Introducing Karsha and Assurance NFTs, at the Intersection of DeFi and NFTs
No society can prosper if it aims at making things easier — instead, it should aim at making people stronger —Emperor Ashoka
What if the future of insurance isn’t insurance at all, but instead, a method to receive future payment for your NFT when a certain event occurs (imagine Alchemix for NFTs)? DeFi brings several innovative mechanics that can be leveraged to bring insurance-like benefits without being an insurance product. Pana DAO has taken those innovative DeFi mechanics and combined them with NFTs to do exactly that. And at a future date, we will abstract the resulting crypto asset product and launch it into traditional insurance channels in order to serve those who don’t have access to insurance or asset ownership today. But we expect the future will always start with crypto, which is where we begin.
How Will Pana DAO Launch?
In the beginning, Pana and Karsha will look similar to other token launches. Karsha, our governance token, can be bonded using bonding mechanics first innovated by Olympus. Pana will be minted when Karsha is bonded, with Pana used as the underlying instrument that determines Karsha value and rewards. This is a classic two-token DeFi model.
However, Pana DAO has set a very clear objective and vision for its master treasury. Pana DAO will use its treasury to support the creation of parametric smart contracts for use on-chain and eventually launch their use off-chain. Borrowing from the traditional Lloyd’s of London model, token value that accrues to the master treasury will be used to sustainably maintain protocol liquidity and Karsha holder rewards. This way syndicate participants who provide capital to Assurance NFTs can do so knowing that they have adequate entry/exit liquidity and with a potential for returns similar to real-world syndicates (once the market matures). This is also true for covered participants who may need to exit and use their capital in the event of a parametric event. Both parties benefit equally from protocol liquidity stability. The mechanic for maintaining liquidity stability is what we call, Loss-Ratio Pegging (LRP) and you can read more about it in our Gitbook. We will also write about it in upcoming Medium articles.
Importantly, like Lloyd’s of London, Pana DAO is not an insurance company, it is a market of members. Pana DAO leaves it to its community members to underwrite Assurance NFTs by funding the master treasury through bonding and each Assurance NFT treasury separately (operating as independent markets). Pana DAO subsequently operates as an NFT market creator and regulator, launching NFT collections under which community members participate in syndicates who can sell back their NFT(s) to Pana DAO when a parametric event occurs. The protocol organization is important because there is a lot that can be leveraged from history and legacy capital structures.
What Happens After Launch?
Once the Pana DAO master treasury has been funded and designs completed for Assurance NFTs, the first Assurance NFTs will be launched for on-chain purchase. These are triple-point assets, the first of their kind that offer:
- The flexibility of sovereign ownership and liquidity of NFT assets
- The power of asset ownership by turning recurring principal into owned, yielding crypto assets
- The option of parametric insurance valuations for NFT assets when parametric contracts associated with an NFT are triggered
Unlike traditional insurance, parametric models do not require a claims assessor to quantify damages and approve claims. Instead, the process is objective and automated — Assurance NFT owners are given the option to have their NFT repurchased by Pana DAO at an algorithmic price when a clearly definable event occurs. Assurance NFT parametric smart contracts operate in a fully decentralized manner, where all transaction details are visible to all parties while they remain closed to any manipulation or tampering.
Who Can Buy Assurance NFTs?
Assurance NFTs can be purchased by anyone in the world regardless of where they are located — this is because (in pure insurance terms) there are no covered persons when trading assets — however we use insurance language when describing the Pana protocol because the resulting outcomes are similar. As we’ve said before, there are no permissioned walls in the Pana economy. This is why we use the Mauryan Empire meme and its empowered merchant model as our guiding theme — there is value in that historic, decentralized economic model being merged with the Lloyd’s of London operating model.
For Assurance NFTs, it means someone can purchase an NFT that has a parametric smart contract covering flooding in Abuja, Nigeria even though they live in Mexico City. But to stay true to our mission to serve the underserved, Assurance NFTs leverage a unique syndicate model that encourages market members to participate as a syndicate member that supplies capital into a separate NFT treasury that backs each Assurance NFT collection delineated by one or more parametric contracts and other parameters. We will dive into these important mechanics in separate articles because it represents a cartesian explosion of opportunities for NFT owners.
The Pana DAO Mission is Inclusive
Pana DAO remains resolute in its commitment to serve the underserved. This includes those in crypto who do not have access to insurance for parametric events that impact them. We are building a community that believes everyone should be able to participate in all sides of the insurance equation regardless of where they live or how much capital they have accrued. Being a member is inclusive and does not discriminate. That’s the beauty of crypto and democratized insurance.
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A Humble Mission to Serve the Underserved. A Bold Goal to Provide Insurance to Everyone.