wETHER vineyard edition

this project is an alternate version of wETHER, see https://github.com/Physes/wETHER . It uses less calls from oraclize as most of the data for the insurance policy contract is provided server wise with signed hash. The factory contract verifies the integrity of the hash and the signature. wETHER is a project to put a "fair" weather insurance and environmental prediction markets on the Ethereum blockchain. Here is the math rational behind the parameters of the contract

##app folder

this folder is not relevant yet

##contracts folder

InsuranceLib.sol

former librairy used in the original wETHer project, this contract is not used anymore.

InsurancePool.sol

new version of InsurancePool, this contract is still in WiP

InsurancePoolDemo.sol

a light but working version of InsurancePool.sol for demo purpose

This contract is deploy on the test see deploying tx

##sample folder

this folder is not relevant anymore and is kept until deleted or proved useful

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##Former ReadMe:

The Situation of the crop grower

We consider a crop grower that expect an event with probability p, if this event occur he will have 0 and if it does not occur he will have 100. This amount can be set to anything, I pick 100 so has not to have too much abstraction.

He has an expected value of:

E = p * 0 + (1 - p) * 100 

The payout of the contract should give a payout that reproduce this expected value minus a fee.

How much should the insurance found send?

We denote x the value that the farmer commit to the contract and y the value that the Insurance found will commit.

If the event occur the crop grower will receive:

x * (1 + y) 

Otherwise he will have 100 minus the x he commit

The expect value become:

E' = p * x * (1 + y) + (1 - p) * ( 100 - x) 

Solving:

E = E'

Leads to:

y = -2 + 1 / p

Node: if y is superior to this value than the crop grower is actually better off with a contract with the plot:

http://pasteboard.co/nBVw3TWki.png

Therefore as long as the y follows this rule the expected utility will be the same for the crop grower whether (or shall I say wETHer) he chooses to take a contract or not. This whole system is independent of the value comited x. In order to avoid having to much value at risk in a single contract we will set a condition on x

1 =< x =< 5

also a fee can be implemented inside or outside y to cover for gas and oraclize cost. The fee can also be set so as to provide a revenue to the insurance fund.

Note: we exclude any probability over 50% as it would lead to a negative y.

Example:

Let's consider:

x = 10
p = 10%
fee = 0.1

Without a contract the expected value is

E = 10% * 0 + 90% * 100 = 90

If the event occur and the crop grower is insured he will get from the contract (without fee):

x * ( 1 + y ) = 10 * (1 - 2 + 1/(10%)) =  90

if there is a fee:

x * ( 1 + y ) = 10 * (1 - 2 + 1/(10%) - 0.1 ) =  89

After the contract his expected value is:

E'= 10% * 89 + 90% * (100 - 10) = 89,9

Insurance is cool :- )))))

What about the insurance fund side?

If the even occur the fund will loose:

x * (1 + y)

and otherwise, it will win:

x

So the expected value for the insurance fund is:

E = p * (-x) * (1 + y) + (1 - p) * x

Let's look at the value of y that makes this expected value positive:

p * (-x) * (1 + y) + (1 - p) * x >= 0

is equivalent to

-2 + 1/p >= y

we found the same condition which is normal and therefore setting a fee in the amount will insure that the fun have a positive pay out in the long run.