kaal:claim:3782220-012

Automating insurance away with smart contracts risks a race to the bottom, because foregoing insurance is more efficient in the short term for an individual, yet the resulting rare unprotected tragedies can chill the entire system.

Source quote, verbatim
we must avoid a race to the bottom. It's more efficient in the short term for an individual to forego any insurance, so some will outcompete others if they are lucky enough to avoid rare tragedies. But the rare unprotected tragedies can chill the entire system.
From

Craig Calcaterra, Wulf A. Kaal, The Importance of Transcendental Unifying Values for Decentralization (2021), Integrating polar values, p. 4
https://ssrn.com/abstract=3782220 · source PDF

Cite as

Craig Calcaterra, Wulf A. Kaal, The Importance of Transcendental Unifying Values for Decentralization (2021). SSRN: https://ssrn.com/abstract=3782220

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Classification

failuresupport: arguedfailure: insurance race to the bottomfamily: collective-action-and-coordination-failuresmart-contractssystemic-riskrisk-and-incentivesinstitutional-design

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