Must Crypto Open the Books? 📖 Insights from Crypto Insurance Experts | Dina Shenouda & Ben Davis 🌐🔒
Nov 11, 2023
Brad Mines
In this pivotal episode of Halving Report 🎙️, we venture deep into the often underestimated yet vital realm of cryptocurrency insurance 💰. As the crypto space burgeons, understanding and navigating its risks becomes paramount, especially for emerging startups poised to revolutionize the industry. We shine a spotlight on this critical aspect, often overlooked but essential for the sustainability and success of new ventures in the digital asset world.
Joining us are two luminaries in this field: Ben Davis, a trailblazer in crypto-insurance, and Dina Shenouda, who offers a rich, nuanced perspective from her extensive experience in the insurance sector. Together, we dissect the complexities, unpack the latest trends, and reveal crucial insights into risk management strategies in cryptocurrency. This episode is not just a conversation but a crucial guide for startups and innovators seeking to fortify their ventures in the dynamic and unpredictable world of crypto. Tune in for an enlightening journey through the essentials of crypto insurance and risk management. 🌐🔒🚀
Timestamps & Topics:
[0:03] Episode Kickoff: Exciting Developments in Bitcoin & Crypto. 🤔💡
[0:06] Ben Davis on the Future of Bitcoin: Beyond Payments, Exploring New Possibilities. 🗣️🔐
[1:18] Dina Shenouda: Technological Evolution in Crypto and Economic Impact. 🌟👩💼
[2:28] Risk Management Deep Dive: On-Chain vs. Off-Chain Risks with Ben Davis. ⛓️🌍
[4:57] Unpacking Crypto Insurance Myths: Overlooked Risks in Companies. 🤯🏢
[6:31] The Human Factor: Dina on the People Powering Crypto Startups. 👥💼
[9:13] Essential Insurance Tips for Crypto Businesses from Ben Davis. 📝💡
In this pivotal episode of Halving Report 🎙️, we venture deep into the often underestimated yet vital realm of cryptocurrency insurance 💰. As the crypto space burgeons, understanding and navigating its risks becomes paramount, especially for emerging startups poised to revolutionize the industry. We shine a spotlight on this critical aspect, often overlooked but essential for the sustainability and success of new ventures in the digital asset world.
Joining us are two luminaries in this field: Ben Davis, a trailblazer in crypto-insurance, and Dina Shenouda, who offers a rich, nuanced perspective from her extensive experience in the insurance sector. Together, we dissect the complexities, unpack the latest trends, and reveal crucial insights into risk management strategies in cryptocurrency. This episode is not just a conversation but a crucial guide for startups and innovators seeking to fortify their ventures in the dynamic and unpredictable world of crypto. Tune in for an enlightening journey through the essentials of crypto insurance and risk management. 🌐🔒🚀
Timestamps & Topics:
[0:03] Episode Kickoff: Exciting Developments in Bitcoin & Crypto. 🤔💡
[0:06] Ben Davis on the Future of Bitcoin: Beyond Payments, Exploring New Possibilities. 🗣️🔐
[1:18] Dina Shenouda: Technological Evolution in Crypto and Economic Impact. 🌟👩💼
[2:28] Risk Management Deep Dive: On-Chain vs. Off-Chain Risks with Ben Davis. ⛓️🌍
[4:57] Unpacking Crypto Insurance Myths: Overlooked Risks in Companies. 🤯🏢
[6:31] The Human Factor: Dina on the People Powering Crypto Startups. 👥💼
[9:13] Essential Insurance Tips for Crypto Businesses from Ben Davis. 📝💡
What's the most exciting thing happening in Bitcoin or crypto?
Speaker 2:
I just got back from a conference where I was speaking on crypto insurance on a panel, and the big thing at that conference was actually ordinals and inscriptions. Using the Bitcoin network for something other than the peer-to-peer payment network that is something that I'm super excited about. You know I'm a big believer in Bitcoin. I do think there'll be more than just Bitcoin, but I love the idea of using the network for something else and bringing quote-unquote smart contracts and doing a bit VM type style of infrastructure on top of it. I love that.
Speaker 2:
I love that narrative, I'm super excited about it, and so I think, personally, that's what I'm kind of looking forward to is seeing what people build on it and how that changes it and kind of changes the community and goes forward from there. So that's the thing I'm quite excited for For Bitcoin. I think in general, I'm really interested to see how we do the theorem scaling question that was a big thing in permissionless, different ways of doing that correctly. I mean, I tried to sit in, listen to a talk on Ethereum scaling and the difference between, like proto, dank sharding and things like that and I was like gosh, I thought I was into this space. I have absolutely no idea what's going on. It was so intense, but it's just great to see the passion and the relentlessness again of the industry just moving forward with it, so I think that's super exciting as well.
Speaker 1:
Like I was saying to Dina earlier, one thing I like about this space is there's always more to learn. There's so many different projects. Bitcoin itself is complex enough. In addition to you, Dina, you're not a crypto expert, as you said, but I'd like to hear one thing you might find interesting about this space.
Speaker 3:
It's the technology. It's mind boggling how far we've come. You're always trying to understand the direction the economy is going. What people are aspiring to do, it's a movement. With me putting my insurance cap on and, very much like Ben, I come from the arts background. I'm not an insurance graduate from in any sense. You're always trying to see the innovation, trying to find out where is this going, what is it about? What's next? We met at AI Futurist. We were talking about what are people thinking? Where is this going? It's one of those things where you're thinking what's the next step? What are people doing with the technology? And a lot of people at the time said to me well, the technology is going to evolve. Is it in crypto? Is it evolved beyond crypto? It's one of those things where it's just nice to follow and see where it's going. It's one of those things that fascinates me.
Speaker 1:
Now there was a mention between you and I about on-chain and off-chain risks. I was wondering, ben, if you don't mind, if you could elaborate whether both types have insurable risks or you could distinguish between the two.
Speaker 2:
Absolutely. I think that's a great question. So when I have to explain insurance to crypto people, I actually started talking about off-chain and on-chain risk. So, on-chain risk is, quite simply, everything that can go wrong with your business on-chain. So that's private keys hacks, that smart contract failure, that smart contract being used unintentionally for purposes that authors didn't intend slashing, correlated slashing, all that type of stuff. So anything that can go wrong in an on-chain environment is what we consider on-chain. Off-chain is everything that happens in the real world.
Speaker 2:
I think one of the things that we're trying to raise awareness for actually is when we're talking with our clients, a lot of them just assume that when we say crypto insurance, you're just talking about the on-chain environment. You're talking about custody, You're talking about fidelity, so the honesty of employees and collusion and stealing of those private keys. But actually 100% of the claims that we've had in our team are entirely from off-chain risk. So the real world stuff is the thing that is going to catch our clients out, and so what we're trying to do is raise awareness that good risk management, good processes in place the biggest risk to your business is probably not losing a private key. It's probably the founders falling out right, or it's you not delivering on a service and you've got a breach of contract suit or a claim or something like that that comes around. It's losing a key employee that goes to a competitor. It's all the headaches that a traditional business have are the things that we see that our clients are claiming.
Speaker 2:
It's really important to understand that the off-chain environment, the day-to-day business stuff, the core and core boring business stuff, is the stuff that will catch you out. I think what we're really passionate about is helping our clients manage that. Obviously, we help them manage the on-chain stuff as well. So we've got cover for slashing, We've got protection for theft of private keys, we can ensure smart contract hacks. And then the off-chain stuff we're looking at. Directors and officers risk cyber. So encryption technology, the coding that you've done just doesn't really work. Or you've reached a contract condition and a great mention that Dina had is when you're looking to sell your business reps and warranties that you're making when you're trying to sell that business, or do you have a patent? Do you want to ensure that patent to make sure that if anybody tries to steal it, you've got some defense there? And so it's all this type of stuff that traditional businesses have that we're trying to bring to the on-chain environment.
Speaker 1:
Definitely said it right when you said most people just think of losing your private keys. That's exactly what I think when I think of crypto insurance, and I never really think about the other risk management factors. You're saying within company workings, operations or whatever it may be is more of a risk. Is that common then? Like you said, 100% of your claims were off-chain. Like, is that common throughout the industry?
Speaker 2:
It's a great question. I mean, obviously there's things, the problems that go on on chain. I'm not trying to minimize that. Like we've seen the headlines, we've seen all the big problems that happen, like that is still a risk, but definitely, talking with colleagues and people in other countries and stuff, and we've had a client that got sued for five million because they failed to check a trademark before they went into another country. Simple, five million, right, like just that kind of stuff that you don't even think about is the stuff that can catch you up. And it's so funny, brad, because like when I was just getting into the space, I'd basically research all the ICOs that were happening. So I'd read white paper after white paper after white paper.
Speaker 2:
And I was working with a guy in a group that I was in to kind of like assign risk ratings to these new companies, and I remember saying to this guy okay, yeah, like the tech looks good, but I'm really worried about like the experience of the founding team. They don't really look like they're that experienced. I don't think they've got this process in place and it's going to talk about the business. His reaction was like whoa?
Speaker 2:
you're actually looking at the business, I was like, yeah, this is what this thing is. It's not just like a smart contract, like people actually have to run this thing Right and so like this whole idea of a business connected to a smart contract and actually that being more of a risk was like mind blowing back then. So it's just finding like kind of raising awareness to go to now.
Speaker 3:
It's actually very typical, though. I mean, when we work with any emerging industries, it's the person behind the company, it's the people who are putting this business together, because we're looking at it and insurers are looking at it as a business. They want credibility, they want to know that it's going to run like a business. You could be the smartest person ever, but if you're not going to run it as a profitable business, there is no business to insure.
Speaker 1:
Are there like common mistakes or pitfalls that companies should avoid when seeking insurance with digital assets?
Speaker 2:
Oh, how much time do you have, Brad?
Speaker 1:
That's a good one Okay.
Speaker 2:
So, first of all, they try to get around using the word crypto because they're worried that it costs more. They don't realize that the underwriters, on the other end, do research. They'll look at the website, they'll look at, like, all these different things, yeah, and so they'll catch it out pretty quickly and they'll be like, why are these guys trying to lie and say they don't, aren't in this space? So it actually just ends up prolonging the process and starts it off on the wrong foot. So being honest and being like really upfront about what you do and how you do it is important. Number two emphasize risk management, and this is what brokers do. So this is what Dina and I can do. If you have a founder that's quite good at objectively looking at the risk, highlighting the stuff that you already have in place in the application or when you're talking with Dina or my arm myself, that's a great thing, because what that allows us to do is say, yeah, they know that this is a risk. Right, they know they haven't done this certain cyber certification, but they're going to do that in a month. That is a much better conversation than they just haven't thought. That, I would say, is number two.
Speaker 2:
Number three, and this is a very, very big one that will save everyone a lot of money. When you put your financials down in an application form, the underwriter will use those financials when you have to project, go conservative. When, I know, when you're raising money, you've got to put like some big financials to get it done. But if you put that number down on the application form and that could be right, and if that's absolutely correct and that's what you're going with, please do. But just know that if you're going to do 30 million in year two, you're going to be charged a 30 million rate, right, and that's going to be incredibly, incredibly more expensive than actually trying to be realistic with the numbers. And so we try to coach our clients and say, guys, are you really sure you're going to do 30 million next year Because you've done one million this year? How are you going to 30x that growth? And if you don't think you're going to do that, then put a number you think you're going to do.
Speaker 2:
So that helps with the rate that helps the underwriters know that it's sustainable growth. And actually, to be honest underwriters, looking at the risk, they much rather sustained linear progression rather than going from like one million to 40 million, because when you grow that quickly you're going to miss things, you're going to skip steps, you're going to fall into holes, you're going to try to do too many things at once and that just increases the risk factor. And so those are like my three basic tips for helping companies lie in this space.
Speaker 3:
And to Ben's point, being realistic is really important in this case. But it doesn't mean that you're married to that information. So a few months you're finding that you're exceeding your projections. You pick up the phone, you talk to us and it's all about transparency, having that open line with the insurers because they're on risk for what you do. So if that means that midterm they're going to apply an additional premium, so be it. You know that's fine. You're growing and you should always consider that your premium will grow with you because your exposure is growing. But initially, to get started and to get your business going in the right direction, be conservative and then Continue to be transparent.
Speaker 1:
I'll definitely be blasting this out to all my new web three friends from the Toronto Futurist Conference so they can get started on the right foot in this industry. I'm gonna jump into a couple fun blitz questions if you don't mind. Then, do you have a favorite cryptocurrency?
Speaker 2:
It's gonna be Bitcoin. I think I'm still an old man at heart and I still love the OG.
Speaker 1:
Are you a Bitcoin maxi?
Speaker 2:
I wouldn't say my maxi, I just really like going through the highs and lows and everything and seeing everything. I just kind of like how it is like. I just kind of like this is what it does. Very good at doing that. Yeah, it's the first one I fell in love with and I still think it's. It's my favorite. I know it's a bit of a boring answer, but I would say that it's still. It's still up there.
Speaker 1:
It's hard to like advise people to go into any other crypto besides Bitcoin. I feel like it's like I'd be, like I would say I'm not a financial advisor, regardless, but I'd be weary to say, like go buy, like I don't know, any other coin like besides maybe Bitcoin or maybe Ethereum. Do you have a favorite?
Speaker 2:
Bitcoin meme. It's gonna be one of the Pepe's, I think. Actually, you know what thinking about it. What were those twins that were back in like 2017? That was like the pamphlet, me, and it was like anytime the market moved, it was like these two French twins.
Speaker 1:
The next time you come across, you get to send me that I'll have to. Yeah, yeah, absolutely any favorite resources in this space or our books or podcasts that maybe you've read recently.
Speaker 2:
I'm a big, big fan of blockworks run down. Byron gilliam does an incredible job of Distilling all the stuff that happens in that day into a then email. I get just a ton of emails every day and letters and news. That's the one I read every day. I absolutely love it. It's short, incredible writing, very timely. I highly recommend it to everybody very cool.
Speaker 1:
Yeah, I've read it a couple times. I can't say it's like my go-to. I'm kind of all over the place, but do you have any any having predictions, or where do you see the market going in the next 12 to 18 months?
Speaker 2:
Well, it's got to be to the moon there, brad. That's the only result. No, I am I. No, I mean absolutely. I mean 2024 is gonna be a big year. I think there's there's a lot of indicators that we're looking at. That means that we're gonna be doing that. From our team's perspective, you know we're incredibly excited about what this next year is gonna bring. It's only good. From that, having perspective, I think this is only gonna increase market perception and everything that kind of goes along with that. So, yeah, I know we're really excited. We do a lot of Bitcoin mining companies in North America. We love seeing their orders and how they're like preparing for it and everything like that, and so there's definitely a lot of interest happening. So we're excited to see it very cool.
Speaker 1:
Are you allowed to name companies that you're working with? Oh, good question. We're working with the risk management on that.
Speaker 2:
Yeah, I know I, I would love to say it.
Speaker 2:
No, I mean we're working with some of the biggest companies, biggest names out there in the crypto industry today, so the biggest exchanges worldwide, is just great to kind of see what they've got plans, what they're they're building behind the scenes. On the other side, we also work with a number of web 2 companies also coming into crypto and when web 3, and seeing those capabilities and what they're excited for. I mean it's absolutely incredible and it doesn't seem like the bear market has any effect on any of that right. Like everybody's building behind the scenes, we only see a little snippet of it in the news. So that's what I'm really excited for when some of these projects are becoming public only so you see, like a kind of an influx with the bull market, absolutely on your end.
Speaker 2:
Yeah, I mean bull bear, doesn't? There's gonna be an influx, for sure.
Speaker 1:
Is there anything worth mentioning about your maybe background or interest in crypto, or about the company that we missed today? They may want to include in this episode?
Speaker 2:
I think the only thing that I would add is that I've recently been thinking more about longevity in this space and thinking three to five years in the future and not getting so caught up in bull bear market cycles, right Like you got to keep an even keel through it all, and that's the thing that's really gonna pay off in the future and that's the thing that I'm really excited for is not thinking about what price is gonna be like tomorrow or two months from now. It's thinking about what this space looks like in three to five years and just incredible amount of things that we're gonna be able to accomplish, and that's what kind of gets me excited up in the morning. That's, that's it for me. But yeah, I'm super, super pumped when in doubt, zoom out.
Speaker 1:
Man, I like that mentality. Guys like us coming in the space in 2017. You know we getting around that time where we've been here a little while now. I can't just be so hung up on that day-to-day price right here for the long haul. I said on Twitter or on sorry, on X the other day that I know I love the bear market because I get my best Opportunities to interview and talk to people in the bear market, whereas once the whole world's paying attention for that short bull run, all these figures are on Fox business, all these big sites. So I love what you're doing. Like I said earlier, there's a great need for people like you in the space. Dina, I hope you're stacking sats and hodlin in the background there. I appreciate you setting this interview up with Ben and your input on insurance, so maybe just let us know where we can follow and learn more wonderful.
Speaker 3:
Thank you so much for the opportunity, brad.
Speaker 2:
It's really a pleasure and it's always great to connect and keep the conversation going then Davis on LinkedIn and happy to chat with anybody about insurance and crypto, and thank you so much for Dina for ranging this. Thank you so much, and for chatting with you, brad, thank you.