The Spring 2021 Chainlink Virtual Hackathon gave rise to a number of exciting projects from experienced developers and first-time hackathoners, including dynamic NFT game CryptOrchids and synthetic index token-minting platform Catalyst. A number of prize-winning projects are being developed into industry-disrupting startups – and some have already attracted the attention of high-profile advisors.
One such project is Vulcan, a commission-free, blockchain-powered weather derivatives marketplace that makes it easy for anyone to bet or insure themselves against the weather. Founder Marc Thalen created the Vulcan prototype during this year’s spring hackathon, where he won the $3,000 DeFi Prize.
Though temperature-based weather derivatives are among the most popularly traded derivatives, they are typically only available to large entities. Vulcan allows anyone to directly request or underwrite weather insurance and trade weather derivatives to protect their businesses. For example, a farmer who anticipates lost revenue when temperatures fall can offset those losses by taking a position on Heating Degree Day (HDD) derivatives that pay out on cold days.
Vulcan determines HDD values using Chainlink External Adapters to call weather data. Though Thalen was initially concerned that his project’s scope would be too big for the hackathon, he was surprised at how easy it was to build on Chainlink. “Outside of the core derivative contract, it took about a week to build the data adapter, set up a Chainlink node for the first time and get the adapter to supply data to the smart contract,” he said.
Vulcan’s upcoming insurance products are focused on creating an easy, intuitive experience for non-crypto users – by converting fiat currency to stablecoins in the background, for example. “We want to keep it as simple as possible and focus on the positive points for the end user: lower fees and faster payouts,” Thalen said.
These products can be reinsured or resold on secondary markets outside of Vulcan’s ecosystem. Vulcan also allows other applications to submit insurance requests to its market. “We want to enable a competitive space for underwriters and allow monetization to parties that have access to reliable weather data,” Thalen said.
Vulcan exemplifies the many opportunities DeFi brings to derivatives that aren’t possible in traditional finance. For example, Vulcan sends the collateral that an underwriter posts to Aave’s interest rate protocol. “This interest can then be used to lower the overall fees for the end user to incentivize the underwriters,” Thalen said. “Similarly, if two parties want to exchange risk directly through a weather derivative, we can utilize the collateral interest of the seller to incentivize the buying party.”
A week into building Vulcan at the Chainlink hackathon, Thalen heard Mark Cuban talk about blockchain-based weather insurance on a podcast. So he emailed Cuban his pitch. A few hours later, he received a reply. Before the hackathon was over, Cuban had jumped on board Vulcan as a strategic advisor. Thalen is excited about Cuban’s wide network of companies that could benefit from having competitive weather insurance policies.
Vulcan is an extraordinary venture, but Thalen said he’s in good company. “I think if you go through the hackathon project list and see everything that was built in those three weeks, it’s really mind-blowing.” Even with all his success, he believes the experience of participating in the hackathon, meeting new people and learning new technology is its own reward.
“The Chainlink community and support has been really awesome. There was a lot of back-and-forth between devs in Discord, and it felt less like a competition and more like ‘get together and build the best stuff we can come up with.’”