The rise of anonymous crypto insurance & prediction markets

Institute of Cryptoanarchy, Paralelní Polis


This presentation is just a thereotical research of technical possibilities of truly cryptocurrencies, anonymization networks and prediction markets.

The author is not and will not be involved in any real anonymous insurance or prediction markets implementations.

The goal of the presentation is to show technical feasibility of such solutions in the near future that can significantly undermined the current system.

Top reasons to exist..

  • A lot of victimless crimes (mandatory insurances, drugs, taxes, etc)

  • A lot of government obligations/duties and restrictions for making a mutually voluntary businesses

  • A lot of angry people / enterpreneurs

  • Technical feasibility (thanks to Tor/I2P anonymization and truly anonymous cryptocurrencies, e.g. XMR, ZCash, ..)

Traditional legal insurance business

  • Is totally regulated by the government (every new insurance product has to be approved by the state)

  • The scope of insurance is significantly limited

  • Always has to be 100% compliant with the legislation (even if there are absurd immoral laws)

Registration #1

  • Register your legal or physical entity to the insurance company

  • The insurance company should not know their real customer names until the insurance claim (even in this situation, it is possible for the insurance company to pay insurance money without the knowing of actual customer name using "trusted adjuster") - can be solved using HMAC function - during the registration HMAC is applied to the entity name using her secret chosen passphrase. The result of this hash is used as a unique insurance's customer ID.

  • The insurant can always prove she has been paying her insurance since the given date.

  • Until the insurance claim, the insurance company will not know the customer's name, but still be able to track her weekly/monthly insurance fees.

Insurance claim #2

  • If the given entity gets a fine from the state, she can ask for her insurance claims.

  • She will scan her government's penalty evidence and upload/send to the anonymous insurance company (ideally encrypted with their PGP key), so they can verify the authenticity of the insurance request.

  • There always have to be ways how to check the authenticity of the government's penalties. Otherwise, you can generate and send fake government's penalties to all people and companies and force them to pay these fines.

  • If the given evidence is real, the insurant will receive money in any truly anonymous cryptocurrency

Verify authenticity of the penalty evidence #3

  • In many countries you can use "Guaranteed Electronic Signature" to make a digitally signed version of the penalty evidence issued by the government-approved notary service - the state notary service is capable to make the digitally signed version of the evidence

  • The digitally signed version of the penalty evidence can be easily verified by the anonymous insurance (using the public keys of the government/state CA)

  • If the insurant fakes the given document and then use the notary to verify it, she will commit the criminal act (should the anonymous insurance be able to insure against it? :-) 

Prevent false claims #4

  • To prevent situations that the entrepreneur decides to become the anonymous insurance's customer when she is already aware of the fact he will get a fine from the government the insurance companies might set multiple requirements for insurance claim, e.g.

    • minimum time of being insured (e.g. few months)

    • no previous insurance claims during the particular period

    • ..

Prevent your insurant real identity #5

  • The insurance companies do not need to have any real information about their customers if trusted adjusters (or "trusted liquidators") are used who are chosen voluntarily by customers in case of the insurance claims
  • These trusted adjusters (for agreed % fee) verify the claim of the client and let know the insurance company to pay the given insurance claims
  • In this situation customers of the anonymous insurance company could choose if their requests should be verified by the insurance company itself or trusted adjusters (which will be probably more expensive)

Recalculation of insurance fees #6

  • The current insurance payments will be recalculated weekly/monthly according to the number of insurance incidents, the total number of paid insurance claims, the number of paid customers, etc.
  • This problem is just a statistical math. It can always be solved. Theoretically, you can be insured against anything; the question is only for how much.
  • Note, the real insurance market starts to exist when you have a lot of paid customers with a feasible insurance business plan, e.g. enough entrepreneurs who consider the given law to be unethical and stupid and with the state which doesn't have enough capacities to check all insurants and impose devastating fines

Closure facts #1

  1. For the government, it will be almost impossible to prove that anyone is insured against any law. Neither they can reveal the given people receive their insurance money because no cash or traditional bank transfers are involved.

  2. Government officials have limited sources to penalize all entrepreneurs; they will always choose only some "victims"

  3. Less stupid and immoral laws mean less feasible business case of anonymous insurance companies.

  4. Both anonymization technology and state dictatorship are always improved over time. Therefore the existence of anonymous cryptocurrencies is the only question of time.

Closure facts #2

  1. The war of governments with anonymous insurance companies can be partially won by abolishing of all stupid regulations and restrictions most people consider to be unethical.

  2. The anonymous insurance against wrong laws can create an incentive for many decent non-technical people to use bitcoins or other cryptocurrencies to protect their property.

  3. The government can increase fines to kill all businesses that break any law and strictly enforces it. In the given situation, the best solution will be to move the business to a different country, or stay and pay high insurance fee.

  4. The state simply does not have enough sources to check if all people or companies follow each law people/companies may be insured for. The situation for the state is asymmetrical with an apparent advantage for anonymous insurance companies.

Social aspect of anti-government insurance

  • To be insured against the laws is a criminal act

  • But is there a criminal act to provide "financial security" for a family whose breadwinner ends up in jail?
    (e.g. is it legal to be insured (as a family/company) against the situation when the breadwinner is arrested for possession of drugs?). Because it is definitely moral.

  • Being a customer of the anonymous insurance is probably legal in case of smaller offenses and illegal in case of criminal acts

The competitive market of multiple anonymous insurances

  • According to personal moral preferences, e.g.:
    • for anarchists: anonymous insurance against victimless crimes
    • for drug users/dealers: anonymous insurance against drug possession/dealing crimes
    • for gun owners: anonymous insurance against illegal gun possession
    • for entrepreneurs: anonymous insurance against stupid bureaucracy

The dark side of anonymous insurance


  • Because of the anonymity, it is not possible to eliminate the existence of the anonymous insurance against real crimes (with victims)
  • They will have probably only few customers, extremely high insurance fees and a bad reputation
  • Instead of the penalty, the insurance can cover all expenses for the best lawyer / legal defending costs

How to eliminate anonymous insurance

  • Temporary solutions:
    • increasing of the amount of fines/penalties (but this may destroy all honest entrepreneurs who follow the laws)
    • increasing of government checks of potential criminals (this may destroy the government budget)
  • Permanent solutions:
    • Abolish all victimless crimes (this is definitely not possible in the current society, but it is feasible in anarcho-based societies)
    • Have effective laws that can be easily checked and enforced

Achieving a perfect corruption using prediction markets

  • How anonymous predictions markets can disrupt any authoritative, hierarchical organization where only a few people have the power.
  • This concept is not new and has been already described by Timothy C May in The Cyphernomicon and
  • Robin Hanson in Futarchy (Vote Values, But Bet Beliefs)

Used technologies


  • Truly anonymous cryptocurrency  – any cryptocurrency with fungibility feature (e.g., Monero, Zcash, Zcoin, etc.)
  • Anonymous prediction market – any market that accepts truly anonymous cryptocurrency and is accessible through onion / i2p address (using Tor/I2P)
  • see also fully decentralized prediction markets Augur and Gnosis that cannot be regulated or shut down by governments

Before nonymous prediction-markets (current) society

  • The governments have a monopoly for laws and regulations which is often exploited by corporations leading to the corporatism. This effect can be seen in all countries worldwide.
  • At this time only particular groups of lobbyists/corporations can corrupt politicians (including members of parliament).
  • It is caused by the fact this lobby requires a lot of the mutual trust. Therefore the corruption is strictly limited to government-friendly financial/lobbyist groups. 

Post anonymous prediction-markets society

  • Anonymous prediction-markets introduce something that was not possible in the past and thanks to truly anonymous cryptocurrencies and prediction markets, is technically feasible now – the creation of fully anonymous economic incentive.
  • Thanks to this property, the prediction markets allow democratization of corporatism. Anyone can make an anonymous incentive to corrupt the politicians. Technically this can be achieved by prediction markets.

Disrupting the parliament democracy election

  • Thanks to the anonymous prediction markets, it is possible to make an anonymous economic incentive to manipulate elections inspectors / poll workers to "make the right winner"
  • If you want to increase the likelihood for your party X to win in the given polling place, make a bet, e.g., 1000 XMR that the party X will not win - you make a strong economic incentive for election inspectors or poll workers to manipulate their polling and make the opposite bet that the party X will win. In this situation, they can gain the reward in an entirely anonymous way.
  • It is impossible to prove the election inspectors or poll workers took the bribe

Corrupting the politician /member of parliament

  • An anonymous economic incentive can also be utilized to corrupt any politician/member of parliament. In the situation when the voting is public, and it is known how each member of parliament votes, it is possible to make a bet, e.g., 1000 XMR that the given member of politician will vote / will not vote for the proposal P
  • It creates the anonymous economic incentive for the politician to make the opposite bet and gain the win.
  • Huge bets can also create a significant incentive for many people (e.g. parties) to collaborate, to make an opposite bet, gain the win a divide it to each participant.


  • For the first time in the history it is feasible to achieve
    • an anonymous insurance against any law leading to disintegration of the authoritative system with the centralized power
    • an anonymous economic incentive leading to fully anonymous corruption & bribes with the impossibility to identify those who corrupt as well as those who accept bribes.
  • The perfect corruption allows democratization of corporatism – everyone can create an anonymous economic incentive and be both bribe provider and receiver.
  • People perceiving the corruption as something horrible may be concerned about this „democratization process.“ It is necessary to realize that thanks to the prediction markets significantly more people can be involved in this process with their real „skin in the game“ reflecting their actual beliefs, probably leading to futarchy.

Anonymous Insurance and prediction markets

By Pavol Luptak

Anonymous Insurance and prediction markets

Every new government's regulation, restriction or embargo that makes impossible for people to trade, do business or increase their expenses, creates a demand for any market solution that helps to bypass these obstacles. The fact - how many entrepreneurs or ordinary citizens consider the given law to be unethical, willing to avoid with the least risk as possible, determines an economic feasibility of the 'avoidance' solution.

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