially cover some of the funds stolen.
Especially since TandaPay is a form of supplemental coverage, it represents the transfer of wealth from people who pay premiums to people who open up claims. So, the thing is that if a pool of people that live in the same area, if they’re consistently paying premiums, why would they do that if all of the claims are fraudulent?
I told my friend this idea and he literally, he just laughed in my face. He said, “Do you know how many fraudulent claims there would be?”, and I was like, “Um, but, you realize that people are not opening up claims against a company such as Prudential, right? The only ones who can approve their claim are people who live within their own community.” He didn’t seem convinced but I really don’t think that when the cops do this, they’re always so careful. Maybe sometimes they do it in broad daylight. They have so much power, they don’t even try to hide their crimes, right?
Joshua: The thing is, now you have this standard that represents what the community believes to be a valid claim. Again, people are paying premiums. If you can allow it to run for long enough, you have a record and that record is not going to agree with the record of the Baltimore Police Department, but it does agree with the consensus opinion of the people that live in that community.
So now, the authority outside of the community doesn’t get to use their power, their social status, their money, to determine what history is a valid history. Right now the people inside of the community that normally don’t have a voice have no authority. They don’t have the ability to get the public to acknowledge their side of the story unless they protest in the streets. TandaPay gives them a record which validates what actually happened because it’s backed up by people paying premiums and claims being paid out.
Now, of course claim payments won’t pay for much. This is after all supplemental insurance, which means that it’s not the full payment to restore what you lost, but at least you’re giving them something that can help. And they don’t feel isolated or ignored, someone is agreeing that a crime happened and is giving them some minimal compensation.
Ryan: What exactly is their claim going to be covering? Would this only provide benefits if they incur medical costs because the police beat them up? Or are you saying arrest insurance for their legal fees? Or are you paying them for lost wages, a day in jail?
Joshua: No, again, you need to consider that a community sets its own standards. In some ways, you could say this sounds like a very bizarre, perverse idea, but just hear me out. There’s something called a reverse lottery. It’s a lottery you don’t want to win, right? Something that happens to you that was … unfortunate. Now, claims could offer a relatively small compensation, but you’re trying to cover maybe one trip to the hospital, or some portion that got stolen from the victim.
The thing is maybe claims pay as little as one hundred or two hundred dollars. People may only be paying a premium of ten dollars. We’re just trying to give people some limited compensation but mostly we are trying to acknowledge that what happened to them was wrong, an injustice was committed. It doesn’t hardly make up for what was stolen from them, but at least they got something an acknowledgement from the community in which they live. At the end of the day there is a record. The record acknowledges that those cops were doing something wrong and harming members of the community, that record is just as important as the claim payment people are receiving. This goes back to what I was saying before, why would people continue to pay premiums if their premiums were being given to fraudulent claims? Why would people continue to participate in that kind of system, you know what I mean?
Again, the community sets its own standards. So long as the standard is agreed upon and everybody follows it, then a record is generated and that record represents what the community believed really happened.
Ryan: Yeah, that could go a long way to helping people feel like they don’t have to go out and protest in the streets. Their complaints only get coverage during a crisis but the cops are doing this stuff on a daily basis. It seems like the only time people who are victims get some coverage from the media is when the cops kill someone.
Excerpt #2 — Sexual assault insurance for college campuses
TandaPay can be used to insure against sexual assault on college campuses allowing communities of female students to create an official record. The goal is that this would decrease the number of sexual assaults that go unreported.
Joshua: How about this idea, female coeds on a college campus get together and decide that they will form a TandaPay community. They’re going to issue sexual assault coverage, which could provide counseling or treatment. Maybe even cover some legal fees? Except, it’s just a small supplement so it may not cover much if any of the expenses associated with those things, but at least it would be something? We’re just trying to help people get some limited medical care or assistance.
Ryan: Do you think there could be fraudulent claims?
Joshua: Well, again, these students should all know one another fairly well. We are talking about a group of maybe 100 or so divided up into another 15 sub-groups. They should have some sense as to whether or not they can trust one another before they form a group or start to pay premiums. But maybe more importantly you want a good leader to act as secretary who can counsel people when they come forward. You know, someone who can really help victims make a solid case when these events occur.
We want the community to hold a high standard and we want the community’s perspective on events to be viewed as accurate so that their record can be authoritative.
No one from outside can tell these communities what they should or should not believe. Within a community people should be constrained from making fraudulent claims because they have serious social consequences. Also a community’s record of events would lose credibility if they approve claims that have no factual basis. This could taint how people view claims recorded in the past or any claims they may record in the future.
Ryan: Why do you need a record that other people can check of who got sexually assaulted?
Joshua: In this world there are authorities and those authorities make statements and those statements get published. These publications becomes the basis of fact, and that fact becomes the way that the public forms an opinion about what is true and what is false. The opinions of the public are the basis for our policies, our laws, and the platforms upon which our representatives run on. Which is why this post-fact political cycle we are in right now is so s****y.
The reason why we have the problems we have today is that the truth is not being reported. That’s how campuses like this are allowed to underreport sexual assaults. They are not being held accountable because no one knows the truth. Why would the administration at a college campus want anyone to know the truth when it would just serve to hurt their reputation?
Ryan: Yeah, I still think it’s up to the person that got sexually assaulted to decide if they want to make it public. I totally agree that if they wanted to make it public the blockchain could provide a record that a claim was paid. I think that would work better if the person that was the victim of the sexual assault didn’t have to reveal their identity but only had to provide evidence. Like, they could keep their identity hidden, other than perhaps that they’re involved in that insurance pool, but maybe even that can be hidden.
Joshua: Again, the blockchain is pseudo-anonymous anyways. Simply publishing a transaction to a long Ethereum address is not publishing your name or other identity information. What you can see on the blockchain is how many policyholders are in a group. How long has this group been paying premiums, what type of premiums are being paid, how many claims are being opened and what is being paid out in claims. The blockchain is merely documenting people’s participation. I return back to my previous point, why would anyone participate in a system which pays out fraudulent claims?
Ryan: I was just kind of assuming that you were looking for a public record of exactly who was sexually assaulted or something.
Ryan: Oh, okay.
Joshua: What you’re looking for is addresses which represent participants. Pseudo-anonymous addresses send premiums and pseudo-anonymous addresses receive claim funds which are approved by the secretary and the verifier. The secretary and the verifier know who the victims are, but they’re not required by law the disclose who those victims are. But, think about it Ryan, who is the ultimate authority that tells the public at large who got raped and who didn’t get raped, how many rapes are there on campus? Think about it, who is that?
Ryan: I’d say it’s two things. I’d say it’s government if there was a court case and if there wasn’t a court case, it’s kind of the word of the person involved.
Joshua: No. No, it’s the school, Ryan. The school publishes this information. When you want to figure out how many crimes have been committed on a college campus or what reputation a campus has, you’re relying on publication data provided by the school. The campuses themselves, they are the authoritative source and how they report at the end of the day affects their bottom line. Which alumni or government agency is going to give money to a campus protecting sexual offenders? Not to mention how much money these sports teams generate in bottom line revenue. In order for these sports teams to be able to compete they must uphold certain standards and although I’m no expert I remember what happened with Jerry Sandusky and Penn State. That nearly compromised an entire season. These sports teams bring in millions and do you really think they’re going to let a sexual assault claim jeopardize that?
That’s why you always have this incentive by the campus to not report or to underreport sexual assaults, right? Authorities dictate history to their own benefit. TandaPay shifts the power to the people so that authorities cannot rewrite history as it suits them. The point is right now we don’t know the truth. We don’t know the truth because communities don’t have the authoritative means by which to verify their own set of facts, their own set of history.
Even if a community does speak out its just ends up being treated as an editorial opinion piece. An insurance claim is the first legitimate record validating that a crime has been committed. A victims story is corroborated by the insurance claim and as a point of fact they received some measure of monetary compensation in the light of their loss. Its official, its not an opinion because a claim payment was made. We need to try new approaches to speak truth to power.
Ryan: Are you saying that in campus rape cases, people generally turn not to the person that was assaulted or the government, but they turn to the school as the primary source of information about who got assaulted? Because I don’t think the school administration staff decides who got-
Joshua: No, think about it this way. The first person a student turns to for help after a rape is not the police but the support staff on campus. The campus counselors provide initial guidance to students in a crisis. What if these counselors are told that it’s the schools policy to emphasize the seriousness and potential consequences of filing a formal allegation of rape. Opening up a formal investigation brings the victim under the same scrutiny as the offender. Ryan, how many rapes do you think go unreported?
Ryan: I think it’s a very large percentage, probably 80%.
Joshua: We don’t want these colleges who care about their reputation, to rewrite history to their own benefit-
Ryan: By encouraging the students to not report it.
Ryan: So you’re saying the school’s encouraging the students to not report?
Joshua: Of course they do, because-
Ryan: Oh, okay. It just seems like it’d be hard to get their staff to follow that because the staff would be-
Joshua: No doubt people are told by staff every day, “I understand your hurting and I sympathize with you in this difficult time. I don’t want to hinder you from coming forward but I just want you to realize that bringing forth an official allegation of assault is a very serious matter … blah blah blah.” It’s almost as if they were saying to someone “are you sure you didn’t deserve to be treated this way? Because, you know someone might question the actions you took to bring this upon yourself.”
Victims are made to think of the consequences if authorities are unable to verify their version of events. The point is that the school is going to try and make it clear that there are consequences to reporting. Filing a claim within your own TandaPay community composed of your friends would be a completely different experience. A community secretary is going to try and listen to that person and just try to figure out what actually happened. They know the victim and they are just trying to see if the victim has a valid claim based on the community’s standards for providing coverage. You are not going to “the authorities” there is not going to be an “investigation” there is not this grave burden of proof weighing heavily upon the victims. The victims are under tremendous stress to just forget about it and go on with their lives.
Ryan: Yeah. I guess it’s always safe to assume a university would be acting exactly with how their incentives are aligned, even if a counselor wants to help the victims they also want to keep their job. I see what you are saying now about the record keeping part. It makes a little more sense, because I was thinking someone may not want to sign up for, “Hey, you get $100 if you get sexually assaulted”, that may not seem as interesting to someone. But, if its like, “Hey, if you ever get sexually assaulted, counseling will be paid for, you’ll be able to handle a few days off work”, if you think about using the money that way. Either way, it still feels to me that money is not the appropriate consolation for sexual assault.
Joshua: Unfortunately we live in a “post citizens united” world and in this f-d up world money is speech. Nothing the community could possibly say using blockchain has any “value” literally if money isn’t backing it up. Sure the claims don’t pay for much but it’s just supplemental insurance and by supplement we mean maybe a rather trivial supplement.
Imagine this though, what if in 10 years TandaPay is a common thing that everyone uses and now 200 coeds, whose identities are confidential, have decided to pay 300 dollars a month in-
Ryan: 300 dollars a month! That sounds expensive for a college student (crosstalk).
Joshua: Wait you didn’t let me finish. You know the Tanda pay architecture is just going to pay the ENTIRE premium back at the end of the month as a rebate if no claim gets opened. They just recycle the same premium month after month. Think about it like a legal defense fund. If there is no assault then no worries. Maybe they only use it strategically when they know they could win hundreds of thousands of dollars in a lawsuit. Maybe the fund could even operate at a net positive if the girls were strategic enough.
Point is, if one of them gets assaulted they suddenly have a legal defense fund of whats 200 x 300… 60K, wow. So long as none of them open up a claim they can continue to receive their premium back as a rebate and recycle it for the next policy period. But it amounts to a 60K legal defense fund that they have at their disposal if any of them are attacked.
But the money is definitely there anyone can see 60K in ETH just sitting there on the blockchain. Maybe put a nice little note next to it saying “we are 200 female coeds on the UT campus and this is the size of our sexual assault legal defense fund. Don’t F — — with us!” Since no one knows who the 200 coeds are, it stands to reason that any guy on campus should treat all the female students as if they had this level of coverage. Maybe people would stop and think twice, you know what I mean. Chilling effect entire campus. You rape, you get sued hard.
Ryan: Yeah, you could market as a way for people to create their own legal defense fund to create a deterrence which preempts sexual assault thereby driving down future claims. That might work actually.
Other relevant topics for TandaPay include:
- Supplemental Workers’ comp (see link)
Prior to workers being able to unionize they can provide modest supplemental benefits to each other. Additionally, TandaPay can provide bargaining power to workers who wish to make their workplace safer. Right now workers don’t have any incentive to document injuries that are not officially reported to their employer. There are actually many reasons non-union workers have that disincentivize them from reporting workplace injuries. Because of this we don’t know how many injuries go unreported.
Supplemental workers comp insurance may only provide trivial sums to workers when they are injured, but it would drive self-reporting of incidents into a database that was permanent. This goes beyond the financial aspects of insurance. The supplement isn’t to provide adequate treatment for injuries or recovery of lost salaries. The primary purpose would be to show that a community of workers approved each other for claims. Additionally, the record can document the worker’s perspective as to the cause of those claims providing them the opportunity to speak out about unsafe work conditions.
We need just enough incentives in the system to keep premiums reasonably low but allow benefits to be sufficient to generate reporting. Companies like Tesla need to be held to higher standards of accountability when it comes to reporting injuries. No one is better qualified than the workers themselves to make these judgements.
- Unexpected Emergency Insurance (see link)
This idea was originally inspired by an episode on a NPR podcast entitled Do You Have $400? presented by the Indicator from Planet Money. The following two facts made me realize how much people need a product like this:
More than half of Americans have less than $1,000 in savings
40% of Americans can't cover a $400 emergency expense
This works if all the policyholders know one another and can verify if someone had an unexpected financial emergency. The easiest emergency to verify is the presence of a $500 deductible. This idea is closest to how a real tanda works. Fraud deterrence for “emergencies” would be hard work for central insurers because it would force them to make judgement calls without knowing the claimant personally. But trying to cover the $500 deductible is an easier version of this problem. With TandaPay fraud mitigation is built into the interpersonal relationships between the secretary and the policyholders. The architecture provides robust security protecting policyholders from all forms of insurance fraud so as to eliminate the cost of fraud entirely from the system.