By Justin Barsketis — Aug 18, 2023

Considerations for an NFT project

Blockchain and web3 have been hype over the last few years, maybe overshadowed by the AI revolution, but still very much a new technology that is getting figured out.

Just last week I noticed that Coinbase launched their new Layer 2 Ethereum protocol, making gas fees cheaper for people using the network. Also more importantly, are integrations with their new non profit, https://base.org/. This is a cool new technology that helps integrate with coinbase with web3 projects. I find this as a nice solution as it is providing more legitimacy and security for fiat onboarding and management of smart contracts.

I will say, I was on the boat that all this technology can very easily be integrated using normal databases, and is kind of overkill for most use cases. Im not sure what changed but its really starting to click with me that web3 is more than just data ledgers, its a way to create autonomous systems that make companies more efficient. When dealing with a competitive market, these types of efficiency gains, no matter how small, are what distinguish winning companies. I've been watching the development of projects and I think its time to take a deep dive into creating smart contracts and learn the technology. What better time than now to do so while I am setting up the new company nomadinsurance.com

The Problem:

As mentioned in my previous blog post, MGA management of networks can be a huge pain in the ass. We have over 15 different insurance providers, with varying level of commissions and how they pay, as well as 35+ independent agents we have different contracts with. All of this accounting of accounts payable and receivables is super complicated and ripe for human error. Its almost monthly now I go through our accountants work and there are errors. Its not their fault, we just have so many different relationships with different vendors and insurers that things can easily get confused. I am essential the data oracle for the company currently to figure out whats going on.

For example, one of our providers for just 1 insurance policy, has 2 different versions of the policy paying different amounts each year for 5 years, then there are 6 riders that can be added to the policy modifying the commission and prices paid. Then for these contracts, we have about 5 different levels of commission schedules depending on that agents history and production with us. This means we have 2 * 5 * 6 variations just for this one policy we have to consider, times that by 40 different policies we offer * 35 agents, thats 84,000 different possibilities of payments over 5 years we have to calculate the good old fashion way of looking at pdf commission payments and memorizing commission schedules. Most of our insurers do a good job of keeping track of most of these things for us, so its managable, but relying on a third parties to accurately do your companies finances is not preferrable on a larger scale. We do find errors on occassion and hundreds of thousands of dollars are being interchanged each month so its a serious risk.

The Solution

As you might have guessed, a blockchain solution representing these complex contract relationships can easily be handled by a blockchain. As of right now my CTO is arguing against implementhing this with blockchain, as in his defense, its just another code base to handle, that can easily be automated using normal coding methods.

This is a very valid argument that I almost agree with and he might win in the long run. On the contrary however, the ability to also have the payments be automatically handled in this network all be traceable on a blockchain just makes sense in my mind. In the end, we both are interested in learning this technology as well, so worst comes to worst if we scrape the idea, we will have gained a lot of new experience with the technology and might come up with better solutions in the future. Its like the first time I took a dive in WordPress and opened a decade of work for me.

NFT Time

Now, for the implementation of the new blockhain, I think the best solution is to mint NFT's representing clients. NFT's represent unique items, in this case it will be client policies. In our case, they are going to be royalty generating NFT's, where they represent income generated from that asset. We have 4 different levels of contracts, and about 15 policies we want to start with. The main levels being a Referral, Partner, Advisor, or MGA that will adjust payments to each vendor depending on the relationship of the NFT to these 4 partner contracts.

For example, a referral might just give us a lead directly, and that NFT just produces income for that referral. Or perhaps a referral is under a partner, under a broker, under and mga, then we split the commission 4 ways between those partners.

At this point, we could easily just make an nft with client information such as a the policy id, partner commission levels, premiumable commission, etc and call it a day. In the end, we will probabaly have some level of this in the backend but we want to make it a bit more interesting while we are at it!

I thought we might as well make this a more gamified version of our platform, and bring in some D&D'esque aspects into it. By making it more like a game, I hope that future users are more engaged, and also there are more tutorials online for things like this :D.

The NFT Collection Idea

First things first, the technologies we are considering using are:

Coinbase wallets for daily crypto transfer to USDC for dividends earned, or optionally a ACH transfer option that trigger monthly if the user wants using Strip Connect, or Relay Fi, and lastly Wise for international payments
Base the coinbase layer 2 protocol that just launched.
ThirdWeb a platform sdk for web3 in nodejs, this example
Contract Standards - Researching still, promising Offsite look up, multi token, composable token
Midjourney, for creating the Art
Xero API - Considering the IRS probably wont accept blockchain records in an audit, we need to create bills and track everything offchain as well using an API and we like Xero.
Lastly, our backend portal. This will be the data oracle and front end UI. This is created using NextJs, ShadCN, Supabase, Vercel.

AML / KYC Concerns

One thing to note, im unsure if coinbase or stripe or any other service will be okay with something like this, KYC regulations are strong in our industry and most banks dont like touching crypto and insurance. As they say though, Move fast, break things. We are going to just launch it and see what happens while being upfront with our banks. We are a pretty vanilla company after all, im sure it will be fine.

The first step to comply with AML, is ensure the insurance provider is handling all payments, at least for now. This way, their internal AML teams will catch most supsicious payments going into the platform.

After that one of the main concerns are that a client pays for a policy with bad money, we pay a referral fee in crypto, and then the client initiates a refund getting the money back causing a clawback. Dealing with a negative balance is unpreferred.

Due to this we are going to ensure that all payments are paid on monthly basis, even if the client paid an annual policy. This means that clients receive a penalty of about 35% from the insurers automatically, and then if we only paid a few months of referrals, the penalty will exceed the monthly payments so no criminal would want to do this considering a 300% fee for clean crypto (I hope). Also with this method, brokers and partners will be paid much more consistently instead of having large spikes during busy season which normally happens, and we can hold larger staked amounts of USDC as payments are waiting to be issued, gaining additional interest income from staking.

NFT Structure

This is where things are going to get a bit odd if you dont understand how NFT's work, but you can easily assign art work and relationships between tokens. This is where the gamification will come in.

How it will work

A "creature" is a policy that generates "energy" depending on who owns that creature. These policies have face amounts paid for the insurance policy.
Whenever a creature creates it base "energy" its transferred to the land owners crypto wallet, which can be converted to USDC in coinbase, or sent via bank transfer once a month.
An "energy booster" are bonuses given for hitting certain production goals. These are quota bonuses or renewals
A "land" are the owners of the creatures that bundles "energy" produced by the creatures for payment. Different land ownership types get different bonuses. These are insurance portfolio contract overrides that are updated monthly. This sends the energy to the correct portfolio overrides.
Every week we mint "creatures" and "lands" representing the new client payments and new portfolio assignments. Lands are minted (paid) weekly to represent collecting energy from the creatures, these are weekly commission payments. If you hit higher production goals, the next months land card could be updated with the clients sold under it.

Here are the 4 partner contracts mentioned, and the land associations

Forest - Referrals - One time sale commissions.
Valley - Partners - A higher tier referral, unlocks renewal dividends and other dividend streams, also can recruit referrals
Land - Advisor - A broker that owns the clients
Realm - MGA - A brokerage that owns the brokers

Rarity

Energy produced by creature on land - Title modifier

500 - Common (Grey)
1000 - Uncommon (White)
1500 - Rare (Light Green)
2500 - Epic (Dark Blue)
5,000 - Unique (Violet)
7,500 - Extremely Rare (Very Dark Purple)
10,000 - Legendary (Red)
15,000 - Mythical (Light Orange)
20,000 - Extremely Coveted (Scarlet)
30,000 - Blessed (Dark Orange)
50,000 - Voidlike (Turquoise)
100,000 - Cosmical (Rainbow)

Home - This list the owners, aka the commission overrides

The Quetzalcoatl lives in the forest of Cashmere, inside the valley of Oz, under the rule of Roret, under the will of Ethera

Contributions - List commission payments made from this creatures

Payment - 02/12/2023

+281 to the forest of cashmere
+219 to the valley of Oz
+281 to the land of Roret
+28 to the realm of Etheral

Plans = Creature Names

We are going to use aztec and mayan gods, too many to list here

For example - Nomad West Tier 4 plan

Huitzilopochtli

Aztec god of sun, war, and sacrific

Uniques - Incentives

We are going to have one time NFT's that represent dividends in the company, almost like equity that we will be available to top producing parnters or advisors.

Example: The Sun - 5M Total Portfolio - 1% Total Profit Dividend - The sun is the most vital resource, providing all life with its energy.

Progression and Bonuses

Lastly we have the progression system of unlocking things as the user uses our platform. There will be one time incentives each month they can unlock for quota being hit in the forms of water cards like springs. But also, referrals, the lowest level, but will have the ability to unlock partner level by a high producing month, by unlocking a more land for creatures to live in "a valley".

A Valley

Unlock - Valley - One time 30k month health - Referal to Partner

All future creatures will have a valley to reside in providing potential long term resources (new sales at higher commission, not old sales though)
Ability to find new creatures (P&C and Life)
Ability to befirend other creatures (client referrals)
Ability to build farms (renewal commission options)
Ability to find rivers, lakes, and oceans (higher quota incentives)

A Land

Unlock if you become a licensed broker and want to work as an insurance professional

Unlocks permanent renewal dividends on all new existing creatures
Ability to bribe all creatures to new land, negotiate on internal marketplace
Ability to buy partner creature tokens for more dividends
Ability to recruit partners and referrals.
Daily payments and instant transfers
Insurance trip incentives

A Realm

Unlocks by doing portfolio transfer to us, or signing up multiple agents.

Integrate into our platform
or a Custom NFT collection
Default energy tax on all creatures / energy in collection

An Energy Boost

No equity, cash bonus only = New Quota Bonuses for Referrals, Partners and Advisors. These bonuses add to the contributions list, they are additional energy boost

A spring has been found invigorating your creatures with water
Creatures affected (list creatures affected, i.e. monthly sales)
+x income

Example Bonuses - Monthly

30k A Rain - Provides additional experience and energy to one creature (renewal bonus dependent on energy)

Production

Base - Keep 15% of energy produced by creature
10k - A Spring - Base 30% energy - Instantly provide your new creatures with minor resources (+100% energy boost)
20k - Mountain Stream - Base 40% energy - Instantly provide your new creatures with resources (+260% energy boost)
30k- A River - Base 50% energy - Instantly provide your new creatures with abundant resources (+333% energy boost)
50k - A Lake - Base 70% energy - Instantly provide your new creatures with abundant resources (+466% energy boost), and stored resources for next month (+333% energy boost.
100k - An Ocean →Base 90% energy - Instantly provides your new creatures with maximum energy (+600% energy boost ) and stored energy potential for next month (333% energy boost).

Creatures

Creatures will naturally level up as they produce more income.

Sample Artwork

Sample NFT

Sample Artwork