Collusion-Proof Oracles for Decentralized Insurance Solutions

Spring 2023 Actuarial Science and Financial Mathematics Seminar

Date and Time: Friday, March 10, 2023, 2:00 PM (CST)

Speaker: Niklas Häusle (University of St. Gallen)

Abstract: Decentralized insurance solutions rely on so called oracles to retrieve data from the outside world (off-chain). We develop a normative blueprint for incentive-compatible and collusion-proof oracles. Incentive compatibility can be achieved through staked tokens, a digital form of collateral that carries voting rights. Higher stakes stimulate additional effort, but increase the risk of collusion. To be inherently collusion proof, decentralized insurance solutions either require a high revenue or a sufficient degree of decentralization in combination with a large network size. If neither one of these conditions is fulfilled, collusion can be precluded by confiscating the stake of malicious actors based on stochastic voting and having voting power concentrated among a few key token holders.

About: Niklas Häusle is a PhD candidate at the Institute of Insurance Economics at the University of St. Gallen, where he works at the intersection of insurance and technology. He has a particular interest in decentralized insurance and tokenomics as well as other topics in the field of digital insurance. Niklas has been recognized for his contributions to the field, including winning the HSG Impact Award for his work on improving blockchain-based crop insurance for small holder farmers in developing nations.