No I'm not talking about Wade Wilson Deadpool. A deadpool is something much more boring but practical. Think of it as insurance in reverse, something that pays you more money the longer you live.

The great thing about such a system is it incentivizes you to live long. Growing much older running out of money is going to be a large scale problem going forward. It's pretty much the only product would make me go "shut up and take my money".

It's formally known as tontine, has several hundred years of history and somehow fallen out of favor. This piece is an examination on why.

Despite advances in fin-tech, deadpool is somehow not a thing in the market (I only know of handful in the west). It's the kind of cutting edge thing I expect to see showing up in decentralized finance, but there's no sign anyone pulling it off anytime soon. So let me attempt to do some first principle thinking on it.

There are two major deal breakers to implementing a deadpool: anonymity and proof of life.

Anonymity

This requires understanding some mechanics. A deadpool requires a group of people contributing money into it. At some point they are start pulling money out of it as long as they are alive. If a contributor dies, the money is divided among the remaining ones, so each end up receiving more. This goes on until the last person.

If you and I end up being the last two people alive in the pool, I would have a huge incentive to call a hit on you. Even if I don't know you personally or where you live, I could conspire with the managers of the pool to figure that out.

Or you could do the same to me. Effectively anyone who buys into this is painting a target on their back. Therefore contributors needs to stay anonymous even to the people managing the deadpool.

But does not make no sense. How would the pool knows who to pay money to if everybody is anonymous?

This makes a great use case for blockchain and crypto-currency. Everything in crypto is pseudonymous by default. Real life identities, location, bank account, nationality are made irrelevant. That itself make it easier to build sufficiently large deadpools without the confines of nation-state recognized corporations. On a blockchain even legality to the courts of law is made irrelevant.

Proof of life

Which brings us to the next deal breaker: having to prove you are alive.

In the past, deadpools were probably done among people in a neighborhood. Everybody knows if you are dead or alive, all you need to do is to show up in the pub. In that time and environment though, anonymity was the problem.

In the modern world, proof of life isn't so straightforward.

Doing so is a matter of degree. When a celebrity is rumored to be dead, dispelling it is simply a matter of taking a selfie holding up the day's newspaper or the hash of the latest Ethereum block.

That's good enough when the stakes are low. When money is at stake, people will go to great lengths to fake being a living old man. Deepfakes at it is today is good enough to render such technique useless.

There's one other way. If a deadpool is done on blockchain, then all it takes is for the person to initiate a transaction. The deadpool may assume that if a user address has outgoing transactions, the corresponding human is alive.

But this can also be faked. Transactions can be automated off chain with simple scripts, long after death. There's also no stopping an old man from passing on his account/address to his grandson, who goes on pretending to be the grandfather.

Phones are getting more sophisticated. Consider combining thumbprints and cameras. That brings the problem of how verification is done: humans or machines? If humans are part of the verification loop, would anonymity be compromised? Besides, it's generally ill-advised to trust inputs from users; everything that can be faked will be if the profit is great enough.

We may start to think about multi-factor verification. All the above are to be performed every month to prove yourself alive. The more stringent the policy , the more factors of proof to ask for. However we have to consider the fact that these are increasingly old people we're dealing with, there are only so many user-experience hurdles we can throw at them before they break.

What if trusted living human agents are part of the process? Someone would go about visiting old folks from time to time just to make sure they are around, and is legally bound to be truthful. This trust though has a high cost of roping into legal systems of nation states, not to mention a compromise to anonymity.

If a deadpool ever gets started, proof of life would likely be a continuous arms race between users and the pool. Better verification techs begets new ways to spoof, and the cycle repeats.