Pharo is designed to empower Market Managers in the DeFi ecosystem to establish, host and promote decentralized insurance markets. In a previous blog post, Managing Pharo Markets, we identified the high level steps any Market Manager will need to undertake:
- Know what risk Liquidity Providers in this market are willing to accept
- Know what service fees Cover Buyers are willing to pay
- Know what your marketing costs are for building a market of LP’s and CB’s
There are two parts to a market — the theoretical part and the programmatic part — and here at Pharo we acknowledge that not everyone is capable of executing on both parts. As a result Pharo proposes a process involving voting with $PHRO and the Pharo DAO to assist aspiring market managers. Establishing a market is a multistep process which is kicked off by the Market Manager and is supported by the DAO and a bounty system. The full diagram is below
Detailed steps are:
- First the Market Manager, the expert in the theoretical part, needs to complete the Pharo Market Creation Form describing the event that is to be covered, the pseudo-code that defines the event that is being covered and an estimate of the scope and scale of the market.
- Secondly, Pharo will push the proposal to the Pharo DAO to prioritize and vote on the proposed markets. Proposals which are approved will be hosted as a bounties, for the programmatic experts, and funded by the DAO.
- Third, bounty hunters, the programmatic experts, will earn $PHRO bounties by providing code for programmatic binary (true, false) resolution of the proposed Market event.
- Lastly, the Pharo community will formalize the event on chain with the programmatic code resolution, provided by the bounty collector, which describes the binary outcome of the event.
With this approach Pharo ensures that:
- Market Managers have technical programming support for creating their markets.
- Talented programmers can earn rewards for helping our community grow.
- Pharo is able to rapidly scale the number of markets so we are meeting our users needs.
Since Pharo will not use people to resolve coverage, this approach keeps market manager or coverage resolution bias and opinions out of the equation and lets the community address programmatic events that resolve on-chain. This is significant since alternative solutions and coverage approaches require a claims process that does not resolve programmatically. Manual claims processes introduce the opportunity for bias in the decision making. As a coverage buyer or a liquidity provider you put your trust in the Pharo programmatic protocol and not an individual who is responsible for deciding how money moves. This is important because most claims processes are generally biased to the side of not wanting to pay.
If this interests you and you want to learn more about Pharo and our upcoming work please join our Discord #market-managers channel and join our discussion!
