Union Finance AMA with Wolf Crypto
We held an AMA with Union Finance in our public Telegram channel on November 17th.
Union Finance is a DeFi protection building block in the DeFi Lego stack.
Union is a technology platform that combines bundled or “full stack” protection and a liquid secondary market with a multi-token model. DeFi participants can manage their multi-layer risks across smart contracts and protocols in one scalable system. Union decreases the barriers to entry for retail users and lays the foundation for institutional investors.
Union allows users to buy tailored protection for composable risks such as: Layer-1, smart contract, exposure, and transaction completion risk.
Union Finance is launching their token via a demand-driven pricing curve on November 22, 2020. You can find out more about that here —
You can also visit the Union Finance Telegram Group or the Union Finance Website for further details.
Here’s what Union Finance’s Project Lead Michael Beck and Chief Product Officer John Liu had to say in the AMA.*
*This AMA has been edited for clarity.
WC (Wolf Crypto Telegram Member)
INTRODUCTION
WC
Welcome to yet another edition of Wolf Crypto AMA…the first in a couple of weeks…the one upside of the US election, less AMA’s…
While it’s been a lovely break, it’s great to not only have the market back in action, but also to be back in the Wolf Den, this time with Michael Beck and John Liu of Union Finance!
TEAM & TEAM GOALS
WC
Guys, it’s our pleasure to have you here today.
Before we get too far into things though, how about a little background as to your history in the space…and any other relevant industry experience you might have?
MB
My background in finance and technology spans about 25 years in software development and architecture, working with both investment banks and hedge funds.
I’m a political economist/MBA by discipline who found my way into technology, so I like to think a lot about tech and money.
In working with UNION, I wanted to find ways to make DeFi more efficient and less risky.
JL
Hi all! Nice to meet you.
I am John, Chief Product Officer of UNION. I hail from Wall Street “traditional-fi” with 9 years trading alternative products and derivatives and 10 years building products crossing the gamut of operations, risk, and trading for the industry.
For the last 3 years I have been “full-on” in blockchain, leading product organizations and strategy at public protocols like Fusion, and advising various digital asset startups. Most recently, I led efforts at WeDeFi, a crypto mass adoption company that had tremendous 100–200% MoM growth.
Excited to continue bridging crypto assets with traditional best practices and adoption with UNION.
WC
John, I have to ask, as a Wall St guy, what’s your favourite movie…or perhaps instead of favourite, what you feel is more realistic or representative of the Wall St scene…the aptly named Wall St, American Psycho or The Big Short?
JL
Ha!
Bit of a layup here. Mostly not psycho murderer-extreme, but the mentality to outperform, outshine, and the egos have quite a basis in reality.
Most realistic would be the Big Short. I traded through that and while things weren’t clear black and white, people taking outsize risk when money can be made has been true throughout history, regardless of the market.
Margin Call is also pretty good.
WC
With your guys’ backgrounds out of the way, I’d love to hear a bit more on some of the team members who aren’t joining us today?
JL
Outside of us, we also have Jarrod Perry — he oversees corporate governance and compliance obligations. Jarrod has worked as a corporate attorney for 10 years and has been working with Michael Beck for over 5 years.
In addition, we also have a team of 8 developers with 2 PM, 1 UX person, 5 lawyers, and 5 marketing. A lot of work up to this point has been done on regulatory compliance — we’re investing early to build a project that can both serve the innovation of crypto and also meet the increasing regulatory oversight in the space. We believe our regulatory compliance creates as valuable a mote as the technology and the community.
WC
Now I have to ask, both yourselves and all the people you’ve mentioned are all very impressive, but at least from an outward appearance, it seems the team consists of three people and two advisors…
Where are the devs at…who’s actually going to build this thing?
JL
Our dev and product team, true to the crypto and digital world, is decentralized — some in US, some in Poland, and some in Asia.
As mentioned earlier, we have a 12-person product/tech team. Michael has extensive experience on dev, so he’s been instrumental not just leading the team, but also coding himself.
Certainly, we will grow the team as our products go live in early 2021.
THE UNION FINANCE ECOSYSTEM
WC
So with the team stuff out of the way, let’s get right into it guys, what’s your elevator pitch on what Union Finance is and how insurance products like yours can work to strengthen the overall DeFi ecosystem…and why they are even needed in the first place?
JL
UNION is the DeFi protection building block in the DeFi Lego stack.
Our decentralized technology platform combines bundled or “full stack” protection, a liquid secondary protection market, and a multi-token model to lower the risk of DeFi participants, without needing membership or KYC.
Decentralized protection for decentralized finance — that’s UNION.
Important note — we’re not an insurance product, but a technology platform that enables protection and efficiency in Defi.
As far as why protection is needed, with over $13BLN of TVL in Defi, and estimated $10MM being drained a month through hacks, with two flash loan exploits last week alone costing ~$8MM — the need for protection has never been more relevant or needed. Mass adoption, retail and institutional, will happen — but protection for those assets is a critical ingredient to continue the adoption journey.
MB
We’ve worked hard to ensure this is how the regulators see us, too.
WC
I mentioned traditional finance in one of my questions above…you guys like to call this TradFi…
As people who have come from the traditional finance space….sorry TradFi…what exactly do you envision migrating over from that space into the blockchain space, for both DeFi in general and insurance products?
JL
In short — everything minus the inefficiency. There is a lot in TradFi that we can leverage.
The approaches to modeling event risk with low number of data points, the financial models themselves, the risk management approaches, counterparty risk assessment — all these serve as valuable approaches to the protection platform we are building. There are great building blocks for us to adapt into the digital world, and it’d be inefficient to ignore what decades of valuing risk has taught both the finance and the traditional insurance industry.
On the actual instruments of value and the exchange of those instruments, there are structured products and other ways to efficiently harness value of a collateral, such as derivatives or lending, previously available only to institutional guys that DeFi is making accessible to all, such as how AMM have made being a liquidity provider available to all. That comes with risks of course, as we’ve seen.
MB
It’s not to say that anything matches cleanly — TradFi is 80% people and 20% tech… DeFi is 100% tech. Don’t want to say we migrate the people… but there is a role for markets and intelligent providers of services, especially in mitigating risks and improving efficiencies.
WC
I’ve seen the terminology of “DeFi Lego Stack” used throughout your various resources. Before we get too far into this, it’s probably a great idea to define what that actually means?
JL
The lego stack refers to the composability of DeFi — how builders can mix and match functional blocks built by others and incorporate into their own financial offerings.
Composability itself is not novel. For example, software in general has been moving towards “no code” type of services — specialists building ready-to-use components for others.
The novel part is the speed and availability at which one can spin up a new project with tangible financial impact. Fork this and that, and cook together something new. Yam, Sushiswap — I’m not talking about what actually ended up happening with the “politics” there — but look at how quickly these projects spun up.
In TradFi, many of these legos are considered proprietary builds, meaning each entity builds their own version of the same lego block.
WC
I usually leave these questions until later in the AMA, but in the context of what is a relatively complex product to understand, it’s probably a good idea to talk about some existing reference sources in the crypto space, namely NXM and Nsure.
What are your thoughts on both projects and what elements of each one you think work, and how Union Finance differs in regards to both a technical approach and feature set?
JL
Both are great projects and we look forward to innovating this large space together.
NXM has proven that DeFi protection works, not just from a demand perspective of protection buyers, but also people who want to sell protection. This is a tremendous accomplishment, and has paved the way for the protection space to continue and grow. Main differences between us are: 1) we don’t require KYC/membership. NXM requires membership, or going through an external wapper for no KYC offering 2) our platform’s ability to write protection is not tied to the value of our governance token.
Nsure is of course, the “new kid on the block”, so, outside of the whitepaper it’s hard for me to make a comparison. Like us, they do not require KYC for participation. However, our goto market products are different with our “bundled protection” concept — it’s more than just smart contract protection, there are other legos to protection. We cover gas protection, collateralization ratios and smart contracts as our initial batch.
Ultimately, we also are building out a liquid secondary platform for all protection contracts to be exchanged. This platform enables redistribution of risk, which will enhance the services of all protection providers in DeFi. Think of what reinsurance has done for insurance.
MB
I think that projects exist to address the constraints they sought to address. Both represent solid efforts and teams.
While we may offer a full-stack, we provide tools that may be considered supplementary in some places to their approaches. I’ve worked with a number of people who believe you shouldn’t need to get fully indoctrinated to use something.
We are composable — so you can take some of us… and leave other parts for later.
WC
That’s a great overview, but before we get fully Union specific, past the more generic difference in features, could you explain to me, in a smooth brain manner, why an end user would choose using Union over something like NXM on Nsure…and what they’d gain as a result of doing so?
JL
Long-term: total protection and flexible re-selling. Got a little too much protection? You can sell it.
Short-term: capacity. The demand for protection far oustrips the capacity right now. Only ~2% of TVL is insured at this point. Even with a conservative assumption, you are looking at a 10x gap to be filled.
I’m not going to talk about all the math/risk modeling differences — those are mostly not differentiators from an end-user perspective.
WC
Ok so not to beat a dead horse here, but since I’m a bit of a smooth brain, if I understand this correctly, it would be fair to say you’re more Nsure than you are NXM?
JL
The better positioning is “different fit for what we see as a gap today.” Each protocol has their own approach, with their pros and cons and the marketplace is both big enough and young enough for a healthy competitive collaboration.
UNION’s regulatory compliant, open participation system in a protocol offering total protection is a very good fit to what we perceive as a market gap. Our ability to mix the best from both finance and insurance models to create a competitive platform is also something I’m excited about.
WC
Now with that out of the way, I have to say, as a project that is looking to open up access to DeFi to “the average user” having one of your selling points as “reducing friction and increasing composability” doesn’t exactly strike me as something that’s…let’s call it normie friendly…in fact there’s probably an argument to be made that half of the users involved in crypto wouldn’t even know what that means either…lol
So how about you break that down for me and explain the ethos behind that and what the ideal net result is you want to achieve by solving those issues for the “average user”?
JL
The technology platform of UNION brings operational peace of mind to users.
Finance is stressful as it is. DeFi, with new terms, new transaction methods, and plenty of headline rug pulls and hacks exponentially increases that stress.
Why worry about whether your transaction will complete? Your assets might disappear? Your capital is unfairly tied up or liquidated? Wouldn’t you much rather pay a bit premium for the peace of mind you receive?
WC
That’s probably a great segue into what you guys consider to be “risk” in crypto…unlike traditional insurance, which at this point in time is pretty set in stone and relatively generic, crypto seems to have new risk vectors introduced almost every week…
So why don’t you run me through a list of where you see risk for current crypto users and these average users you’re looking to attract into the crypto ecosystem and perhaps what you guys see as additional risk vectors as we move forward in this space?
JL
Think of DeFi protection as the leading wave of the frontier of cyberisk. Lol. yeah, that’s 3x the edge.
As mentioned before, protection is more than just hacks — gas, collateral utilization, these are all risks. But let’s focus on hacks, since it’s top of mind.
Outside of the clear-cut “smart contract bug”, as has been seen recently, with flash loan exploits, there are risks which may not always be bugs. Some are due lapses in best practices, price tolerances.
In TradFi, these are addressed through a “swiss-cheese model” of defense — layers and layers of protection checks, which individually have holes, but when layered upon each other, significantly increase protection, at the cost of speed/ease of use.
With the velocity of crypto being so fast, where people can create arbs or market dislocations through massive flash loans, protection against these exploits is a component that we are investigating closely.
WC
As you mentioned, when it comes to risk, there’s something that’s been on my mind when it comes to all these crypto platforms…something that’s been somewhat of a trend in crypto lately is projects passing technical audits…often multiple audits…and then getting exploited and rekt not long after…
I’m interested to not only know your opinion on that and of course, how Union relates to/protects against these sorts of risks, like flash loan attacks, that other insurance products in the space don’t?
JL
It’s a difficult position for auditors, and DeFi is not alone in this problem. In the traditional world, not just TradFi, organizations go through many technical, security, compliance audits as well — and still breaches occur. Audits are not guarantees, though they certainly do help and should be done.
I mentioned this in my previous answer — we’re investigating each exploit closely and adapting our roadmap accordingly. We do think that partnering with auditors, who themselves are learning from each attack and getting stronger, and mixing their risk assessment with our event risk models is important to how we price protection products — that’s about all I can share at this stage.
WC
Sounds like a full time job to research all the exploits in crypto haha, though having said that, it boggles my mind that flash loans are being used on all of these…and seem to be still being used in the same or similar manner as the first round of flash exploits we saw
JL
Every day is a learning experience!
MB
What’s nice is when our conceptual approach shows that we would effectively address the complexity of the issue at hand without reducing the applicability of our framework.
WC
John, since we’re talking about attack vectors/protection scenarios, and based off your involvement with Fusion in the past, and as the hack, exploit…insider job…however you want to define it, was something we covered in this channel, I’m interested to know if that influenced your decision to be involved in Union and if Union was a thing at the time, what result it would of had for the project itself or the projects token holders if such protection was in place?
JL
Impressive research!
Yes, Fusion was more of a “best practices” situation. The investigation is ongoing and I do not know the full details, but I’d bucket that situation to failure in the operations process and not failure in technology.
That incident did not influence my decision to join UNION, however. As a product person with engineering education, I am always looking at “what is missing in the market”? And UNION was a good fit there.
Theoretically, if UNION did create a protection contract that covered “any type of inappropriate fund use” 1) the risk premiums would be commensurate with the risk 2) there would have to be people willing to write protection on the other side. Assuming these conditions were met and protection was bought, then upon filing the claim by the protection buyer, the claim would go through the UNION governance process, and then each writer of protection would share in the loss. — just like any other protection product.
Since joining UNION, I’ve spoken with quite a few projects who have asked about these types of event risks — like rug pulls, someone loses a key, or some such thing. They all boil down to an unpredictable event risk, similar to a corporate default — which by the way, is why I like this model so much for protection products.
WC
I mean for sure there would be demand for that product haha, not sure how many people would want to underwrite it and take the risk, but the degens in crypto always end up surprising me…
JL
Exactly.
MB
This would be a great opportunity for projects to throw down when questioned about their own work and intentions to deliver.
WC
On the other side of risk, is protection of. So let’s talk a little on that before we get into how this is all achieved.
You propose three starting points for protection policies in your whitepaper as a starting point when the platform launches, Transaction Gas, Collateralization Ratio and Smart Contracts.
Can you give me a quick TLDR on each and why you’ve chosen these as a starting point?
JL
It’s a good combination of market gap and well known models.
Furthermore, Gas/Collateralization Ratio, even Impermanent Loss protection use similar option-based models. During the gas spike of summer, paying $15 just to send a transaction made participation from “everyday users” an impossibility.
Collateralization ratios continue to be overly onerous for the majors, even factoring in their volatilities. And of course Smart Contract protection needs no explanation — just look at the headlines, BZX, Harvest, Akropolis, Value etc.
WC
Now you’ve explained it, I do like the idea of Transaction cost protection, it’s certainly VERY unique, however what happens when we’re more Layer 2 than Layer 1, and Layer 1 solutions become more legacy rather than the norm…or dare I even say it…ETH 2.0…doesn’t this make this aspect of Union’s ecosystem somewhat redundant?
JL
With how quickly DeFi dynamics change, who’s to know how things would evolve in the coming months? Some think ETH2.0 might still have gas problems. Regardless, for people who don’t think gas will be a problem, to your point, the market will figure out what the product fit is.
Between now and the time when ETH2.0/Layer 2 becomes mainstream, there will always be risk of a gas super spike, to borrow a TradFi term. Also, remember this is just one of the goto market products to address demand — other protection lego blocks from UNN will be released to fit the changing dynamics of DeFi.
As an aside, Layer 2 is a very interesting proposition, and we did quite a bit of research with these solutions before deciding on our current path — primarily so users can benefit from the composability of all the DeFi lego blocks.
WC
The Collateralization Ratio aspect of your protection plans seems to be one that is internal to the Union ecosystem and affects movements within…am I right on that?
If so, isn’t that a little niche and if not niche…meta, insurance on the insurance platform?
JL
This is an important point: The protection, much like smart contract protection, can be extended to ANY protocol UNION supports. I want to distinguish between goto market and product application. As a goto market, what better way to prove that this product works, than with our own ecosystem? Once it has been proven, once there is a track record and even allowed us to improve on the offering, then the barrier of adoption for other projects will be substantially lowered.
This is one product that has gotten the most interest in my discussions with potential partners. Lending is a big part of DeFi. Lending protocols, investment firms, vaults, even stablecoin issuers — all are interested.
WC
The smart contract one is pretty obvious, so we can kind of just skip on past that one, but I did want to know, you have it in quotes in the whitepaper “unintended code usage”…I mean isn’t that a matter of semantics and if so, who defines that?
There’s a ongoing debate re the flash loans I mentioned above as to what consists a bug or a feature, or if you want to get far into it, if code is law or law is law lol
JL
I’d like to say the whitepaper was prescient. In reality, as you can tell from my previous answers, we saw the recent type of “not really a bug” exploits as an area that needed addressing.
The way to address these semantic-esque is to codify what can be codified with clear conditions paired with a strong governance protocol. This framework is not novel — it is employed by traditional insurers all the time. It’s all the “fine print” in insurance policies. The difference? Rather than having a single entity determine nebulous conditions, there is an open governance framework layered with checks and balances.
WC
There’s a huge market there for that right now, if you can address that one, you’ll probs have most projects as a client pretty quick
So with the background and theoretical stuff out of the way, let’s break down the various elements of the Union ecosystem, as they say, the best place to start IS the start, so let’s talk protocol level first…
What are the various components on the Union protocol and do they all connect up to achieve the end result as we’ve just discussed?
MB
Sure — let me field this coming from the architecture perspective
At the top, we need to structure a set of entities and definitions that enable for interoperability between a variety of functions. Think of these as the core representations that work inside our system and pass between components.
The use of these components is addressed through permissions and governance — so governance is a key component to the protocol.
Unlike most projects that build governance as an extension to mandatory administrative function or use decoupled governance as a one-size-fits-all approach, we use a tailored governance solution that streamlines adjudication and consideration around policy structures and their behaviors.
Our governance framework integrates with the broader ‘fabric’ of functionality we provide.
This includes data ingestion, processing/analytics, policies/benefits/underwriting, and utilities/base components (the smaller subsystems we use internally).
WC
That sounds quite complex, I’m not going to pretend I understand all that, but I do look forward to seeing it play out!
MB
Working this way allows the system to evolve and to scale as we build with partners and team.
At a high level, we are always working with a conceptual model — we want to make sure we have the broadest conceptual framing, which is still useful to get technical leverage over specific needs at hand.
Some projects refactor too early (they oversimplify) and make their frameworks either too rigid for solving problems or difficult for general use — so teams and customers start to move around them.
We’re really focused on the delivery of value as articulated in the whitepaper — this provides a practical grounding for the work to be done.
Fortunately, we have a broad enough base of considerations and functional/non-functional requirements, that everything is moving together in a nice, comprehensive and cohesive way.
JL
Unveiling the covers of the car engine always is scary — but goes to show how much thought and effort has gone into the project already.
WC
So as far as I see it, to understand how Union functions, we really need to understand the underlying economic model of the ecosystem first…
Maybe a good starting point here is an explainer of how this type of model works in the TradFi world and then compare Union’s methods to that?
And as always…smooth brain it for me please, no math equations!
JL
No equations. Challenge Accepted!
In Tradfi, institutions measure the cost of event risk, and charge enough premium so that the probability of paying out coverage is less than the premium collected.
WC
So if I’m to understand this correctly, the crux of your economic model is a risk v reward strategy in which users provide capital to underwrite policies that other users then take out as protection for certain products/events etc..
Let’s talk about this capital, as past the framework and big brain math stuff you guys provide at your end, it seems the whole system can’t work without it…
So for Union, what form does this take and how are users incentivised to and what role do they play in this aspect of the platform?
JL
Again, keeping things simple, protection writers deposit their capital to “sell” protection to buyers. The capital doesn’t come from UNION. We simply provide the technology, the risk parameters, and the governance to enable this risk exchange.
From a protection writer perspective, they are earning an attractive and alternative avenue of yield. Compared to their other sources of return, this could be a good diversification.
WC
You mention various capital pools in your response and I note in your whitepaper you reference what’s termed as MCR and SCR.
Can you go into a little more detail on there and why they play such an important role in the big brain math stuff, past the overall viability of the system in general?
JL
This is going to be a little more complex — but I’ll keep to NO EQUATIONS!
MCR and SCR are measures used by insurance companies to calculate how much capital they should hold to keep the pool solvent. The formula for MCR/SCR is also the same formula used by finance to measure event risk in portfolios known as VaR or value at risk. In other words, it’s a widely adopted and battle-tested formula.
As long as the capital in the pool is above MCR, for example, then in theory, the pool can cover 85% of claim amounts in 1 year. This threshold gives confidence to people who buy protection, and at the same time, excess capital can then be used for other purposes, such as earning excess returns to further bolster capital reserves and pay out protection writers.
I had to sneak in some numbers…
WC
So just to make this crystal clear, SCR essentially means the amount of leverage collateral can then be lent out for protection policies right?
If I’ve got that right, what’s the starting leverage and how do you expect this to fluctuate over time?
JL
Yep, in essence. Leverage + operational capacity. SCR is just much more conservative — capital to withstand 99.5 of claims, versus MCR at 85%.
The exact leverage this unlocks will be based on the protection product as well as the collateral being protected. It’s too early for us to share the leverage numbers at this time since they will fluctuate with time, as you noted, and we’re continuing to fine tune the models.
WC
What role does the surplus pool play in the Union ecosystem?
JL
Think of this as a rainy day reserve. The models do their best to predict and quantify a hard to predict event. The reserve is there as added protection for solvency.
WC
So in regards to underwriting a policy on Union, what form of collateral can a user use for this and what’s the maximum position or risk they can take as part of this process?
JL
For now, protection contracts can be bought with stablecoin, likely DAI. This simplifies risk parameters and cross-currency risk substantially.
However, we have plans to extend beyond the stablecoins, to majors based on demand and governance votes.
WC
Now pricing models was something I alluded to in the introduction to the AMA, but it obviously plays a hugely important part in how feasible the whole system is and how it compares to other products out there…
Without getting too math heavy, can you give me a TLDR of how this works and what efficiency re pricing this gives Union over other insurance platforms?
I.e that’s a really long winded way of asking, wen protection policies and how much?
JL
Another no-math challenge! Putting me through the wringer.
The pricing has two toggles — how much demand is there, and what is the risk of the protection?
More demand equals higher prices — think of this as Uber’s “surge pricing”. Riskier protection equals higher prices — analogous to taking life insurance on a heavy smoking / drinking individual vs a vanilla individual with no vices.
As for the question, wen policies — we expect the first set of products in Q1. For how much — we’ll see what market demand and dynamics are then.
WC
A monotonous demand curve sounds really really boring lol..
Is this a new and more boring way of saying pricing for premiums will be based on supply and demand or there something more to this that I’m missing?
JL
Hah, it’s an old and boring way of saying constantly upward sloping curve. But yes, as shared earlier — more demand, more price.
WC
So can you run me through the process of what actually happens when a claim is made on the Union platform?
How is it decided and how is it paid out?
JL
In our whitepaper we have a nice schematic of how this plays out.
The “smooth brain” explanation: Claim is made through a portal. Depending on the protection type, the claim is either paid out automatically or goes through protection writers in the pool for approval.
There are checks and balances for conflict resolution, including escalating to all UNION writers and voters and ultimately UNION DAO. Think of this as escalating from local court to supreme court.
WC
So one thing that’s not explicitly clear to me in reading through your documentation was what the “suite of products” you’re actually going to be building and how these will actually form a user layer that not only crypto people but “average users” can interact with?
Is the idea here that you’ll bootstrap the network with some apps of your own and then allow others to build on top of the protocol?
JL
Yes for other protocols to build and integrate with UNION’s protection products. For an average user, imagine if they deposit money into a Vault, and as they deposit they are presented with the option to purchase protection.
UNN TOKEN UTILITY
WC
We covered off some of this in the previous answers, but for the sake of the AMA, let’s get it on paper in a nice easy and consumable TLDR format…
You have several tokens that are part of the Union ecosystem, what are they and what utility do they serve as part of the overall ecosystem?
JL
TLDR version — UNN for governance, uUNN for the protection buyer claim, pUNN for the protection writer’s share of the protection pool premium and likewise, risk..
WC
Let’s do the main token first, the one you’ve sold as part of your raise, UNN.
Now consider me a cynic, skeptical…or perhaps even a realist, but I’m yet to see a governance model that works in crypto…
It seems there is a very fine line between letting the lunatics run the asylum, whales taking control of a protocol, or implementing a governance system that is more centralised and offers no real influence on the underlying ecosystem…
Now that’s a very long winded way of asking…why is UNN any different…and what’s your overall approach to implementing governance on the platform?
MB
I think the general challenge is that most people, as much as they prefer choice and opportunity to engage, often fall back to the work of community activists. They don’t have much interest in governing their day-to-day — — even though with decentralization, they implicitly are responsible for their agency in these settings.
You need engaged stakeholders — and the ability to delegate voting functions within community. The core UNN token does this.
It allows the ownership and control of the governance token to sit apart from where its vote is stored or tallied. The owner of UNN can move their votes flexibly among delegates who can vote on their behalf without shifting token ownership.
If you don’t want to engage — find a delegate. If the delegate isn’t working for you, reassign your vote or vote directly.
We further separate the function of providing governance from the function of providing liquidity — which means people interested in governing dont have implicit underwriting risk and vice-versa.
You can participate in UNN specifically and only as a delegate or governance participant.
WC
So I assume you’ll gracefully transition to a full DAO style system over time right? This won’t be a day one thing?
MB
The DAO style system is a vision of empowered delegates. We are building the bones for this today. Both in the architecture, and how we have found early stakeholders and purchasers for the token, who we will look to for participating in some of these earlier roles.
JL
There are some good projects we can look to that have done this transition successfully.
MB
We have this notion as our lighthouse.
WC
Well I hope it helps you navigate the rocky and murky waters of crypto governance sufficiently!
MB
I’d like to think my background in political economy would be helpful, but crypto is always a hotbed of innovation. We need to focus on incentives — some of this will come through mitigating contingencies post launch, I’m sure.
WC
When it comes to the UNN token, we can’t ignore the fact you can also stake it on the platform, though unlike other platforms, this doesn’t actually take the form of adding an extra incentive to users collateral right…it exists outside of that part of the ecosystem?
How exactly does staking work and what’s it actually used for…past locking tokens from supply and giving the end user more UNN tokens for doing so?
JL
Correct, the separation of governance and protection is quite important.
The many dynamics of staking are still being finalized and we will share more in coming days. However, we have already shared Liquidity incentives, and as mentioned in whitepaper, potentially future incentives on premiums.
TL:DR they are meant to grow the ecosystem!
WC
I note you have a Geyser as part of your ecosystem…The Geyser first came to prominence with AMPL.
Is this a straight clone of, or is there some sort of twist with Union’s Geyser?
JL
Coming back to the composability of DeFi. Let’s say, we draw heavy inspirations from that Geyser.
MB
We look at it as a tool for incentive and price stability — but our token doesn’t rebase, so the calculation of incentives is different.
We know there are going to be people going to DEXs with the token.
We are a platform with utility, first and foremost — and we see this as a mechanism for creating the necessary incentives to align the behavior of exchange with the success of our platform.
WC
I note you can also stake pUNN tokens…what’s the logic behind this and if they’re already being used to underwrite protection on the network is there any risk in doing so, for both the users tokens and the system in general?
JL
The exact ratios and dynamics are still being worked on. But much like elsewhere in DeFi, projects take LP and provide additional incentives on those LPs, we feel there’s a proven system that works to both to increase adoption while being responsible.
MB
The pUNN tokens are the core ‘protection pool’ tokens.
They are received as a user contributes to a ‘protection pool’ for a specific purpose. Distributions from the pool are realized through these tokens.
Staking these tokens represent vesting a flow of entitlements from the pool into a staking vault where they can be locked for additional incentive. Similarly, we believe that parties may want to trade these tokens as a way to increase/decrease leverage or exposure to a certain class of risk.
You can see cases where a specific risk might have a thin underwriting market — this addresses the incentive to make sure there is some compensating speculation on the other side of the policy.
WC
Speaking of which when a user takes out a protection policy on Union, they receive uUNN tokens that are representative of that policy.
Can they do anything with these tokens like users can with pUNN?
JL
Nothing guaranteed but if we do find incentives that align all parties, we certainly will propose for voting.
MB
uUNN tokens are the policy themselves — they have proportional couplings to the underlying pools.
They are, by nature, less fungible.
UNN > pUNN > uUNN fungability…notice I didn’t say non-fungible.
Depending on the policy, entitlements to benefit streams may require more/less flexibility. This is similar to traditional insurance markets.
Can you stake your uUNN — of course — in the collateralization usecase in the whitepaper, that’s exactly what’s happening.
Would you stake a uUNN for transaction finality — — probably not — you’d use it as an entitlement for a claim.
WC
You mention that both pUNN and uUNN tokens can be traded on a secondary market. Is this something similar to being able to trade locked CORE LP tokens on Balancer or do you have something different in mind for this?
Past the ability to do so, what’s the point of?
JL
Risk distribution and liquidity.
An example to compare with from TradFi: an illiquid asset has much higher premiums than a liquid one.
An example to compare from Insurance: Reinsurance in cybersecurity takes ~ 40% of all insurance premiums.
MB
People should be able to exchange risk without destabilizing the protection pool shares reflected by those entitlements.
When you unwind risk to reassign it (liquidate back into the pool), you have to re-originate the entitlement. It’s sloppy from the perspective of someone trying to understand how much protection exists for a specific behavior in a given moment.
Does that make sense?
UNN TOKEN SALE & SUPPLY
WC
It does, but I’m just taking a moment to take that all in!
But next question, the token sale…I’ll be succinct…wen sale, wen launch?
JL
wen sale! The sale is on the 22nd of November.
We’ve prepared a document with Token Metrics, Token Sale details and a bunch of other critical information here —
The token will launch directly after the conclusion of the sale.
WC
As I mentioned before, I’m a bit of a smooth brain, and definitely not a math guy.
Based on the above article, can you do the hard work for me and give me an idea of what your day one starting market cap will be?
Approx is fine as I know there is a few variables there…
JL
My “math on spot” is weak too.. Leave for the crypto experts to predict. 🙂
MB
Smooth brain aside — we have a demand-driven linear pricing model. So the market cap will be determined by how many tokens clear in the public round.
WC
Why did you chosen to do a demand-driven pricing curve as opposed to a straight raise?
MB
We wanted to enable a notion of price discovery (albeit one way) and set timing of proposed liquidity on the other side to provide reasonable adjustments. We also wanted to make sure that purchaser behavior from earlier and later stages didn’t have direct impact on each other until a market clearing price had been proposed through outsider interest.
I think everyone is hard-pressed to think of a perfect way to do this. It’s like skinning a cat. You would hope all the reasonable approaches propose putting the cat to sleep first.
WC
How can a user contribute to the sale on the 22nd?
JL
To pre-register, visit —
There’s nothing like pre-registering to smooth brain your contribution on 22nd!
WC
Speaking of which, the best smooth brain trading platform is Uniswap for that very reason…
Will UNN tokens be listed on Uniswap initially and if so are you going to incentivise liquidity providers on Uniswap from day one?
MB
We will assume that users will seek Uniswap for themselves. The geyser is our approach to support the behavior. As a utility token, we aren’t actively endorsing or promoting exchange activity at this time.
DUE DILIGENCE CHECKS
WC
Ok I’ll leave my wen CEX question off the list for now then haha!
I know I’ve taken up a bunch of your time so lets end with some quickfire DD questions…
Does Union Finance have a Github?
MB
Yes, however currently it’s not public.
We will be placing code in public repo for community viewing as we begin to complete our audits.
WC
Where is Union Finance incorporated?
MB
The Caymans.
WC
Do you have a legal opinion that your token isn’t a security?
MB
We do — and that we are also not an insurance company, broker, or exchange.
WC
Has your token already been minted? If so, what’s the address?
MB
No.
WC
Wen mint? Wen smart contract audit?
MB
Mint after audit. Audit in progress.
CLOSING THOUGHTS
WC
Well that’s all my questions for tonight, thank you for your patience with my smooth brainness and of course your valuable time.
JL
Great questions. Pleasure to be here.
MB
Thanks to you and everyone in the group today. Great questions, indeed!
Happy to answer others at our own Telegram channel or Discord group.
Union Finance Resources
Website: https://www.unn.finance
Telegram: https://t.me/UNNFinance
Twitter: https://twitter.com/unnfinance
Medium: https://medium.com/union-finance-updates-ideas
Whitepaper: https://www.unn.finance/wp-content/uploads/2020/10/UNION-Whitepaper-DRAFT.Oct_.2020.pdf
Wolf Crypto Resources
Public Group: https://t.me/WolfCryptoPub
News Channel: https://t.me/WolfCryptoAnnounce
Twitter: https://twitter.com/WolfCryptoGroup
