Mike Miglio, the CEO of Bridge Mutual, gives us an insight into the decentralized insurance ecosystem in an exclusive interview with TechBullion
Please tell us your name and a little about yourself.
I’m Mike Miglio, an accomplished cryptocurrency attorney and the acting CEO of Bridge Mutual. I began investing in the space back in 2016 and started a boutique crypto-securities law firm in 2017. I’ve been an essential part of more than four dozen projects as legal counsel, including QTUM, Certik, Akropolis, Gate.io, NOIA and others.
What is Bridge Mutual and what unique services does the platform provide?
Bridge Mutual is a decentralized, discretionary insurance platform that provides coverage for stablecoins, centralized exchanges and smart contracts (with more products to come).
What are the specific risks stablecoins are facing in today’s crypto market?
Stablecoins are not necessarily as stable as they appear to be for multiple reasons. Many stablecoins claim to be backed by hard assets at a ratio of 1:1, meaning that for every stablecoin in circulation, the issuer of the stablecoin has $1 of fiat currency, commodities, securities or property in reserves as collateral.
The problem is that many of these stablecoins can’t, or won’t, be audited by independent, third-party auditing firms. For example, Tether (USDT) hasn’t had an independent third party audit since March, 2017 but has minted over $18 billion worth of value. A stablecoin liquidity crisis becomes possible when the issuing entity doesn’t have enough collateral to cover the amount in circulation, which could crash the price of a stablecoin economy swiftly and, potentially, forever.
We’ve seen examples of stablecoin crashes before. NuBits was a popular stablecoin that stayed successfully pegged to $1 from 2014 to 2016. In 2016, the price dropped dramatically over the span of a few days down to 20 cents, but was able to recover over a period of 3 months. After its recovery, it stayed almost perfectly stable for another year and a half, until it suddenly crashed in March of 2018 and has never recovered. Today, NuBits is now worth $0.13 and has even reached prices as low as $0.02–but the coin is meant to be $1.00.
Likewise, stablecoin reserves held on-chain can be hacked and crash the value of a Stablecoin instantly. This happened literally today, November 17, 2020, to the Origin Dollar ($OUSD), which is now worth $0.15.
Large institutions understand the risk of storing value on-chain in stablecoins, especially when these coins are run by centralized entities with little transparency. In order to increase adoption, insurance of these funds is a necessary and inevitable next step.
What is the technology behind Bridge Mutual and how does a decentralized insurance service for Stablecoins actually work?
Bridge Mutual runs on Polkadot, as opposed to many of its competitors which run on Ethereum. Our insurance solution to stablecoins is impactful because it’s truly decentralized and doesn’t depend on people to handle the claims. Bridge Mutual tracks the price of all the stablecoins on its market across multiple exchanges. If the average price of a stablecoin drops beneath a predefined price point for a set period of time, any claimant that was covered before the price drop can submit a claim using our app and instantly receive the full value of the policy they purchased. There is no voting or chance for human manipulation that might result in a valid claimant being denied.
DeFi has become more popular in the blockchain market, where does Bridge Mutual come in and what is the level of market demand for decentralized insurance?
The DeFi space has attracted a lot of value. Most of this value is locked in smart contracts. There are multiple common attack vectors that hackers use to wrongfully extract this value, oftentimes causing irreparable damage to the personal finances of DeFi users and the credibility of the decentralized exchange, platform, or project that was successfully attacked.
To prevent attacks from happening, serious projects should (and usually do) have their code audited for vulnerabilities, however: 1) Not all teams have their code audited, or they only have a portion of their code audited; 2) sometimes projects alter their code after it was audited; and 3) sometimes auditing teams miss vulnerabilities in the code. At present, we are seeing at least 2 major attacks per week that result in millions of dollars of value being stolen, and some of these attacks are inside-jobs. Bridge Mutual is a solution to this problem.
Beyond smart contracts, Bridge Mutual also covers events where value can be lost in the stablecoin market. The main purpose of a stablecoin is to maintain a set price relative to another asset (usually $1 USD). Some stablecoins are under the direct influence of a centralized party, while others are managed via Decentralized Autonomous Organizations. Both are susceptible to price crashes caused by rapid changes in liquidity, hacks, and attacks. Bridge Mutual insures stablecoins from price drops for any reason, allowing the average consumer and institutions to have peace of mind when storing their value in these assets.
Finally, Bridge Mutual insures centralized exchanges*, such as Binance, Huobi, Kraken, and hundreds more. Centralized exchanges are susceptible to hacks, attacks, internal theft, loss of private keys, and other events that equate to a loss for end users. Most exchanges also do not have traditional insurance policies covering their reserves (and even if they do, insurance companies actively work to avoid paying out on claims).
*It’s worth noting that Bridge also insures decentralized exchanges, but these fall under the category of “Smart Contracts”.
Tell us more about the yields and profits earning and sharing, how does this work?
When users lock up value (in the form of BMI) in our coverage pools, those funds stay there until 1) a valid claim against an asset is made and claimants are paid out; or 2) they withdraw the funds themselves. Coverage providers are always at risk of losing their locked value when a successful claim is made. In exchange for this risk, coverage providers receive three things: 1) yields, which are derived from the reinvestment of funds in the coverage pools on decentralized lending platforms; 2) profit sharing, which is earned whenever someone purchases coverage for an asset that is being covered by the user; 3) voting rewards, which are given to those that vote on claims made by claimants.
Are there any available opportunities for investors and partners at Bridge Mutual?
Bridge is currently undergoing its private sale, so there is technically an opportunity to invest. However, Bridge is making sure that all of its private sale investors add significant value in the form of influence, community growth, and meaningful partnerships.
Investment is not being taken just for the sake of investment; we are making sure that all money coming in adds more value to the project than what is going out. The market cap at launch will be very small, meaning there is plenty of room for the public to get in on the token when it launches without the fear of getting dumped on.
We’ve been very selective and have declined multiple investment offers from groups that have a reputation for dumping. We are also not giving any investor such high investment allocations that they can single-handedly sink our economy. If we wanted to, we could easily raise 5x more than our current target, as we are vastly over-subscribed with investor interest, but we are here to change the world, not to pocket profit and abandon the project. I encourage all influential and sincere crypto enthusiasts reading this to join our community, there is a place for you here.
Could you tell us about your team?
Our team is a group of highly accomplished and noteworthy individuals with impressive backgrounds in coding, insurance, law, finance, and exchanges. For detailed information on each member and their bio, please visit our website at www.bridgemutual.io
How safe is Bridge Mutual in terms of legal and security measures?
We plan to constantly sponsor audits for other projects, make these audits public, and provide a security score for all of the popular and upcoming projects out there. Because our business model necessitates that we partner up with a myriad of auditing firms, we will also have these auditors audit our own code and work closely with our dev team to ensure we’re one of the (if not the single) safest stores of value.
In terms of legal security, two of our founding members are established attorneys in the cryptocurrency space. Compliance is our top priority.
Do you have more information for our readers?
There’s a wealth of knowledge available online via our materials, FAQ, and articles. If you are interested in what we’re doing and want to be there when we launch, please visit our website: www.bridgemutual.io
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