Insureblocks: Recent Episodes
Walid Al Saqqaf - Blockchain insurance
Michele Curtoni heads the strategy and new business development at SDX, SIX’s regulated digital asset exchange platform, which is part of the SIX Financial Group, the financial market infrastructure of Switzerland. In this podcast we discuss a wide range of topics from wholesale CBDC projects, cryptocurrencies and a lot more from the optic of a regulated digital asset platform.
What is blockchain? The first time Michele was explained what is blockchain was in 2014/15. At that time it was described to him as an append only data structure. It's an Excel where you never can delete a row, you can only add them, but you can look up whatever you wrote before and what other people wrote before it. It has a chatter effect where you have to validate what is heard by the participants in a “room”. In terms of how it applies to the financial industries, it comes down to the ledger, the compression of the ledger, intermediaries and malicious actors onto a network and how the validation of the blocks would work.
SIX and SDX SIX is the financial market infrastructure of Switzerland. SIX operates the infrastructure for the Swiss and Spanish financial centres. The BME (Bolsa de Madrid), the stock exchange of Spain, was acquired by SIX in 2020. SIX runs the CSD, central securities depository, in Spain, the clearing house called X-Clear and the listed exchange. Michele describes, SDX as a bet that SIX took a few years ago to start capitalising on the blockchain revolution. There was a recognition that SIX needed to prepare itself for this digital revolution of digital assets and crypto currencies hitting the traditional FMI space. SDX was built to cater for this new business, of both crypto and digital securities by creating a kind of CSD on blockchain to tokenise those digital regulated securities. In September 2021, FINMA, the Swiss Financial Market Supervisory Authority issued two approvals to operate financial market infrastructures based on blockchain. Specifically, FINMA has authorized SIX Digital Exchange AG to act as a central securities depository and the associated company SDX Trading AG to act as a stock exchange. This was the first time that a licence has been issued in the Swiss financial centre for infrastructures that facilitate the trading of digital securities in the form of tokens and their integrated settlement. This proved that you can build a CSD under a specific regulatory regime, using a private DLT This allows for atomic settlements, trading and settling at the same time, and for smart contract enablement. In November 2021, SIX issued its own dual tranche bond to fund the M&A transaction to acquire BME. The CHF 150m ($162m) bond was composed of a CHF 100m digital bond listed on SDX and CHF 50 million conventional bond listed on the SIX Swiss Exchange. The splitting of that bond in this manner was voted by the participants. The bond was oversubscribed and the rating was equal across the two channels.
Wholesale CBDC projects SDX participated in two wholesale CBDC projects. Project Helvetia, was conducted by SND, the Swiss National Bank, the Bank for International Settlements (BIS), SIX/SDX and 5 commercial banks. The project looked at introducing a Digital Swiss Franc as a CBDC in Switzerland. Project Jura, the second wholesale CBDC project involved Banque de France, BIS, SDX and the Swiss National Bank. The project aimed to enable instant settlement of foreign currency transactions as payment versus payment (PvP) and the use of wholesale CBDC to pay for tokenized commercial paper transactions as delivery versus payment (DvP) with immediate settlement. The project also aimed to explore how cross border central bank movements of assets and money would work. It looked at the concept of DvP, of commercial paper, in this case issued under French law against a Euro CBDC and then a PvP of that Euro CBDC versus the Swiss Franc CBDC. So, a transfer of assets versus cash and then cash versus cash.
Iota Nassr is a policy analyst at the OECD within the financial markets division. She currently manages the FinTech experts group of the OECD Committee on Financial Markets, leading the analysis around anything that has to do with digitalization of finance. The OECD Report “Why decentralised finance matters and the policy implications” is product of the committee’s expert group composed of representatives of the 38 OECD members coming from Central Banks, Ministry of Finance and other financial authorities.
What is blockchain? Iota’s definition of blockchain hasn’t changed much since her previous podcast on Insureblocks on “Tokenisation of Assets and Potential Implications for Financial Markets – OECD Report” on the 13th of June 2021. She still sees blockchain and DLT, more broadly, as a way to record, share information and to exchange value in a decentralised manner without the need for trusted central authorities or intermediaries.
However now she believes the emphasis is now more on the programmable nature of decentralised distributed ledger technologies and the level of disintermediation involved in the different networks and structures that we observe in the market.
Why this report?
The Summer of 2020, also known as the DeFi summer caught the attention of the OECD. This was due to the exponential growth they were observing and the level of participation of retail investors in what is a very highly volatile market that is devoid of the traditional safeguards that are in place for investors and consumers in traditional financial markets.
The feedback loops they have observed between DeFi and mainstream crypto such as Bitcoin, Ether ,the main stable coins along with the recycling of profits between the two kinds of environments, made it increasingly critical for the OECD to have a look at this space.
The final reason for analysing this market was the growing institutionalisation of crypto assets, which may be increasing risks of interconnectedness between decentralised and traditional finance. This report’s objectives is to like into DeFi models to understand the risks, opportunities and implications for traditional finance.
What is Defi? DeFi, decentralised finance, claims to replicate what is known as traditional finance in a decentralised way in an open way through applications built on Ethereum and increasingly on other blockchains.
There are two possible misconceptions around DeFi. The first is that not all DLT based financial applications are DeFi. So the fact that a financial application is built on the blockchain does not make it by default part of DeFi. The second misconception has to do with self proclaimed DeFi applications that may not be truly decentralised. The degree of decentralisation varies from one project to another.
The report defines three key defining features:
Non-custodial: The protocols and the applications have a non-custodial nature. There is no central authority or other intermediary gains access to or control over participants’ digital assets; instead, participants manage their private keys, and therefore their digital assets, directly. Self-governed and community-driven: Most DeFi protocols are open-source and allow the community to review and further develop the code underlying the protocols. This happens through the use of governance tokens. Composable: Existing components of DeFi networks (i.e. digital assets, smart contracts, protocols and applications built on top of the protocol layer) can be combined to create new applications. The open source nature of DeFi applications is a critical enabler of this attribute, as it allows everyone to look at the code and use it to create new applications.
Source: OECD Report Author
Most popular DeFi products The concept of liquidity mining and of collateralized lending on the DeFi lending protocols was one of the most obvious ways for investors to earn yield on the back of mainstream crypto...
In 2016, Etherisc was one of the first companies to launch a real world use case for a flight delay insurance policy on a public blockchain. Regulatory and lack of stable coin hindered that early solution. In 2017, they relaunched along with an insurance partner but still had challenges. In today’s podcast, Christoph Mussenbrock – CEO & Founder of Etherisc shares with us what they have learned since 2016 and why their 2022 launch is going to win.
What is blockchain? Blockchain is a technology which allows you to keep a distributer ledger of transactions. It comes in two flavour as either a public or private blockchain. In a public blockchain, all participants can validate transactions independently thus creating a new level of trust. Some of these public blockchain such as Ethereum offer programmable computing, which enables the running of programs such as smart contracts. Smart contracts can be used to programme a complete insurance business process on top of blockchain which is what Etherisc is doing.
About Etherisc Over the years, Insureblocks has featured a number of Etherisc’s spokesperson such as Stephan Karpischek, Renat Khasanshyn and Michiel Berende.
Etherisc was started in 2016 by Chistoph and Stephan when they develop a small prototype for flight delay insurance that they presented at DEFCON2, an Ethereum Developer conference in Shanghai. At that time it was one of the first insurance real world applications. Soon after developing this prototype the Etherisc team started encountering legal and regulatory issues. Whilst tackling those issues they decided to build a whole platform where anybody could build products on top of it, something akin to an operating system for insurance products.
This platform is an open-source common infrastructure, the Generic Insurance Framework (GIF), which includes shared smart contracts, product templates, microservices and the native cryptographic token (DIP) to enable the seamless and efficient creation of decentralized insurance products, with increased transparency and fairness for all parties.
Over the last few years they have developed a new legal model which for the German market and most other European countries which enables them to run insurance products without needing an insurance license which can be quite expensive with a large number of regulatory compliance issues.
This new legal model enables Etherisc to design insurance products without the need of a formal insurance license with the approval of the German financial regulator.
Projects currently hosted on Etherisc’s open-source Generic Insurance Framework include FlightDelay Insurance, Crop Insurance, and Hurricane Protection.
Flight delay insurance, relaunch? When Etherisc’s flight delay insurance launched as a prototype in 2016 it had no legal framework and no stable coin to leverage for it to have a compelling proposition. The lack of a stable coin meant a highly volatile risk with the use of Ethereum coin leading to insurance payout of either nothing or very large sums of money.
In 2017, Etherisc partnered with Atlas Insurance PCC to address the lack of an insurance license. Etherisc could effectively rent the Atlas Insurance license. However, a Stamp Tax of $15 for each policy meant launching the flight delay proposition was not feasible as the average premium was around $15.
It was only in 2022 that Etherisc could successfully launch their Flight Delay product with a solid legal framework and a stable coin like DAI with which it could run its transactions on.
Thoughts on Fizzy from AXA In August 2018, Insureblocks featured Fizzy, AXA’s flight delay insurance policy, which subsequently closed in 2020. You can listen to their learnings of that experience on an Insureblocks podcast.
Christoph view on that is that AXA like other traditional financial companies, typically have very complex internal IT systems which are heavily regulated.
In this podcast we had the pleasure of having Dan Salmons, CEO of Coadjute and John Reynolds, COO and founder of Coadjute return to Insureblocks to share with us the launch of their real estate blockchain platform and their thoughts on a mortgage stablecoin.
What is blockchain? Dan’s definition of blockchain: In our previous podcast, Dan had used the glass box theory as an analogy to explain what is blockchain. For this podcast he uses a football match. In the old days before live TV existed, you had to rely on a newspaper reporter or a friend at a pub explaining to you what happened in a match that you had missed. In that scenario you have to rely and trust somebody else to share that information accurately and reliably to you. What blockchain does to the property market is that it introduces the possibility of live TV where you can form your own opinion as to what happened as can everybody else. Blockchain brings that sense of all its participants having the information for themselves without having to rely on some other intermediary to give them second hand information.
John’s definition of blockchain: In August 2020, John saw blockchain as allowing the data to flow between the various different systems. Now for him, blockchain is fundamentally about trust. It’s the identity on the digital trust ecosystem that Coadjute has built by connecting numerous platforms and putting in a trusted identity. The data flows whilst important, can only be trusted if you know the identity of the source of the data. Digital identity and trust is fundamental.
Who is Coadjute?
Coadjute recognises that today the experience of buying and selling property in the UK, and in most other countries, is a complex and fragmented activity that takes a very long time, requires the coordination of a lot of parties and is overall a difficult, slow and frustrating experience for both the buyer and the seller.
It’s the same for the people involved in the property market whether it is for the professions involved in legal, real estate, government, financial and son on. They all have to come together on a property transaction for it to work. Today there is no market infrastructure like the ones you find for the stock exchange and others.
What Coadjute does is that it acts as a trusted network that connects all the systems of the different players in the property market in an interoperable manner. This means whether you’re a real estate agent, a legal conveyancer, a mortgage broker you can access your regular platform and yet still have access to the activities of the other parties involved in your transaction. You can see what is being done in real time, share messages, documents, identity funds and much more.
Pilot launch The housing market in UK is composed of numerous parties ranging from legal firms, estate agents, and lenders to mortgage brokers. Today’s property process involves waiting for documentation, chasing for updates, rekeying data and endless uploading of documents, all of which add to the time and cost of the property transaction.
With more than 25% of deals currently falling through and billions lost in efficiencies, Coadjute is introducing R3’s enterprise blockchain technology to help solve this problem.
With the Coadjute network, there is greater transparency, a reduced risk of fraud and an accelerated process with significantly less admin. Conveyancers will be able to protect sensitive client data by Coadjute’s encrypted network, which only the conveyancer and the receiving party can see. In addition, all parties involved in a property deal – including the estate agent, conveyancer, mortgage lender, and broker – can track the live progress of the transaction from their existing software.
Launching in July 2021, with the first live property deal on the network, a 3-bedroom house, Kent, Coadjute has ambitions to reduce the 5-month average process for buying and selling property by half.
Todd McDonald is the co-founder & Chief Strategy Officer at R3. In this podcast we discuss R3’s Product Vision and their views on market trends, market needs and R3’s long term product investment.
What is blockchain? Blockchain is a way for multiple participants to join a network and update the state of that network without having to trust someone to coordinate amongst them. For businesses, Todd sees blockchain as a way to connect with more customers and more businesses without having to worry as much around the trust factor.
Three market trends Back in September of this year Todd presented at CordaCon a presentation entitled “R3 Product Vision: Market Trends, Market Needs and R3’s Long-Term Product Investment.”In it he started by analysing three market trends:
“Everything is an asset”, “push-pull of (de)centralisation” “Plan ahead for regulation”.
Everything is an asset Blockchain has the ability to create digital scarcity. Essentially anything that you can prove ownership of can become an asset. Assets can be digitally mobile such as NFTs and/or they can be used as collateral for a loan.
A digital asset of course can be the digital manifestation or representation of a real physical asset but equally it could also by a pure digital asset. Pure digital assets, such as the purchase of digital property in the Metaverse, have recently seen a bit of an explosive growth. Republic Realm purchased a $4.3 million 24x24 digital piece of land, whilst Metaverse Group in November made a $2.43 million purchase of parcels in Decentraland.
Push-Pull of (de)centralisation Blockchains are custody and software. They’re the ability to custody digital assets in the software layer without having the need of human beings. Todd shared with us that some of the biggest investors in this space so far have been existing intermediaries. Financial market infrastructure is heavily investing in distributed systems and blockchain.
He then explains what he sees as the different facets of the decentralisation journey:
You need critical mass and become successful. There needs to be a journey to attract people to a network and distribute the roles of that network. Potentially over time the network can become more distributed to decentralised. What is interesting about the crypto side is that with tokenomics all participants can be incentivised from day one onto a decentralised network Progressive decentralisation a term coined by Jesse Walden, from Andreesen Horowitz, talks about starting out within a bootstrap minimum viable ecosystem, ie. quite centralised, which as it grows can progress into a decentralised one
Plan ahead for regulation Once regulation starts it pretty much only increases. This comment isn’t specifically related to crypto regulation but more on financial services. There is an increasing amount of regulatory imperatives such as open banking, GDPR, and Central Securities Depository Regulation (CSDR).
Modernising market infrastructure SIX digital exchange became live on the 18th of November 2021, when SIX, launched a CHF 150 million ($162 million) tokenised digital bond with Credit Suisse, UBS Investment Bank, and Zürcher Kantonalbank acting as the joint lead managers.
What is interesting about this new digital market infrastructure that SIX launched off an R3 Enterprise Corda blockchainis that it leverages an existing ecosystem that SIX had. Second it has the ability to handle an asset through its lifecycle from cradle to grave. Three the settlement process, of settling into what is in effect into a central bank digital currency.
What this illustrates is a way for these new tokenized assets to have higher velocity and to be able to reach across borders in a way that regulators are ok with.
Corda & Conclave Early on it with the launch of Corda, it became clear that industries wanted to bootstrap networks where the founding participants wanted to control those net...
Over the last 12 months Decentralised Finance also known as DeFi has really exploded with reported total value locked reaching $250bn. R3 who operates in the permissioned blockchain space is spinning out Obscuro into the permissionless space of DeFi. In this podcast we’re joined by James Carlyle who explains the DeFi landscape, the challenges it faces in terms of privacy and scalability and how Obscuro can address these.
What is blockchain? Blockchain is a distributed databased. Instead of one party running it, it is run as a network by a group of entities who don’t necessarily trust each other. It contains features that ensure that entities don’t need to trust each other, they can trust the infrastructure and the code itself.
James has been on a blockchain journey since 2015 when he started off with permissionless public systems like Bitcoin and Ethereum prior to joining R3 in 2015 and helping to design Corda. Corda though had a very different principles than permissionless public systems as it was designed as a permissioned blockchain. The participants all have a verified identity so you know who you are dealing with, whilst on permissionless system they have a pseudonym. Now with Obscuro, James is returning to permissionless public systems.
Decentralised finance (DeFi) Over the last 12 months Decentralised Finance also known as DeFi has really exploded. A few weeks ago JP Morgan reports that total value locked (TVL) has grown from last year’s $20bn to $200bn today.
For James, Defi is an expression of freedom and of innovation. It’s growing very rapidly as it’s able to innovate at lightspeed. All of these applications are open source which means that it is possible to take an existing idea to either build upon it or in some cases to steal it and simply rebrand it. These things increase the level of innovation and increase the level of take up.
At the heart of DeFi is transparency. It runs on permissionless systems, which means anyone can take part, download the data and help in the validation process.
The first generation of DeFi builders and users were not interested in privacy and James believes that DeFi is heading towards a new generation to builders and users who are aiming for a more mass market where privacy is important. The ECB released a report on the digital Euro where privacy is seen as a key digital enabler.
Whilst privacy is important it can unfortunately also be used as a cloak for illegal behaviour. For DeFi to be picked up and used by the mass market it has to be more regulated. Regulation needs identity and KYC. R3 is uniquely placed to interact in this space as it has this rich heritage of having very strong ties with regulation and regulators
Miner extractable value (MEV) In a public blockchain system such as Ethereum there are participants who are submitting transactions. Miners who are here to confirm transactions can see the contents of the transactions that users have submitted. They can take advantage of it in some cases in what is called front running. For example, if you want to buy something on the market you don’t want someone else to bid the price up ahead of the transaction. That’s what is possible when a miner can spot that a user is trying to something and they decide to step in first and thus get the transaction before the user and the user is left behind buying it at a higher price.
It has been estimated that around $1.4 billion of MEV is being taken from Ethereum blockchain users annually from a total DeFi market of around $50 billion. Global financial markets are worth $100 trillion. One of the main motivations of Obscuro is to help solve some of these issues.
Ethereum scalability issues Ethereum to some extent is a victim of its own success as it suffers from scalability issues. With the explosion of DeFi projects, and their corresponding transactions that need to be processed by all of the nodes on the Ethereum network,
Tim Nelson is the CEO of Hope for Justice and is part of the founding board of the charity which exists to try and end all forms of human trafficking and modern slavery across the globe. They work alongside major multinational businesses through an organisation called the Slave Free Alliance that they set up a few years ago.
What is blockchain? Blockchain is a distributed database that is shared between the nodes of computer. It stores information electronically in a digital format. It maintains a secure and decentralised record of transactions and what differentiates it to other databases is that it guarantees the fidelity and security of a record. This generates trust without the need of a third party.
Modern Slavery According to the International Labour Organisation (ILO) there are 40.3 million people in forced labour, sexual exploitation, domestic servitude, organ harvesting and forced marriage worldwide:
Including 24.9 million in forced labour and 4 million in forced marriage. It means there are 4 victims of modern slavery for every 1,000 peoplein the world 1 in 4 victims of modern slavery are children. Out of the 9 millionpeople trapped in forced labour, 16 million people are exploited in the private sector such as domestic work, construction or agriculture; 4.8 million persons in forced sexual exploitation, and 4 million persons in forced labour imposed by state authorities. Women and girls are disproportionately affectedby forced labour, accounting for 99% of victims in the commercial sex industry, and 58% in other sectors
Global Estimates of Modern Slavery
Most people think that slavery was ended with the William Wilberforce Day. However every day around the world people are being trafficked every day. They are forced to work within the supply chains of major multinational businesses, into all forms of sexual exploitation, into forced domestic servitude and in countries where there is no organ donation scheme, there is organ harvesting.
Most people are shocked to know that for example in the UK, the number one place people are trafficked to the UK is actually from the UK. People are actually taken in the UK.
When Hope for Justice started doing rescue and investigation in the UK, the organisation started in an area in West Yorkshire that covers 2.2m people. At that time the entire police force across England and Wales had rescued 88 individuals and said that was the extent of it through an operation called Pentameter one. Hope for Justice within its first year of operation in just West Yorkshire alone, rescued 110 victims of which the youngest was just three months old trafficked for sexual exploitation and the oldest was 58 years old for forced labour.
Impact of COVID The impact of COVID has been massive on everyone around the world. The shutting down has made a bigger impact on the most vulnerable in the world. Farmers have missed crop planting or harvesting whilst others haven’t been able to go to work putting them into a very vulnerable situation. It is in that backdrop that we see a real shift happening. Companies have rolled back efforts the they were doing globally. According to Tim, COVID has probably hit back the movement against modern slavery about 10 – 15 years.
The vulnerabilities that existed in communities have been exasperated by COVID and one where traffickers have gone in to exploit those individuals who have the greatest degree of vulnerability. The degree of this impact is going to be felt for the decades to come as individuals who have had to take on debt, many of them are going to become debt bonded to the individual traffickers themselves. Whilst those who have taken loans whose interest rate is so high that the will never be able to pay off those loans. There is a quarry in India where 30,000 families are debt bonded to the quarry.
A $150 billion industry According to the International Labour Organisation (ILO) forced labour generate...
Central bank digital currencies (CBDCs) are increasingly being talked about in the press with announcements of initiatives from different central banks working on CBDCs coming out left right and centre. Few however are as forward thinking and embracing a collaborative approach as the Bank for International Settlements (BIS). For this podcast we are joined by Daniel Eidan, Adviser and Solution Architect at the Bank for International Settlements (BIS) in the Innovation Hub where he builds technology solutions for the central banking community with a special focus on blockchain and CBDC. He will share with us some of the exciting work his team are doing for driving CBDC forward.
What is blockchain? Blockchain and DLT is often referred to as Web 3.0 whilst the internet of today is Web 2.0.
Web 2.0 enables to globally connect communications protocol whilst blockchain and Web 3.0 isn’t just about putting communication protocols digitally but to store value digitally. What blockchain enables is to execute computations between different members and keep a record of state. Essentially as Daniel mentions we can encapsulate value. Value can be cryptocurrencies, central bank digital currencies, contracts and many other forms of value. This wasn’t something possible in the Web 2.0 because the fundamentals weren’t there.
What are CBDCs? To fully understand what CBDCs, central bank digital currency, are you first need to understand what is a currency. Money and currency in general have three attributes:
They are a unit of account A store of value A medium of exchange
What central bank digital currencies do is that they digitise those three attributes.
To explain how this happens Daniel uses the “money flower” approach which looks at its four different attributes:
Is it universally accessible? Is it electronic? Is it issued by a central bank? Is it moved around in a peer to peer way?
A retail form of CBDC will have all four of the money flower attributes. It will be universally accessible, it will be electronic, it will be issued by a central bank and contain central bank liability, and it will transact in a peer to peer way.
What is important to recognise is that most of the retail monetary base is not central bank money, it’s commercial bank money. For example, when you deposit money at you bank it is likely that a large part of your fiat currency is with a claim against your commercial bank. Then through a set of mechanisms that claim is insured by potentially a central bank or a federal institution.
The only claim that retail can have against a central bank is in the form of cash. Cash of course is a tiny percentage of the total amount of money individuals have. What CBDC does is takes that cash liability, in a retail context, to exist in a digital context in a way that’s accessible to anyone.
The question is what happens to individuals who do not have a smart device, or electricity, or WIFI? In addition, how is universal accessibility attained to individuals with disability issues or are elderly? There are a number of technical solutions that can help to lower this barrier but it is one that is a challenge in terms of the last mile for reaching ubiquitous CBDC.
In the case of wholesale, the case for CBDCs is to broaden the base of digital currency from tier one institutions that are regulated domestically to fintechs, startups and perhaps banks in other jurisdictions. So, it's really extending the promise and the capability of central bank money.
Privacy Why is cash private? There isn’t actually a mandate for money to be private. The fact that cash is private is a consequence of the technology. Cash however isn’t always private. For example, purchasing a house in only cash cannot be done in a private privacy manner.
Daniel makes the important point that CBDC will promote more privacy than digital payments of today that are motivated by commercial interests....
Leandro Nunes, Vice President, Product Development and Innovation at Mastercard, joins us to share how he leveraged Mastercard’s DNA in scalability, payment automation and governance. We also discuss the important of a data governance model and his top tips for building scalable blockchain solutions.
What is blockchain? Blockchain is a distributed ledger technology (DLT) that uses a consensus methodology to immutably record blocks in sequence in a ledger. It’s a technology that is driven by data governance. The governance is on the data side not necessarily on the blockchain. Data governance looks at the question of ownership of the data, who has visibility over it and the rights for sharing it.
It allows for the creation of networks to tackle use cases where the participants can integrate their systems in a decentralised environment where they can share the data. This provides the visibility to increase the trust between the participants.
Leandro also stresses what blockchain is not. It’s not the saviour of the world and shouldn’t be a solution looking for a problem. As any other technology blockchain needs to connect and be integrated with other solutions such as AI, IoT, payments and others.
Mastercard’s DNA – network builder When talking about blockchain there is this dependency on how to build and manage a network for different participants. In some ways these challenges are similar to the one of payment networks like Mastercard who has the established the credibility of having the global coverage, the need to scale, and acts as a neutral network builder not taking any sides. It is this element which is within their DNA. It is this DNA which can be leverage to build and gain adoption to new technologies such as blockchain.
When you swipe your Mastercard within two seconds the user gets an approved message. Within those two seconds a lot of things happens amongst many participants to make sure the settlement is done.
Mastercard provenance solution
Mastercard’s Provenance Solution, is essentially an API layer on top of a Mastercard blockchain that serves as an orchestration hub for an entire ecosystem of partners. It bridges the supply chain traceability events with a payments network. This enables to share supply chain related data to inform the decision making process for the payment side. Decisions can be automated which in turn reduces the reconciliation costs, dispute resolution and speeds up the entire process.
Leandro stressed that they’re not a tech company trying to sell blockchain. They use blockchain as a technology, the value they can bring in addition to combining supply chain traceability along with the payment side is around bringing scalability to the governance. Working with their partners to answer the questions of how do you build a network where you can be neutral within its governance structure? How do you create a governance where you don’t take sides?
Use case: Australian farmers In August 2021, Cirralto, the B2B payment services business, announced it is leveraging the Mastercard Provenance Solution, and the Fresh Supply Co digital supply chain network, to provide Australia’s farmers with better access to trade finance.
The WTO estimates between 80% and 90% of global trade relies on trade finance, yet there is a $1.5 trillion gap between the market demand and supply for trade finance. Financial institutions usually don’t want to lend money to a small supply chain company that they don’t know. However when you bring traceability, you bring blockchain and you increase visibility and trust these financial institutions realise they can use this data to reduce their risk assessment to make better lending decisions.
Cirralto brings the fintech side, along with local lenders in Australia, to Fresh Supply Co supply chain network who brings the traceability platform and sharing the data with the Mastercard provenance solution.
Alisa DiCaprio, is the Head of Trade and Supply Chain at R3 and also facilitates a lot of R3’s research. Whilst the concept of governance is familiar to many in the business community it has proven to be quite a challenge to blockchain business networks. In this podcast we discuss with Alisa, her latest research paper on the future of enterprise blockchain governance and collaboration. We cover some of the design and implementation of new business and technical models that will ensure that your blockchain journey is a success.
What is blockchain? For Alisa, blockchain is just a database but what makes it different from other databases is that it’s decentralised that is global accessible. Like other digital technologies, blockchain requires the same adjustments to the global and commercial infrastructure.
Discussing the future of governance and collaboration In July 2021, Alisa published a white paper entitled “The Future of Governance and Collaboration”. R3 began itself as a banking consortium and thus gained from the get go experience on how to build and manage consortiums. A lot of their consultations with companies building on Corda was about how do you manage a consortium?
What they realised is that when projects go wrong it often is not because of the technology but because of the decision making process that doesn’t work or something with regards to governance. So, the white paper was an effort to set out the different examples of where governance has worked and all the different choices that need to be made. It sets out the policies that need to be thought of, it defines what is governance, and the questions that need be asked when building on blockchain technology.
What is governance? Governance refers to the processes and the rules that determine how a system makes decisions as it evolves. It is something that needs to be thought of as early as possible as it establishes the core capability for a sustainable business network to last from its inception to the future.
Are aspects of governance unique to blockchain? In legacy technologies there are well defined areas for adjudication when things go wrong. As blockchain is a new technology it doesn’t have those well defined adjudication history nor a long lasting legal infrastructure. A lot of today’s rules and regulations don’t apply to blockchain, so for this reason, governance becomes very critical. It contributes to its reputation as a technology that works.
Why do blockchain projects fail due to governance? For Alisa, there are two types of characters that are early blockchain builders:
Entrepreneurs Established businesses that may have an innovation fund or some money to play with
Entrepreneurs who build on blockchain are usually new to the technology and are not necessarily thinking about establishing a governance structure. Established businesses which could be large companies or existing consortiums who are building on blockchain have an existing governance structure and they assume that it will work with blockchain and it doesn’t always.
How do traditional business networks differ from blockchain business networks? Traditional business networks differ from blockchain business networks in three ways:
Consortiums are considerably more common in the setup of blockchain business networks. The reason for that is because blockchain allows to innovate on a sector wide level rather than just a business level Blockchain business networks take a lot longer to implement than traditional business networks and also to change. Part of the reason is because it’s so new that it is unclear what the regulatory infrastructure is. You may need to establish a rulebook if the legislative component does not exist. And of course, there is a business culture change with suddenly the need to operate in a decentralised way. The role of the business network operator becomes a lot more important that it is in traditiona...
IDunion is a new European decentralised identity management platform that is promising to bring user centric digital identity with privacy at its core. In this podcast we had Adrian Doerk – Product manager at Lissi and communication & Public relations at IDunion, walk us through IDunion.
What is blockchain? For Adrian, blockchain is just a data structure. When you expand its definition from a DLT (distributed ledger technology) perspective with multiple nodes on a network what makes it interesting is whether the rights to writing on the network are permissioned or permissionless. This is determined by the type of consensus that exists on the network who determines who and what is written into the network.
Present challenges with digital identity History of the digital identity on the internet:
Isolated siloed identity where users would login and authenticate themselves with the provider of a digital identity for accessing a service Federate identity where multiple companies and institutions got together and agreed on a single sign on for multiple sites. However, the challenges of this model is that the identity was still focused on a central operator and not all companies and institutions where comfortable with this approach User centric identity where a classic example is login with Google login or Facebook login. Whilst this is very convenient for the user it does lock up the user in a proprietary ecosystem which is very dangerous since these providers live from user and behavioural data which they resell to third parties.
The next generation of digital identity will be designed with privacy by design principles. It will be a user centric proposition that is both convenient but also gives the user more control around their identity for authentication and identification purposes.
Identification asks: who are you? Authentication asks: is it you again?
IDunion vision IDunion is a consortia, whose aim is to build an open ecosystem for self sovereign identities controlled by its user. Whilst the platform can be used everywhere it is based on European values, laws and regulations.
Everyone (including natural as well as legal persons and things) has the possibility to manage their identity information by themselves and to decide when they want to share this information with whom. The sovereignty over one’s own data is tremendously important, especially when it comes to very sensitive and personal information.
Users can choose one of several wallets, which are used for storing and presenting credentials to third parties as required. This is helpful for a wide range of use-cases and enables a new way of identity management. Thus, technology companies are no longer acting as a central identity manager, but the user himself! The user can decide where the information can be seen, which program is used to manage information and with whom this information is shared. We call this concept the self-sovereign identity.
IDunion platform Source: IDunion
IDunion uses Hyperledger as a kind of technical umbrella for their multiple implementations:
Hyperledger Indy for the implementation of the network Hyperledger Aries for the agents which communication with the network Hyperledger Ursa for the crypto libraries
Governance IDunion initiative was started by a number of German stakeholders and early on received some funding from the German government.
The newly founded IDunion organisation will act as the legal entity behind the network and represent the stakeholders’ interests within a European Cooperative Society (Societas Cooperativa Europaea S.C.E.). In addition to operating the network, the organisation’s main tasks will be to attract new partners and to bring together partners working on the same or similar use cases. This ensures that all European participants are put on a level playing field.
The participants in the network have defined rights and obligation...
Jim Nasr, is the CEO of Acoer, a software development company whose vision, and work is all about building useful, usable, real time technologies that are fundamentally targeted at the healthcare industry. Jim was the former chief software architect at the Centre for Disease Control and Prevention (CDC) in the United States. In this podcast we discuss how NFTs and blockchain can be used to empower individual’s consent.
What is blockchain? Blockchain is a public infrastructure that should be used within the public context. Blockchain provides transparency, auditability and accountability. Blockchain is a layer of trust that can be used to impute trust between parties who don’t trust each other.
Jim is keen for blockchain to move past the world of cryptocurrencies and proof of concepts. He wants to make blockchain as practical as possible with real practical solutions.
Challenges of consent Consent is an element of compliance.
In the healthcare industry, when you go see your GP, you fill out paperwork to essentially give them consent to your medical health information for all time. For Jim there are a number of issues with that. It’s wrong that the patient doesn’t always fully comprehend what they’re signing, the process is complicated, it has to be done multiple time and the patient has no rights to say they’ve changed their mind. Jim gives the example that “if you're my orthopaedic surgeon, you should not have access to my mental health information”.
There is a double challenge with regards consent. On one side individuals who sign consent forms have no idea what they have exactly signed, what data is shared and where that agreement is. On the other side organisations have limited idea on who signed what agreements, what data was covered and where the agreements are stored. This creates repetition of the process where the individual is repeatedly asked to sign new consent forms.
Dynamic consent is the recognition that consent is not a and done concept, it is more dynamic with potential multiple phases for providing consent with the ability to revoke the consent, where the consent may expire after a certain amount of time and where it could be renewed.
Dynamic consent is digital which gives it properties to be tracked and monitored.
Data dignity Data has creators like individuals on Facebook, Instagram and Twitter to name a few who create data on those platforms. Essentially, we are implicitly giving those platforms the ability to use this data and along the way we become the product for the “free usage” of that platform. Consumer of those platform are creating content for the platform to leverage in a manner that creates a financial windfall for themselves. The issue is that we as consumers have no say in how that data is marketed and no say on whether firms like Cambridge Analytica use our data and create secondary data markets for themselves.
Regulation: GDPR & CCPA Regulation such as GDPR (General Data Protection Regulation) and CCPA (California Consumer Privacy Act) provide an important opportunity for regulators to help regulate consent. GDPR gives EU citizens the right to grant access to their information to third parties, including consent and gives them the right to be forgotten. Crucially this regulation carries some serious teeth where the financial penalties for firms who breach GDPR regulation is up to 4% of gross revenue.
For example Google has received a fine of €50m, British Airways of €22m and Marriott International of €20m.
CCPA is very similar to GDPR in terms of the protection it provides to consumers, in terms of consent and in terms of being fined if firms don’t comply.
In the healthcare industry there is the Cures Act which gives patients the legal right to get access to their health data from their electronic health record irrespective of the type of app they’re using.
Components of consent There are multiple components to a consent.
In January 2020, 12 global pharmaceutical companies and 17 public and private entities; including technical, legal, regulatory, academia, research organisations and patient representative organisations, got together to form PharmaLedger, the pharmaceutical blockchain consortium.
Joining us for this podcast is Daniel Fritz, PharmaLedger Industry Project Leader and Supply Chain Domain Architect at Novartis and Marco Cuomo, Manager Applied Technology Innovation at Novartis, a team that brings in new technologies, such as blockchain, into Novartis. Marco is also the co-lead architect at PharmaLedger for the blockchain platform.
What is blockchain?
Daniel likes to introduce blockchain with the five A’s:
Assets, too often blockchain is associated with cryptocurrencies as assets but assets can also be data and medicinal products that can be exchanged on a distributed ledger technology Audit, the immutability aspect of blockchain is good for audit. Automation, use of smart contracts eliminate non-value adding steps Anonymize, especially important in the healthcare care industry to protect the patient’s data by keeping it confidential and protecting their privacy Authority, no central authority where authority is distributed amongst the participants
For Marco the real strong added value blockchain provide at its core is the immutability function. Whatever you store on the blockchain, transactions and data are immutable so no one can change it.
An introduction to PharmaLedger
PharmaLedger, launched in January 2020 as a public private partnership under (IMI) the Innovative Medicines Initiative, a joint undertaking between the European Union and the (EFPIA) European Federation of Pharmaceutical Industries and Associations. It’s a three project with over €22m of public private funding. There are 29 partners in the consortium which includes 12 pharmaceutical companies whose goal is to accelerate blockchain adoption. Its aim is to prove that this technology can bring value to patients, increase trust amongst all of the different ecosystem stakeholders and enable new capabilities around supply chain clinical trial and health data. In addition it aims to demonstrate that blockchain can address some of the key challenges the industry has around identity and governance.
The whole idea of the IMI is actually about building consortiums to address problems or challenges that are too risk for any one company or too expensive for any one company and which would benefit from having public partnerships.
PharmaLedger use cases PharmaLedger has launched with 8 use cases broken down into three domains:
Clinical trials Health data Supply chain
Within the supply chain domain, you have two versions of supply chain traceability: clinical supply and finished good traceability. There is electronic project information (ePi) which is also known as an e-leaflet, or an e-patient information leaflet. It’s a digital version of the leaflet you find in a medicine box. It contains the latest approved version of that leaflet in a manner that preserves the patient’s privacy. In the future it will have the capability to send out recall notification, if there was a quality issue of that product, to send updated product information and also to apply some additional checks on the provenance of that medicine to help reduce the risk of counterfeits.
On the clinical trial side, they have eRecruitment which is clinical trial recruitment so that patients can share their health profile and be matched through an algorithm to open clinical trials. Clinical trial eConsent aims to reduce the very administrative process for agreeing to undergo procedures and processes for any clinical trials. Clinical trial for IoT devices is for getting data from devices. Personalised medicines is putting it all together with some advanced digital technologies like machine learning and artificial intelligence to help predict what ki...
Arnoud Star Busmann, CEO of MineHub and Carl Wegner, CEO of Contour join us in this exciting podcast to discuss their cross blockchain ecosystem collaboration. Arnoud and Carl share their insights on how to identify opportunities for cross ecosystem collaboration based on customer overlaps and data to ultimately build an experience that will delight the customer.
What is blockchain? Carl’s definition of blockchain, within the context of distributed ledger technology, is a way of managing multiple databases and keeping that data where they overlap is in sync. You have a set of consensus mechanisms to manage agreements between the multiple databases, a communications protocol and a rules-based system for them to work.
Arnould’s definition of blockchain is one of a data infrastructure that provides a shared single source of truth that is distributed across an ecosystem. The responsibility for maintaining the shared truth maintained by a neutral, unbiased machine or machines. The data is owned by the data owners but the truth is controlled by none of them. The governance model of data is really the crux of blockchain technology and distributed ledger technology in Arnould’s opinion.
ERP 2.0, it’s the ecosystem resource planning, building the apps and solutions that create value across an ecosystem instead of just one enterprise on the basis of that shared data.
Challenges MineHub addresses
In the mining and metals industry there are many parties involved in post trade management of physical commodity transactions and across general supply chains. The multiple parties have a tendency to collaborate and coordinate themselves via email, sending PDFs or couriering paper documents. So, by the time that information is reconciled and acknowledged to be true, the cargo is already discharged or financed.
There are a number of challenges with this approach in the sense that it is easy to manipulate, hard to trust for important business decisions making such as credit decisions, stockpile optimization, purchasing, pricing and compliance. The worst problem according to Arnoud, is that the valuable information has a tendency of being locked up in courier bags or boxes.
World Economic Forum White paper: “digital transformation is estimated to generate more than $320 billion of value in the metals and mining industry over the next decade, including $77 billion”
MineHub ensures that its users have high quality information, reliable information about the most important risks and opportunities in their daily work available in real time
MineHub has developed its platform on HyperLedger Fabric. However, it is on their roadmap to go multi-ledger because they have a requirement to have a single reliable source of truth with data privacy and data residents.
Challenges Contour addresses
Contour was previously known as Voltron before they rebranded.
Trade finance is a very paper intensive industry where information is being couriered back and forth. Goods are arriving before the paperwork gets there thus making credit decisions harder to make or slower.
Contour focuses on one aspect of trade finance which is a letter of credit, which is where a buyer and seller have some trust issues between each other. The buyer doesn't want to pay for something that he didn't want, whilst the seller doesn't want to ship and let go of his stock until he's sure he's going to get paid. They both use their banks to act as intermediaries to effectively manage the trust. That trust is managed by moving documentation between buyer and buyer’s bank and seller and seller’s bank and back and forth.
Contour facilitates all four parties ability to see information at the same time. All four parties can join one ecosystem to support a letter of credit between them using one platform, an R3 Corda platform, instead of potentially four and Contour allows transparency and veracity of information between the parties.
Asset tokenisation has become one of the most prominent use-cases of distributed ledger technologies (DLTs) in financial markets, for assets including securities, commodities and other non-financial assets. For this podcast we had Iota Nassr, Economist and Policy Analyst at the OECD, join us to discuss her recent OECD report on the tokenisation of assets and their potential implications for financial markets.
Iota started working as an investment banker at Merrill Lynch and at Citigroup before joining the OECD for the last 9 years working for the committee on financial markets. The committee has set up an expert group on financial digitalisation which includes representatives of central banks, finance ministries, treasuries and other financial authorities from the 38 OECD members. The group looks into Fintech related matters in financial markets and their policy implications including the area of blockchain in finance.
What is blockchain? Blockchain is a type of distributed ledger technology, that records information in a distributed manner, in an immutable, time stamped and programmable manner that allows for the exchange of value without the need for a trusted central authority or without the need of intermediaries.
This allows for efficiency gains on the back of such disintermediation.
Tokenisation of assets and potential implications for financial markets – OECD report On the 17th of January 2020, the OECD published the “Tokenisation of assets and potential implications for financial markets” report.
Since 2018, the OECD committee on financial markets had been working on blockchain related issues. What kicked it off was the ICO (initial coin offering) hype, which the OECD looked at for their potential for SME financing in a report entitled “Initial Coin Offerings (ICOs) for SME Financing ”. With the drop in ICO hype the committee continued to have an interest on the potential of tokens and tokenised markets post ICO, particularly on their potential proliferation in the technique of tokenisation would affect traditional financial markets.
What they were really looking at is a theoretical environment where tokenized assets and market for tokenized assets take off. If that were to happen, how would it affect financial markets? And what do policymakers need to know and think ahead of that? That was the initial objective of the tokenisation of assets report they published in January 2020.
What is tokenisation of assets? The report looks at tokens from two perspective: (1) tokens representing a pre-existing real asset and (2) tokens “native” to the blockchain.
Source: OECD Report
The firsts case has tokenisation as the process of representing in a digital way by using the DLT an asset that already pre-exists. The tokens exist on the chain and carry the rights of the assets that they represent. They effectively act as a store of value for something that exists in the physical world.
Source: OECD Report
In the second case, we have native tokens which are built directly on the chain and live exclusively on the distributed ledger. Cryptocurrencies like Bitcoin or payment tokens are examples of native tokens which derive their value in of themselves and are defined by their existence on the blockchain.
The difference between the two is that in the first case the real assets on the back of which tokens are issued, continue to exist in the off-chain world. In the case of physical real assets, those would need to be placed in custody as to ensure that the tokens issued are constantly backed by those real assets. In the second case the issue of custodianship or third parties securing the existence of the tokenised asset does not exist.
The role of the custodian in the first case is quite important because they are here to ensure that the real assets continues to exist off chain, that the characteristics of the asset correspond to the characteristics that are assigned to the token is...
Harry Behrens – bloXmove co-founder. Harry was until recently the Head of the Daimler Mobility Blockchain Factory where they built a mobility blockchain platform. Harry describes himself as a software guy. Now, along with his co-founder Sophia Rodiger, he has performed a management buyout of the Daimler Mobility Blockchain Platform which is the core of what bloXmove will be bringing to the market. In this podcast we discuss how bloXmove will enable building an open mobility ecosystem.
What is blockchain? Harry defines distributed ledger technology (DLT) as way for independent parties to keep a shared set of truthful facts of transactions they conduct amongst each other. It is a peer to peer system that facilitates trusted transactions between trustless parties, where they can trust the distributed ledger to reflect the reality of the business relationships between them.
From Daimler Mobility Blockchain to bloxMove
One of the many uniqueness of this startup is that of the four founders, two of them are women with the CEO being a woman named Sophia Rodiger, who also comes from the Daimler Mobility Blockchain Platform.
The Daimler Mobility Blockchain Platform is a blockchain project at Daimler Mobility AG whose aim is to sustainably optimize booking and invoicing processes for mobility solutions.
Non-native electric automakers, where native electric being Tesla for example, are facing serious transformations, in additions to the challenges of COVID19. Daimler for example is doing a form of demerger of all its entities where the truck unit is being separated from the passenger car unit and its financial arm is being split into two. In such times Daimler, like any other business, needs to focus on its core business. Thus, no matter how promising the mobility blockchain platform could be for Daimler or Daimler mobility it isn’t core business.
The platform was production ready and was ready to be “unleashed” as Harry describes it. However, as the platform was built for ecosystem, he believes that any big player with a very strong brand name will never be able to build an ecosystem because it won’t be able to attract the other brands to its ecosystem. For example, Daimler wouldn’t be able to attract Toyota, BMW or Tesla to join the Daimler Mobility Blockchain Platform.
Thus, the only way to do a platform game, to go into platform economics based on software can only be done via a perceived neutral entity. A platform branded as the Daimler Mobility Blockchain Platform will never be able to become the platform for shared mobility or urban mobility.
It was thus agreed that Sophia and Harry will perform a management buyout of the Daimler Mobility Blockchain Platform via bloXmove with the help of venture capital funding from players such as Outlier Ventures.
“By granting the software license, we want to make it possible for the platform to be used for other areas of application and thus to reach its full potential. I am very pleased that our successful pilot project is now being continued and further developed at bloXmove,” says Carmen Roth-Schäfer, CTO Daimler Mobility AG.
BloXmove being this independent third party is now able to build on this mobility blockchain platform and build a mobility ecosystem to revolutionise the way urban mobility is conducted.
Changes to the mobility industry About 5 years, Harry shares, that the automotive industry started looking into an analysis of the upcoming megatrends such as “CASE” (Connected, Autonomous, Service/Software, Electrification), development towards smart cities, environmental consciousness and avoiding congestion in the big cities.
Mobility as a service is increasingly growing as large cities are increasingly becoming congested and cities are in turn trying to reduce the number of vehicles in them by adding congestion charges and reducing parking spaces. Cars are increasingly becoming internet connected computer on wheels with higher degre...
Souleima Baddi is the CEO of Komgo, an innovative platform that powers trade networks. In this podcast we discussed the challenges of bringing blockchain to the trade finance industry. Souleima shared her insights on how to manage the need to bring user value immediately whilst dealing with both tech and user issues for adopting blockchain. How do you manage IT and security departments conventional ways of vetting a new platform whilst gaining the trust of traders accustomed to using email and paper processes for the last decades?
Souleima is a banker, having spent 18 years with Société Générale, of which the last 10 years were in Geneva launching their commodity finance business. She’s also a passionate mum of three kids.
What is blockchain? Blockchain is a distributed ledger. It is a shared and synchronised database across multiple participants, that enables the recording of interactions and transfer of information, such as identity or values like money and securities, between two parties without the need for a centrally coordinating entity.
Komgo uses DLT to create a digital audit trail of documents which strongly mitigates the risk of hampering the document or using the document multiple times for fraudulent purposes.
Trade finance industry challenges One of the main challenges of this industry has been its usage of paper based process for such a long time.
There has been an acceleration of digital transformation that has increased due to COVID. However, transforming an industry does take a lot of time. Individuals are not easily willing to change their way of working, their routines, to invest in change management and put extra effort to adopt new processes.
Komgo has more than 150 companies using its platform on a worldwide basis. Souleima recognises that for companies using any new software is a huge investment in terms of time and energy before it brings added value to the company. Teams within companies are swamped with their everyday job with their execution and it is extremely challenging for them, despite their goodwill, to embrace digitisation on top of everything else.
The good news is that the trade finance industry recognises that digitisation is an absolute must and that it will play a major role in the future of the industry. The players who move too slowly in embracing digitisation will lose their competitive edge to others who are faster at it.
Komgo
Komgo is an industry initiative with 20 shareholders from corporates and financial institutions who have merged forces to build a solution that matches the needs of the industry from both sides. Komgo is a software development company incorporated in Geneva in 2018 whose vision is to bring workings solutions to clients that helps them execute more trades, faster and in a more secure manner.
Komgo, offers fours solutions to the market:
Konsole: streamline trade finance – structured and authenticated messaging to issue secure banking instructions Market: optimize liquidity & manage risk – harmonized data and transactions to enable better choices Check: simplify onboarding & renewal – a single source to accelerate KYC Trakk: keep track of document trails – build unique documentary audit trails to guard against fraud and falsification
Konsole Konsole allows banks and corporates to connect together in an authenticated structured exchange around the full lifecycle of trade finance instruments. Souleima provided an example where corporates can discuss between them and agree on the draft of a letter of credit which they can push it to their banks. There is no need to create new chains of interactions, it goes from opening the issuance, the amendment and the presentation of the document to the settlement of the letter of credit.
In addition there are automated flows between Konsole and the client’s internal systems so that data flows from the eCRM of the trader can move through the platform to the back ...
Chaim Finizola is the ClaimShare Director and the head of business development for emerging markets over at IntellectEU. In this podcast we discuss ClaimShare’s confidential computing solution built on top of R3’s Conclave and Corda Enterprise platform for the detection and prevention of “double dipping” fraud in the insurance industry which runs in the several billions of dollars each year.
What is blockchain? Blockchain is a technology that allows different actors to collaborate with each other without having to trust each other. Having a database in the form of a distributed ledger you can have not only the data decentralised, but also the way the data is handled in a decentralised manner.
Independent of the discussion of centralised versus decentralised, Chaim reminds us what is important is to focus on the business use case and then determine the best approach.
What is confidential computing Confidential computing allows different actors to perform private computations on specific data sets and process data without other actors being aware of each other and without them being able to see what data is being processed.
The party that is hosting this black box whether it’s a regulator or a network operator they can’t see what is being processed within the black box.
An example of such a black box is the Intel SGX chip which has enclaves where the data can be processed in a fully confidential way without revealing any data to external parties.
Insurblocks recorded a podcast with Richard Brown, CTO at R3 entitled "Confidential computing - introduction to R3's Conclave". “Double Dipping” Fraud KPMG has estimated that detected and undetected fraud make up between 5% to 10% of insurers’ total claim payouts. “Double-dipping” fraud a key contributor to fraud, costs the insurance industry several billion dollars each year, which inevitably leads to higher household insurance costs
Double dipping happens when one actor for one loss event goes to multiple insurers to request a same payout. For example, a customer whose had a car accident will go to insurers A, B and C to get a payout from each one of them. This is quite a large problem for insurers which today has been extremely hard to detect. Insurers are usually unaware of this problem as they do not have a way to detect if their customer are insured with another insurer and if a payout has been made on a claim or not.
There has been attempts by insurers to share information via a centralised database but that came up with a number of complexities from a regulatory standpoint and from a GDPR one. In addition, centralised databases run the risk of getting hacked or of leaked sensitive information.
IntellectEU IntellectEU are the developers of the ClaimShare solution. The firm was founded over 15 years ago as an integration company in the payment sector. They have done over 400 integrations, mainly with SWIFT, in addition to other payment rails. Since 2014 they have been working with DLT and were the first to perform a SWIFT to Ripple integration.
In the blockchain space, IntellectEU has been working first with Ripple, then with Ethereum and in 2016 they were one of the founding members of Hyperledger. Since 2017 they have been working closely with R3
Up to now they have been working with 40 capital market, insurance and telco projects for using blockchain and emerging technologies such as AI, confidential computing and quantum computing.
ClaimShare
Chaim introduced ClaimShare is the first platform that allows the detection and prevention of double dipping fraud in the insurance industry. ClaimShare uses blockchain technology to allow the sharing of public information to match data and match claims based on colour, location and date, for example. They then use, confidential computing part to match sensitive data of the claims that can be the named user, their address and birthdate.
Charles Kerrigan – Partner & Global Head of Fintech at CMS. Charles spends his time looking at what do new technologies mean for the industries that their clients work in from financial institutions to fintechs, crypto firms, and blockchain protocols. In this podcast we take a comprehensive look at NFTs and their impact on the financial industry, on property, transferability and ownership within legal frameworks.
What is blockchain? Charles gives us a lawyer’s definition, where he sees blockchain as both a puzzle and a challenge. To explain that he gave us an example, where is cryptocurrency property as defined under a legal system in English law. Property can be categorised into two buckets:
Real property, is tangible and is something that can be touched. Intangible property: Shows in action, is essentially everything else where you can bring an action in relation to it, i.e. that you can sue in court for it.
When Bitcoin arrived, it wasn’t something that can be touched and thus could be considered as an intangible property. However intangible property has been defined over the centuries as something that you can sue under a contract. Bitcoin thus isn’t either an intangible property nor a tangible one.
The theft legislation talks about depriving someone of property, so bitcoins not property, you can't steal it.
In November 2019 Sir Geoffrey Vos, Chancellor of the High Court came to the conclusion. That crypto-assets have all the legal indicia of property and are, as a matter of English legal principle to be treated as property. There are two primary reasons:
First, the novel features of some crypto-assets, such as intangibility, cryptographic authentication, use of a distributed transaction ledger, decentralisation, and rule by consensus, do not disqualify them from being property. Secondly, they are not disqualified from being property either because they can be regarded as pure information, or because it might not be possible to classify them as being things in possession or things in action
Taking the above points into consideration for defining blockchain, Charles explains that blockchain identifies value, it establishes certainty of ownership and is able to transfer value with certainty.
NFTs – Non Fungible Tokens NFTs provide the opportunity to identify ownership in a digital context and that has value in itself.
A lot of present and historical legal disputes around commercial law are with regard to disputes over ownership. A person acquires a piece of property from another person, not through a valid transfer, whether it's via theft or mistake, or anything, that means that Person A has lost an asset, Person B has gained an asset in a way that's invalid. So far, we've got an easy case, because Person B should give it back to Person A.
The hard cases come from variations of when Person B, hands it on to person C in exchange for some value. So now you've got A out of pocket, and C out of pocket, and B disappears whether physically or financially where they become insolvent. We've now got a dispute between A and C, neither of whom are at fault. But both of whom are arguing that they should have this asset returned to them.
NFTs provide an immutable, searchable register in terms of who is the owner of a piece of property.
Because NFTs are sitting on their own blockchain protocol such as Ethereum, they transfer their rights of ownership via an executable code. Two questions arise with regards what is being transferred:
How to reconcile two registrars a real world asset registrar such as the Land Registrar in the UK with a NFT registrar? Where you don’t have a real world asset registrar for example in the UK, copyrights are not registerable. The protocol on which the NFT is minted and issued will purport to transfer rights, but it's not transferring rights and their copyright unless the copyright owner is party to that transaction
Joan Zerkovich – Senior Vice President, Operations at AAIS (American Association of Insurance Services) and Brian Behlendorf, Executive Director of Hyperledger at the Linux Foundation join us to announce that the AAIS' OpenIDL is joining the Linux Foundation. In this episode we get an introduction to the AAIS, OpenIDL, the Linux Foundation and Hyperledger. We also discussed how OpenIDL will leverage the Linux Foundation unique approach to governance.
What is blockchain? Joan: distributed ledger technology is a technology that provides a way to have immutable records in the digital world, in a networked environment. Blockchain is used in a number of ways in addition to cryptocurrency, such as for business applications that require data security, privacy and an immutable record. OpenIDL uses blockchain to pursue a path of data security, privacy and transparency.
Brian: blockchain is a shared system of record amongst participants in a commercial ecosystem. Brian, compares blockchain to the mid and late 90s when a group of folks were talking about free software and working on projects with no justifiable economic basis behind them such as the Apache Software project and the Linux project.
Insurance have been conservative about adoption of new technologies, open source software and blockchain technology. However, Brian now thinks that insurers now see blockchain as solving some real problems, particularly problems created in understanding risk within a regulated environment.
Blockchain helps organise an industry to solve a collective problem. A shared system of record, with automation through smart contracts is an essential part of solving these problems and doing that in an auditable and verifiable and, and regulatable way.
AAIS AAIS is a US based advisory organisation. In the United States, insurance is regulated at the state level. That poses some issues when you’re trying to offer insurance products nationally. The National Association of Insurance Commissioners or representatives from all the states got together and they said we need an organisation that can help them collect data on the insurance market and provide some perspective at the national level. They can use that data to develop products that can be filed in all 50 states to provide a common foundation for insurance companies to add value on top of that with some consistency across all 50 states.
For the last 80 years AAIS has been authorised to collect data from the insurance carriers as an advisory organisation licenced in 50 states. AAIS is allowed to collect data that insurance companies wouldn’t be able to share between themselves due to antitrust concerns. AAIS uses that data to provide reports to the regulators and to develop products that they use.
Linux Foundation and Hyperledger 20 years the Linux ecosystem was composed of a number of open source contributors from RedHat, HP, IBM and thousands of other contributors. A consortium approach was set up as a home for the Linux project where the basic sustainability model was companies paying membership dues tiered by the size of the organisation. They weren’t pay for software development but paying for the coordination overhead, or as Brian calls it, the air traffic control function to all the different contributions coming in.
After a few years there was a sense that this model was stable, that it was reliable and replicatable. The model was thus used for adjacent technology domains like cloud computing, software define networking and industry specific domains like automotive software. For each of these projects there is a clutch of companies who pay yearly membership dues to provide the core essentials, small staff to serve in that air traffic control function and coordinating functions. This has led to the creation of over 400 different projects.
When Hyperledger started five years ago, it was started and continues to be managed in this kind of model where it has its ...
Shaun Frankson is the CTO and co-founder of the Plastic Bank. In this podcast we discuss Plastic Bank’s model and perform a deep dive on Plastic Bank’s blockchain and token platform. This is a great example of how blockchain can be used for social good.
What is blockchain? Blockchain is a secure digital ledger that provides a trusted way for peer to peer data exchanges in an encrypted manner.
The Plastic Bank
Plastic Bank transforms plastic waste into a form of currency to help create ethically sourced ecosystems where communities that collect this plastic receive an above market rate for it.
Plastic Bank uses blockchain technology to work with some of the poorest communities in the world to offer them a digital ID and a digital savings account to provide them with financial inclusion. Plastic Bank’s message is if you have to use plastic ensure that it is plastic that was stopped from entering the ocean and that is used to improve lives and regenerate communities.
Tackling poverty Shaun explains that when you look at the 17 United Nations Sustainable Development Goals, the first one is poverty. Poverty is the focal point of many other issues including ocean plastic. Plastic Bank uncovered that about 80% of ocean plastics comes from developing countries with almost no waste management systems. They recognise that by creating a business solution where recycling can be an earned income for anyone not as an endpoint in life but as a starting point to a better life, a starting point to education, career training that can provide for all the things a family needs, then this can address both the plastic problem and the poverty problem.
When Shaun looked at bringing technology to bring financial inclusion to the poorest places in the world he came upon a number of problems: no phones, limited connectivity or data, and issues of illiteracy. They had to design a whole interface for first time illiterate person that’s never used a phone, without any reference to any technology and potentially lives somewhere with poor data connectivity.
Plastic Bank designed a system where when they open up a new branch they give the local team a first phone where they can create accounts for non-phone holders upon verifying their ID and age. This will automatically create for them a digital ID and a digital wallet for them to receive the cash earned from the plastic they collect. Like that they can earn their first phone through this system and provide them with full access over their account.
Hitting the 1 billion plastic bottles milestone
The Plastic Bank measured that it takes 50 bottles to reach 1 kilo of plastic. 1 billion plastic bottles resulted in 20 million kilogrammes of plastic waste that was prevented from entering the oceans.
It took them 4 years to reach 500 million collected plastic bottles, this year to reach the next 500 million and in the next 12 months they expect to recycle well over another billion bottles worth of plastic.
The Plastic Bank has a target, that by 2025, they will be becoming a billion dollar company, impacting a billion lives and preventing a billion kilos of plastic from entering the ocean every year.
Plastic Bank’s Blockchain Need for a digital reward programme where we can ensure that the right people get the right amount of reward. For example, how to ensure in a country like Haiti that you put millions of dollars into the country and ensure it goes to the right people in a safe manner.
Whilst on the other side their client would want a system that is attack proof. They desire a system that is valid and legitimate. This is where blockchain becomes a valuable tool as it provides trust to the data, trust to the impact stats, and trust the right people in some of the poorest parts of the world would receive the right amount of money for their labour in collecting the plastic.
IBM Montpellier’s blockchain team stepped in to provide support to Shaun’s tea...
Cindy Vestergaard is the Stimson Centre Director, Nuclear Safeguards Program & Director, Blockchain in Practice program. In this podcast we discuss the interesting work she does in safeguarding nuclear material with blockchain technology.
What is blockchain? Blockchain is a subset of DLT, which is essentially a combination of a variety of different technologies that have been around for already a number of decades, such as peer to peer protocols, cryptography hashing, to make it an immutable ledger that can be shared securely, digitally, across the ecosystem.
The Stimson Centre
The Stimson Centre is a think tank that was set up in 1989 by Barry Blechman & Michael Krepon at a time when the Cold War was ending shortly before the fall of the Berlin Wall. It’s a nonpartisan and independent centre that looks at real world problems.
The work that Cindy’s team does is evidence-based policy research that sits at the intersection of technology and policy.
SLAFKA
In 2019 a partnership was established between the Finnish Radiation and Nuclear Safety Authority (STUK), the Stimson Centre in Washington, D.C., and the University of New South Wales (UNSW) in Sydney, Australia, to develop the world’s first distributed ledger technology (DLT) prototype for safeguarding nuclear material, called SLAFKA. Finland is the first country in the world to be building a deep geological repository for its spent nuclear fuel. STUK, its radiation and nuclear safety authority approached the Stimson Centre for helping them develop a prototype.
The question for STUK and for the government of Finland needed to answer is how to ensure that the material underground is also the same that is reflected on the books above ground. Data integrity is very important. The other reason is concerning their relationship with Euratom, the regional safeguards body for the EU’s member states that ensures a regular and equitable supply of nuclear fuels to EU users. The objective is in increasing security, enhancing data sharing and transparency between STUK and Euratom.
For the Stimson Centre, the opportunity, was to see if DLT can actually handle the different types of transactions that are needed under a nuclear safeguards agreement.
Data transactions and trust amongst parties From a data transaction perspective; nuclear material moves within a facility, within a country and internationally. As it moves it also shifts in form for example from yellowcake or uranium ore concentrates to enriched uranium. All these movements and change of state have to be logged and reported to either a national regulator or a regional regulator such as Euratom within the EU and then to the International Atomic Energy Agency (IAEA) in Vienna.
Source: Stimson Centre
Today’s data transactions come in all shape and form both in terms of paper and in an electronic format. The IAEA has a portal for safeguards declarations but it isn’t universally used. Some countries still provide their declaration on a USB stick whilst others on paper.
In the nuclear world there isn’t a lot of trust among different parties. The IAEA goes in to monitor and verify that what states are doing is actually meeting their obligations in using nuclear material for peaceful purposes.
One of the reasons why the IAEA hasn’t launched a blockchain system is partly due to its stage of digitisation. International organisations such as the IAEA are the still the product of their member states. If member states are not willing to put money in certain thing then it takes a long time for them to happen.
Launch of the Proof of Concept (PoC) On the 10th of March 2020 the SLAFKA PoC was officially launched in Helsinki. The purpose of the PoC was to demonstrate can the DLT SLAFA prototype handle nuclear safeguard transactions? The answer was yes. The platform was able to demonstrate transactions:
Shipping material within a country or outside of a country
Walid Al Saqqaf, Founder of Insureblocks and CEO & Co-Founder of Rebalance Earth joins us in this podcast to discuss the role blockchain has in fighting climate change but also the impact it can have in regenerating biodiversity. In a world that is increasingly threatened by the challenges of climate change, ecosystem destruction, and the 6th mass extinction, carbon credits and carbon offsetting markets seem ill equipped to face them. The markets are plagued by a lack of transparency and a number middlemen here to make a quick buck, can blockchain, AI and Internet of Things along with keystone species like African Forest Elephants provide an answer?
What is blockchain? Bruce Pon, co-founder of Ocean Protocol, mentioned blockchain as this “general purpose technology” like the steam engine during the industrial revolution. Now everyone will tell you that blockchain is a distributed database that removes the need for intermediaries and that has immutable or tamper proof properties.
From the perspective of Rebalance Earth, Walid looks at blockchain from two perspectives, a short term and a long term one:
On a short term it is a technology that allows for the transparent, traceable and trusted transfer of value, from firms and households wishing to rebalance themselves, to local communities that are here to safeguard keystone species like African Forest Elephants who perform the carbon offsetting services and the maintenance of whole biodiverse ecosystems. All this in a transparent manner to avoid corruption and double counting.
From a long term perspective, we all know today that biodiversity is important. However we don’t have enough data to understand how important it is, and crucially how much it’s worth. To get the necessary amount of data to begin to understand biodiversity you need a very large number of actors around the world to share their data. This is where blockchain can come in, in the creation of a data marketplace that will facilitate the share of data to unlock the value of biodiversity
Rebalance Earth
Co-founded by startup founder, Walid Al Saqqaf, Assistant Director at the IMF, Ralph Chami, world renown conservationist Ian Redmond, along with 60 volunteers, Rebalance Earth is a purpose driven company whose aim is to re-imagine carbon offsetting as a mechanism to fund the protection of keystone species to promote and regenerate biodiversity. Other ecosystem services attributable to these species will follow as research reveals the value of their role in the ecosystem.
Biodiversity is the variety of life on earth in all its form and all its interactions.
A keystone specie is an organism that helps to define an entire ecosystem. It is one which has a disproportionately large effect on its natural environment relative to its population size. If that species dies an entire ecosystem risks collapsing. Equally if a keystone specie is reintroduced into an ecosystem it can reflourish. This is the case of what happened in the Yellowstone National Park when 31 wolves were reintroduced into it in 1995.
The company headquartered in the UK, uses nature-based solutions augmented with innovative technologies such as blockchain, AI (artificial intelligence), and IoT (internet of things) sensors to monitor the “client’s animals’” and manage the transfer of carbon offsetting dollars to local communities in Gabon.
The Kyoto Protocol
The Kyoto Protocol was adopted on 11 December 1997. Owing to a complex ratification process, it entered into force on 16 February 2005. Currently, there are 192 Parties to the Kyoto Protocol.
In short, the Kyoto Protocol operationalizes the United Nations Framework Convention on Climate Change by committing industrialised countries and economies in transition to limit and reduce greenhouse gases (GHG) emissions in accordance with agreed individual targets. The framework pledges to stabilise greenhouse-gas concentratio...
Silvia Attanasio, is the Head of Innovation at ABI (Italian Banking Association). Previously to that role she worked for 17 years at ABI Labs, the centre of research and innovation at ABI. Previously Silvia introduced us to Spunta, the private permissioned DLT project for interbank reconciliation. In this podcast she shares with us some of the work that ABI and its consortium of Italian Banks are looking to offer to the European Central Bank in its development of its CBDC called the Digital Euro.
What is blockchain? Blockchain is a disruptive technology that can deeply transform the way we transact. It may add transparency and eliminate frictions in transactions. Blockchain is not a cost cutting technology. It is a technology that can bring some efficiency gains in due course. Blockchain technology can transform processes
Update on Spunta Silvia featured on Insureblocks on the 22nd March 2020 where she introduced Spunta, a private permissioned DLT project for interbank reconciliation.
The new application streamlines and automates the reconciliation of transactions, improving governance of the overall Spunta process, a nostro vostro account, and moves from a slow error prone settlement system to a real time management of the reconciliation process.
Today after three waves of migration, nearly 100 banks are in production operating the Spunta DLT daily. Each bank has its own DLT node, geographically distributed in nine different cities across the country processing 322 million transactions.
Introduction to Central Bank Digital Currency (CBDC)
The term CBDC denotes money that a central bank could create in digital form and make available to the general public. It would not be another currency, it will be another form of the existing currency.
In January 2021, The Bank of International Settlement ran an updated survey with central banks around world. In it they found that 86% of central banks are engaged in CBDC work. P from 80% in May 2020. Central banks representing 1/5 of the world’s population are likely to issue a retail CBDC in the next three years.
The goal of improving financial inclusion is much more pronounced in emerging economies, while it is less present in advanced economies like European Union, where the main objectives are the security and efficiency of the payment system.
The Digital Euro The European Central Bank’s CBDC is called the Digital Euro. The ECV see’s three main benefits in exploring the possibility of launching a Digital Euro:
Support digitisation for a native digital European economy Respond to the declining usage of cash as a means of payment. Tackling sovereignty concerns related to foreign private digital means of payments in the euro area or possible future foreign CBDC
There are a few more benefits from the bank’s perspective that Silvia highlighted such as the possibility of enabling use cases based on the programmability of the currency, and the possible application to transactions from counterparties as a machine.
Preserving properties of cash, anonymity and privacy in a Digital Euro Fabio Panetta, Member of the Executive Board of the ECB stated that in a blog post: “Central to all our discussions is the fact that a digital euro would be a means of payment that would complement cash, not replace it. Abolishing cash is not on the table, as ECB President Christine Lagarde and other members of the ECB Board and Governing Council have stated publicly on several occasions.”
With regards to anonymity. If the identity of Digital Euro users were not verified at any stage of a transaction then they would be anonymous and AML / CFT mechanisms (anti-money laundering / combating the financing of terrorism) wouldn’t be effective. Silvia believes that this would require at least a light identity verification when opening a digital wallet. However as the implementation of a Digital Euro may happen on a DLT platform it is possible to ensure...
Gary Storr, General Manager of Trust Your Supplier by ChainYard, explained to us some of the challenges that the supplier information management industry is facing with disparate sources of information and the role blockchain can help to mitigate them. In this podcast you will hear how Trust Your Supplier creates a trusted source of supplier information and digital identity that simplifies and accelerates supplier onboarding, lifecycle management and the seamless exchange of information.
What is blockchain? For Gary the best way to explain what is blockchain is what it isn’t. Blockchain is not a cryptocurrency, it’s a technology. It isn’t a programming language. Blockchain is a ledger that is organised in a sequence of blocks that are chained together. It is distributed and it’s immutable. Blockchain is highly secure and decentralised, thus allowing for a multitude of participants to store information on the blockchain within the ledger. Security is assured by encryption and hashing technology making it impenetrable from current day hacking.
What is ChainYard? ChainYard is a subsidiary of IT People Company, founded by Sai Nidamarty, its CEO. IT People Company is essentially an IT staffing business that was started in 1999.
IBM is a close partner to IT People Company, so when Sai noticed that blockchain was taking off he decided to spun off a new organisation called ChainYard with the intent for it to be a service organisation providing IT consulting services in and around blockchain.
Within a few years of launching ChainYard, Sai recognised there was an opportunity to create commercial applications on blockchain to address serious needs within the enterprise, such as Trust Your Supplier.
ChainYard is now a 5 years old organisation with 80 staff providing blockchain services and products.
Challenges of the supplier information management industry Supplier information management is about getting information on a supplier. It is essentially an identity question which blockchain is particularly good at with regards to establishing an identity and to protecting it.
Traditional enterprises have traditional systems where identities are very segmented. It isn’t unusual for large supplier to have hundreds of identities within the system architecture. This is highly unmanageable. Systems could be storing, for a single identity, multiple versions of the truth for a contact with varying degrees of accuracy. Questions regarding data privacy are another issue.
Coming out of an enterprise and looking at the market a supplier would want to have a single identity as it deals with a number of customers. Similarly to a driver’s license or to a passport you want a single identity to be used across the value chain.
Consequently, there is an opportunity for efficiency, for speed, for reduction of cost, for reduction of risk and for compliance.
Trust Your Supplier (TYP)
IBM, a partner of ChainYard, recognised that there were some pain points within its supplier information. Both IBM and ChainYard expressed the desire to leverage their respective blockchain expertise to tackle those challenges. Trust Your Supplier was thus born to tackle not just IBM’s supplier identity issues, its supplier qualification and lifecycle management issues but also those of enterprises across industries in a decentralised manner.
Within its capacity as a partner IBM teams from TradeLens and Food Trust have contributed to the expertise and development of Trust Your Supplier.
With Trust Your Supplier, every supplier is provided with an identity on a blockchain platform. Provide them with easy tools and applications for them to access and process that identity in a meaningful way.
It allows organisation to discover, identify, qualify, on board and manage relationships with suppliers in a decentralised manner with a single version of the truth.
Trust Your Supplier application is in production for the last 18 mon...
Christopher McDaniel is the President at the Institutes’ RiskStream Collaborative. In this podcast he announces the launch of Canopy 3.0 their latest version of their insurance blockchain platform. This new platform, built on Kaleido, supports Corda, Enterprise Ethereum and Hyperledger. Chris also shares with us his plans to launch first notice of loss in production mode on Canopy 3.0 this year.
What is blockchain? Since the launch of Canopy 1.0 in late 2017, Chris' view of blockchain has evolved. Back then when they were building Canopy 1.0 their views were that blockchain was fundamentally a sharing mechanism. There weren’t many applications out there so they had to build use cases and applications to demonstrate to the market what is possible.
Now with the launch of Canopy 3.0 things have changed. GDPR, and the right to be forgotten, has had some impact on what you can and can’t do on a blockchain. There are now many parties building out solutions on blockchain compared to back in 2017. Whilst blockchain is still a sharing mechanism there is this realisation that you don’t need to put everything on the blockchain. You can store data off chain and link it to the blockchain via a validated hash. For Chris, blockchain is a great solution for verification, for trust and for facilitating sharing.
The Institute and RiskStream Collaborative The Institute, parent company of RiskStream Collaborative, is focused on education and certification in the insurance industry. Their flagship certification is the CPCU certification amongst another 20 certifications.
Their reason for starting RiskStream Collaborative, is that the management at the Institute realised that emerging technologies such as blockchain, AI (artificial intelligence) and IoT (internet of things) are going to be key things they will need to teach and certify for insurance professionals in the future. Based on that they created RiskStream.
Canopy 1.0 Prior to creating Canopy 1.0 the Institute organised a working group for 30 insurers who wanted to find out more about blockchain. From that event three to four proof of concepts (PoCs) were set up on a public Ethereum blockchain. Some of the learnings they gained from that event was the need to build on a private blockchain. Canopy 1.0 was launched on a private Ethereum blockchain with proof of insurance as the one use case built on top of it.
Canopy 2.0 One of the key learnings that the team took out of Canopy 1.0 is that members of RiskStream Collaborative weren’t comfortable with the classic version of blockchain where everything is shared with everyone on the network. Whilst the information was encrypted and accessed on a permissioned basis it still had trust issues along with legal and compliance ones as it was shared with everyone.
Chris and his team looked for an alternative solution and identified R3’s Corda as it had a point to point approach instead of everything being shared across the blockchain. This was a critical success factor for the consortium’s members. Purist would argue that Corda isn’t a blockchain but a distributed ledger technology (DLT). Whilst this is true from a technical standpoint, the DLT solution provided the answers to the challenges they were facing.
Canopy 2.0 was launched on a Corda Enterprise License with a number of use cases such as first notice of loss, proof of insurance and a number of other applications within commercial lines, workers compensation, certificates of insurance, surety bonds and a proof of concept for the placement process for reinsurance between brokers and reinsurers.
Canopy 2.0 brought significant learnings including one where a number of customer needs and third-party solutions weren’t a natural fit for Corda and thus couldn’t be integrated into Canopy 2.0.
GDPR along with the California Consumer Privacy Act (CCPA) of 2018 introduced some new challenges for blockchain. Both presume the operation of the traditional d...
Pratap Tambe is the Head of BFSI Blockchain Consulting, UKI and Europe at Tata Consultancy Services (TCS). He has has 25 years of experience has been working in commercial insurance since 2011 and in blockchain with insurance since August 2015. In this podcast we discuss TCS partnership with B3i and how blockchain has evolved in the insurance industry since 2015.
What is blockchain? Pratap looks at blockchain more from a DLT (distributed ledger technology) perspective. He uses an example where traditionally a transaction is sent to one or more web servers run by one party. Typically, one server validates that transaction, processes it and saves it. In DLT, a transaction is sent to multiple servers run by different parties which validate the transaction and together run a consensus process. Successful outcome of the consensus results in the transaction being processed and saved.
In blockchain that transaction will be saved in a chain of blockchain which isn’t necessarily the case in DLT.
Tata Consultancy Services Tata Consultancy Services (TCS) is a 50 year old IT services company that is part of the Tata Group which has revenues of $106 billion. TCS has $22 billion worth of revenue from 470k global professionals that employs 36.4% women from a total of 147 nationalities.
TCS partnership with B3i for ecosystems innovations In November 2020, TCS partnered with B3i to design, develop and launch ecosystem innovations based on DLT for the insurance industry.
Having worked in the London insurance market since 2011, Pratap is sharply aware of the difficulty competitors have in collaborating together. He believes that B3i has managed to launch a consortium blockchain of the ground with the participation of a number of those competitors.
B3i has developed a strong product vision and technology which requires a strong system integrator (SI) partner like TCS. As an SI, TCS plays a key role in enabling and scaling consortium blockchains to succeed.
TCS brings scaling up innovation, pipeline ideation and validation, product engineering, professional services and product support. These are natural services provided by a typical SI.
TCS already works with many global insurers and reinsurers across geographies from providing IT services support. Because of these relationships TCS brings unique value in helping blockchain consortiums provide back end integration into the blockchain to their customers and partners.
The role of the SI is to leverage its relationships to enable and support the baseline success of initiatives in core geographies of the blockchain consortium. Once that is achieved the SI is here to scale up innovation and delivery in core geographies and then to other geographies.
Ecosystems of ecosystems Insureblocks is a big fan of the notion of ecosystems of ecosystems. We perceive a future where we will see cross industry blockchain consortiums connecting and exchanging value between each other. For example, B3i could connect to PharmaLedger in the pharmaceutical space or to Marco Polo in the trade finance space.
Pratap states that B3i connecting with other blockchain consortiums is part of the agenda. He also states that this fits well within TCS strategy of driving ecosystems whether or not they use blockchain.
One current example that Pratap mentioned is asset or property data. The insurance industry has a lot of this kind of data in various formats and in varying quality of data. The insurance industry could cleanse this data, and leverage it with the appropriate consent to monetise this data to other industries.
Another example of cross industry collaboration is for healthcare industry consortiums interacting with a healthcare ecosystem.
Blockchain in insurance since 2015 In August 2015, Pratap published an article entitled “Blockchains and London insurance market?”. Back then he was a great fan of the potential of blockchain.
Shermin Voshmgir is the author of the book Token Economy, the founder of Token Kitchen and BlockchainHub Berlin. In the past she was the director of the Research Institute for Cryptoeconomics at the Vienna University of Economics which she also co-founded. She was a curator of TheDAO (Decentralized Investment Fund), an advisor to Jolocom (Web3 Identity), Wunder (Tokenized Art) and the Estonian E-residency program. In this podcast we discuss "How to design your own token system". What is blockchain? Blockchain is a collectively maintained public infrastructure where people are incentivised to keep the ledger up to date in a trustful manner. It is the backbone of this new generation internet often referred to as the Web 3.
Blockchain allows its participants to collectively settle data transactions, whether its value transactions or data flows on a shared public infrastructure that everyone can trust. This contrasts to today’s Web 2 which is managed by private client server infrastructure where data is managed and stored behind the walled gardens of a server that belongs to a specific institution or a private entity.
Shermin believes that blockchain itself isn’t particularly interesting. What is interesting is that blockchain brought the back-end revolution for a decentralised web or Web 3. Tokens are the killer application of the Web 3 as websites were the killer application of the early internet in the 1990s when the World Wide Web came about.
Types of tokens Cryptocurrencies and crypto assets are specific type of tokens.
A token can represent money, whether it’s state issued money, often referred to as CBDC (central bank digital currency) or virtual currencies such as cryptocurrencies.
Tokens can represent any type of assets such as commodities, physical assets and fungible assets like art or real estate. Any virtual or real asset can be tokenized and have a digital representative that is easily traded.
Tokens can also be used to represent an identity of a person, machine or an institution. Credential tokens are tokens that are tied to an identity or that have limited transfer abilities.
Token System A system is use to described how people and objects interact in this physical world. Token systems can have varying degrees of complexity.
Usually, the more actors are involved in a system, the more complex the system and its interactive parts become.
An example of a complex token system is the Bitcoin network which is a network of physical computers operated by humans or institutions. It has a three-layered network composed of tokens, machines, and peer-to-peer network.
An example of a less complex system is a token system that represents tokenizing shares in a company which can be settled on a public or semi-public infrastructure.
Creating a token system, the questions Source: Token Economy, Shermin Voshmgir
When creating a token system the main questions that one should ask themselves are:
What do you want to do? What is the purpose of your venture?
For example, if you want to tokenize real estate, the question of how to design your token system is very different than if you want to create a token based social network where the token creation needs an intelligent incentive design for how to incentivize people to upload and curate posts. An example of such a token system is Steem. However, such token systems are very complex and have a lot of unanswered questions.
Tokenising real estate whilst it involves a series of complex legal questions sits within an understood legal framework. Whilst they may seem less complex they can very easily become more complex where your individual real estate objects can be tokenised allowing for fractional tokenization of a single object, like an apartment.
There is a series of technical, legal, economic and ethical questions to be asked when we design our token system, but the first question is always, what do I want to do?
Blockchain Sandbox is Poland's first business and technology platform designed to accelerate the development of innovative blockchain solutions within an isolated system that simulates real world production environment. To take us through this innovative solution we are joined by Dorota Dublanka, President of the Foundation Cyberium and Head of Human Resources at KIR along with Maciek Jędrzejczyk, Blockchain Technical Leader at IBM for Central and Eastern European Region and lead architect of the blockchain sandbox.
What is blockchain? Dororta defines blockchain as a list of records that is stored on a wide range of computers. She also refers to blockchain as lego blocks where different participants join together to build a tower together whilst verifying each blocks added to the structure and exchanging information between each other.
Maciek’s defines blockchain as a database with a very specific data structure whereby transactions are put together into a block representing an interval of time between the recording of a previous state and the current state which is going through the approval process. Each block is cryptographically linked to previous blocks and the governance over how the data is stored on the chain is determined by the network. The network decides whether or not certain transactions are going to be included within a block or not.
State of innovation within the financial sector in Poland Maciek states that to understand the state of innovation in the financial sector in Poland one has to go back 30 years to 1989 – 1990 when Poland transitioned to a market economy. At that time there was no digitisation and computers were virtually inexistent. The financial infrastructure was nearly all paper based. Everything had to be created from scratch which represented both a set of challenges and opportunities for Poland.
Poland had virtually no technical debt, or legacy IT infrastructure within its financial services sector that other countries in Western Europe or in North America had. This enabled the Poles to choose the best and most flexible solution to their specific needs. As the Polish leadership and society were very curious they were also very open to innovation.
Dorota added that, Poland has a relatively high social acceptance for innovative solutions. Poland has one of the highest percentages of mobile banking and debit cards users in Europe. Because of its embracing approach to innovation, Poland has adopted a lot of the most innovative platforms for payment solutions and its IT professionals rank as some of the top 10 best in the world.
The Blockchain Sandbox Blockchain Sandbox is here to accelerate the development of innovative blockchain solutions in Poland. They aim to demystify what is blockchain and break the view that it’s only related to cryptocurrencies. They wish to develop blockchain technology to support entrepreneurs and companies to access solutions within the sandbox.
Startups and major companies who join the sandbox with innovative ideas can leverage blockchain within the sandbox for developing their applications and business solutions. They will also receive support from the blockchain sandbox founding members.
Foundation Cyberium is the leader of the Blockchain Sandbox. The founding members are PKO Bank Polski, KIR and IBM. PKO Bank Polski is one of the biggest banks in Central and Eastern Europe who has implemented production grade blockchain solutions.
KIR is the hub of shared services for the Polish financial services sector. They build system solutions for the banking business and the government. KIR is one of the sandbox leaders and is implementing innovative solutions to the economy.
IBM is the technology partner to the Sandbox initiative. Chmury Krajowej, the national cloud operator, responsible for sustaining the IT infrastructure for mission critical applications in in Poland, is a technology provider to the initiative.
Bernhard Lang, Member of the Board at MSG System, joins us to discuss innovation and blockchain in the insurance industry. In this podcast we discuss the importance for the insurance industry to remain relevant in an ever changing market. How making innovation a corporate discipline and embracing a customer centric approach to remain engaged in customer ecosystems is critical to that objective of relevance.
What is blockchain? From a non-technical point of view blockchain is a form of digital representation of what we naturally do in real life. We want to be part of social communities within which we communicate, make agreements, state facts, and make promises that are then known to the people within the community as a current status of things or an evolving collective truth.
The technical definition of blockchain is that it’s an immutable and distributed technology that enables the creation of new business scenarios. According to Bernhard, too often blockchain technology is looked at from a technology angle first before a business one. He personally prefers that we start with a business problem and then identify blockchain technology if it is the right one for the business problem.
About MSG Bernhard Lang has been with MSG for the past 25 years. MSG is a German product based system integrator. MSG focuses on 10 different lines of business. Their business strategy is to develop industry specific content, software assets, software solutions, that go very deep into the lines of business along with a consulting services associated with it. The majority of MSG’s business is within insurance but also looks at other industry verticals such as banking, public sector, automotive and others.
In addition, MSG works with startups such as Ritablock (featured on Insureblocks: Ep. 124 – Reinsurance accounting blockchain, Ritablock integrates with B3i’s Fluidity platform) and they have co-developed the SAP FS-RI (financial services reinsurance), which has become the market standard for professional reinsurance companies and for cedents.
Outside of reinsurance, MSG has partnered with Marco Polo, a trade finance blockchain solution, to help them integrate with SAP European Systems.
Insurers approach to blockchain in comparison to mature platforms like SAP Bernhard believes the insurance industry is quite open to blockchain technology however he notes that the materialisation of previous blockchain investments haven’t been that great. Consequently he believes that in the future the insurance industry might be more cautious to making investments in blockchain.
Source: Cookhouse Labs
MSG has an innovation lab in Canada called Cookhouse Lab. In May 2017, they launched a four week design thinking blockchain workshop along with seven insurance companies where they identified 34 uses cases and created three prototypes. Whilst there was a lot if interest at that time, Bernhard would qualify the output as having had a limited impact and not significant enough to be considered a game changer.
Whilst he believes insurers will keep looking at blockchain technology few will expect high returns.
Evaluating new innovative technologies within the insurance industry Bernhard candidly describes the decision making process within insurance companies as being sometimes irrational. To support that statement, he recalls a meeting regarding ACORD standards, which in his opinion represent a huge business case. During that meeting, insurance professionals flew in from around the world, agreed to join forces and create a service organisation. All participants were requested to make a €40,000 investment for this initiative. Unfortunately, they had great difficulties in raising that amount of money. Bernhard asks the question that if it was such an obvious use cases with large saving potentials why was it so difficult to raise such a small amount of money?
For Bernhard the insurance industry sometimes makes irrational d...
Mark McLaughlin is IBM’s Global Insurance Director, leading IBM’s Global Insurance strategy, solutions, and partnerships. Mark’s teams analyse trends in the insurance business and in technology, predict strategies for insurers, and build IBM insurance solutions to meet insurer needs. In this podcast we discuss the challenges and opportunities of blockchain in the insurance industry with special insights from IBM.
What is blockchain? For Mark blockchain is a trusted shared ledger. It enables business entities with different interest and different goals, that may not 100% trust each other, to establish a common ground where a set of documents, processes and data is maintained by a group across a business network.
It is maintained in a way that is immutable where everybody can see the changes that are going on and where everybody has a record of it. Blockchain also have features like smart contracts that can help automate business processes in a trusted manner by all participants.
Mark points out that there are a lot of different things you can do with blockchain from digital currencies to running shared business processes.
How has insurance embraced blockchain technology? Mark believes insurers are feeling the heat on innovation due to the 46% CAGR on Insuretech investment and the entry of large players like Ping An and Amazon into online distributed type insurance ventures.
Insurance being baked into other industries such as the purchase of an airline ticket in the US now comes with the offer of travel insurance as part of the process.
The insurance industry knows that they have to figure out ways to connect to broader ecosystems and to innovate. Blockchain is one way of doing that. Whilst insurers have a high level of interest in blockchain they have had a little trouble getting started in some cases.
Blockchain has great potential as a technology and an increasing number of insurers are willing to embrace it. The challenge however is with the business model. Other technologies such as AI (artificial intelligence) do not have the same challenge. AI is very easy to visualise, it can be used to better process a claim, underwrite a risk and advise an insured.
Blockchain is a little tougher. The challenge isn’t the tech it’s the use case behind the technology. Insurers who have been successful at using blockchain are those who have correctly defined the business value. It is however a very tricky exercise because blockchain is about creating networks and you have to ensure that the value line up across all the players within that network.
Digitising business during COVID There is a tonne of complexities in the insurance industry and people tend to stick to the process they know because they know how to manage the complexities within that process.
However, some forward-thinking companies have during this COVID world looked at digital interactions and how they can rethink their business to leverage new technologies. For Mark, It is about “how do I build better interactions with my end user? How do I get closer to risk? How do I do a better job of providing personalised and customised advice around that risk? How do I connect relevant products and services at the point of risk?” Insurers that can figure that out and do that at scale will be the most successful ones in the future.
Approaches to innovation and blockchain Too often insurers judge innovation in its ability to sell more of their existing products. The more successful insurers are those that think “Instead of how do I take my existing policies and my existing business and adapt them, they think more about how do I reinvent the entire risk process?” Too often the decision making process insurers get caught up with is very short term instead of thinking more long term and the bigger picture.
Connectivity to customer and connectivity to risk is very important for insurers according to Mark.
Dr. Denise McCurdy, Blockchain Governance Advisor at Grove Gate Consulting along with Tom Fuhrman, Blockchain & Cybersecurity Consultant at Vector MV, join us in this podcast to discuss the challenges of adopting blockchain from a governance and risk standpoint.
Denise is a blockchain governance advisor who has written a doctoral dissertation on blockchain with a special focus on supply chain and governance. She’s also the VP of blockchain governance for a supply chain and logistics startup.
Tom Fuhrman is a blockchain & cybersecurity consultant specialised in cybersecurity consulting for the last 25 years. Recently he has extended his scope into blockchain consulting, where he focuses on strategy, governance, risk management, and specifically looks at the intersections between blockchain and cybersecurity.
What is blockchain? For Denise, blockchain is a database shared across a network of computers. As a record or block gets added to that database the blocks are chained together. Records on the blockchain are very difficult to change because each block has a hash which refers to the previous block. So, any change of a block requires a change of the entire chain. It is this attribute of blockchain which makes it very secure.
For Tom, blockchain is a shared, continuously updated immutable database. It represents a single source of truth amongst trustless participants. As Tom is a cybersecurity expert he believes that blockchain inherently has two of the three attributes that cybersecurity requires:
Integrity because of its immutably nature Availability because it is distributed Confidentiality isn’t something that blockchain has inherently but it can be added with encryption
Tom also reminds us that blockchain exists in two basic design philosophies: public permissionless and private permissioned. Permissionless is most famously known via Bitcoin where anyone can participate at any level. Everything is decentralised and transparent in a trustless environment.
A permissioned blockchain has a restricted access. It isn’t as decentralised and they require a certain degree of trust.
What is governance and its impact on blockchain and its members? Governance is about agreeing upfront the rules and the processes and what to do when things go wrong. It’s a system of rules that helps govern an ecosystem of players in how they can interact.
Whilst working on her dissertation Denise started to interview supply chain business people who were trying to deploy a blockchain solution. During her interview she kept hearing that it isn’t about the technology but instead, a real lack of clarity around how firms need to work together much more closely than they're used to doing due to the nature of blockchain. What her interviewees were expressing was the need for a governance framework, or playbook.
Blockchain impacts its members because they now have to share business processes, confidential information and intellectual property. It’s synonymous to them having to expose the underbelly of their organisation in ways that they haven't had to do before.
This closeness of sharing sometimes blurs the lines in their eyes of where their company ends and others begins. For many this is a cultural shift which many companies are not used to.
For Denise one of the key governance challenges is understanding the amount of changes that people and firms are going to have to do.
Collaborative governance as a key mechanism to removing obstacles Collaborative governance is a particular type of governance that in Denise’s point of view is quite well suited for blockchain as it addresses many of the common issues at the beginning of blockchain such as: information asymmetry, incentives, prehistory of cooperation or conflict of members.
These are starting conditions that have to be addressed at the very beginning. This then flows into an agreement on how to make decisions, what is equitable,
Michael Shea is the Managing Director of the Dingle Group and the Chair of Sovrin Foundation’s SSI in IoT Working Group. In this podcast we discussed the white paper he authored on Self Sovereign Identity and IoT. To explain the opportunities SSI can provide to IoT, Michael introduces us to three profiles: Jamie (machine to person), Bob (machine to machine) and Bessie the cow (digital twin).
What is blockchain? Blockchain is a decentralised database, which is cryptographically secured and immutable. The decentralised part means that it operates in a wider ecosystem than traditional ones, that sits within corporate firewalls, which gives it greater resiliency and redundancy.
The cryptographic component along with the different proof of work, resolve the double spend problem and bring a level of assurance that transactions have not been modified.
An introduction to Self-Sovereign Identify (SSI), Decentralised Identifiers (DID) and verifiable credentials. Self-sovereign identity is an identity model, where an entity is in control of its own identity and information related to it. SSI as a concept started to take shape in 2016 with Christopher Allen’s 10 principles of self-sovereign identity. In December 2020 the Sovrin Foundation released its 12 principles of self-sovereign identity, which fundamentally is about an entity’s ability to control the information about themselves.
Decentralised identifiers (DIDs) is a pointer to the identify information known as a DID document that helps to create the trust layers within SSI.
A verifiable credential is a cryptographic bundle that is created by an issuer of a credential such as the DVLA for a driver’s license. That credential includes attributes stating that the driver is legally entitled to drive a vehicle and it may contain other pieces of information such as your address and other details. A cryptographic bundle is signed using the public private key of the issuer in this case the DVLA which is then returned to the holder of the driver’s license. That holder can then use that credential to a verifier to indicate his/her authorisation to drive a vehicle.
Internet of Things (IoT) Machine to Person Machine to person is where a device is interacting with an individual. The machine can be attached or worn by a person and is measuring some aspect of the person's personal or physical environment and transmitting this data directly or indirectly to a connected device. For example, a person with diabetes would have a sensor that is attached to their body reading their glucose level and communicating the data to an app on a smartphone or a separate physical device.
Machine to machine Machine to machine is the communication between an IoT device and a computer, smartphone or device. Using the above analogy, the machine is the device or the smartphone speaking up to a central repository for transmitting that information to an endocrinologist on behalf of the patient.
Digital twins A digital twin is a virtual digital representation of a physical object. That can be a person, an animal, or a thing. The most common use of digital twins is in an industrial setting. For example, a jet engine has hundreds of sensors embedded inside it, streaming data off to the aircraft engine manufacturers and creating a whole digital profile of itself.
Risks associated with IoT
On the 21st of October 2016, multiple major DDoS attacks happened which took down numerous high-profile websites such as Netflix, Twitter, GitHub, Airbnb and others. This denial of service attack, known as the Mirai botnet attack, was a result of the Mirai malware installed on a large number of IoT devices. Such attacks illustrated the risks associated with poor security on IoT devices.
As the number of IoT devices continue to grow every year, Michael believes that IoT and security is going to continue being very much like oil and water.
Siddhartha Jha is the Founder & CEO of Arbol, an insurtech platform for parametric products that uses blockchain, big data, machine learning and smart contracts to bring transparency and remove delays and disputes of traditional insurance policies. In this podcast we revisit parametric insurance to discuss why it is now poised for new growth potential thanks to increased availability of granular data, improved technologies and attraction of non-traditional capital.
What is blockchain? Blockchain is a system of distributed consensus. Instead of having a central authority determining when a transaction takes place, or when a particular event has taken place, you have a distributed consensus around that event or transaction taking place. Blockchain allows for immutability and allows for a tamper proof environment where different parties can agree on something happening without a central coordinating authority.
What is parametric insurance? Parametric insurance uses data to make a loss assessment instead of having a human check the level of damage from an event and pay based on a subjective loss estimate. Parametric uses data sets as it’s index and a trigger to make a payment.
Sid uses an example of a farmer who takes an insurance policy for $100,000 if he/she doesn’t receive 3 inches of rainfall on his farm. Such parametric insurance changes insurance from this subjective loss assessment process, which can be filled with delays, disputes and sometimes fraud to one where once a trigger is generated an automatic payment will happen.
This creates a great customer experience where there is greater transparency and peace of mind. From an incumbent insurer standpoint, the simplicity of parametric leads to scale and reduce costs. They can avoid relying on loss adjusters, managing different claims process and legal costs as we’re now seeing in business interruption contracts due to COVID.
From a regulator perspective, Sid believes regulators could get interested in parametric insurance in its ability to fulfilling many gaps in the traditional insurance system:
Covering high deductibles Where data sets are becoming richer to provide new innovative parametric insurance as it removes the proving of burden of loss from the customer to the data set
Why has parametric insurance not scaled yet? Parametric insurance has been around since the late 1990s but hasn’t quite scaled yet. Sid believes there are a number of reasons for that:
Availability of granular data sets Technology and processing power can be an issue for processing simulations. For example, Arbol can process 40,000 – 50,000 simultaneous weather simulations to price an entire basket. This would have been very difficult 10 – 15 years ago with the available computing power back then. Customers are only now becoming comfortable and familiar with parametric insurance
Blockchain and parametric insurance Very often companies who offer parametric insurance using blockchain are challenged on whether or not they needed a blockchain. Sid believes that if you’re running a simple parametric insurance for one product in one region you don’t need a blockchain. A simple SQL database will be sufficient.
Operating across a large number of regions, especially in regions where trust levels for institutions and insurance companies can be very low, blockchain can help.
The decentralised nature of blockchain means you can have a data infrastructure which is decentralised. Something that Arbol has embraced since day 1. What this means is that when a payout happens a customer can know that Arbol had no control over that and that they can verify the original third-party data if they so choose to.
Another reason why blockchain and parametric insurance can work well together is from an audit perspective. Parametric insurance can be using thousands of different IoT sensors that all require auditing. Blockchain’s time stamping, transparency,
Frank Lu is Head of Ping An Blockchain Technology at OneConnect Smart Technology, a subsidiary of Ping An. Previously to Ping An, Frank Lu was one of the original founders of Hyperledger Fabric. In this podcast we discuss the different approaches to blockchain and the advantages of creating encrypted data networks for data privacy, cross validation of data and ability to run business logic on encrypted data.
About Ping An Ping An is a Chinese holding conglomerate with 30 subsidiaries that mainly deal with insurance, banking, and financial services. The company was founded in 1988 and is headquartered in Shenzhen. "Ping An" literally means "safe and well".
Ping An ranked 7th on the Forbes Global 2000 list and 29th on the Fortune Global 500 list.
The company is considered to be China's biggest insurer, with US$107 billion in gross premium income in 2018. Its market capitalization is at US$220 billion in July 2019, making it the world's largest insurer except for Berkshire Hathaway.
Frank’s subsidiary, OneConnect Smart Technology, is mainly responsible for financial services. Frank heads the Technology Division for blockchain which is responsible for PingAn’s blockchain across the conglomerate.
What is blockchain? Blockchain is a shared ledger technology which provides a single source of truth to all participants on a blockchain. It’s a way for different participants to be able to manage and work on the same data source. Every time a change is done to the data source, all participants will have visibility of that change. It has features which makes it immutable thus ensuring any attempts to delete a record or change a record will get noticed by the other participants.
Frank’s journey to blockchain Back in 2013, Frank was part of the IBM WebSphere Strategy Team. His team was working on gamification technology which involved using coins and badges as game elements to motivate a workforce. In 2014, The project was pivoted to a mobile gaming backend as a service working for Jerry Cuomo.
At that time Ethereum hadn’t yet launched but had published the Ethereum whitepaper along with a few lines of code which attracted the interest of the team Frank worked at. They investigated the Ethereum whitepaper to determine how they could use it for their gaming backend work.
Based on the mobile gaming backend work a new project was launched, initially called “Blue Chain” that received $1m to explore blockchain solutions. John Wolpert was invited to lead Blue Chain and Richard Brownwas also invited to participate in the project.
Initially the plan was to avoid having to start from scratch in building a blockchain solution. They looked at the possibility of partnering with Ethereum to bring their technology to the enterprise market. However, due to internal politics it was decided for IBM to build their own blockchain solution. The Blue Chain initiative was then called Hyperledger Fabric. In December 2015, Hyperledger Fabric was formerly launched under the auspices of the Linux Foundation.
In early 2016, PingAn convinced Frank to join them.
PingAn’s blockchain technology As head of blockchain technology at PingAn, Frank has an interesting view of consortiums. In his opinion consortiums are formed by entities who are interested in accessing other people’s data. Everybody wants to leverage other people’s data, however most aren’t willing to share their own data. His criticism of Hyperledger’s approach to blockchain is its use of channels which is essentially a point to point connection between counterparties, something which you can do with existing traditional technologies. Hyperledger’s approach is if you want to make confidentiality a priority then you should use blockchain technology.
PingAn has a different approach. Their blockchain technology is heavily based on cryptography where all data is encrypted on the blockchain and where the participants can run business logic on encrypted data.
Gustav Strömfelt is Project Manager at the World Food Programme & New Venture Consultant. In this exciting podcast we discuss some of the blockchain work the United Nations World Food Programme (WFP) has been conducting over the years including Building Blocks and collaborations with other UN agencies such as UN Women.
Winning the Nobel Peace Prize
Winning the Nobel Peace Prize represents for Gustav an important spotlight on the importance that food has towards global peace.
Awarding the 2020 Nobel Peace Prize to WFP, the Norwegian Nobel Committee described the link between hunger and armed conflict as a vicious circle in which “war and conflict can cause food insecurity and hunger, just as hunger and food insecurity can cause latent conflicts to flare up and trigger the use of violence.”
The Nobel Peace Prize gives WFP recognition “for its efforts to combat hunger, for its contribution to bettering conditions for peace in conflict-affected areas and for acting as a driving force in efforts to prevent the use of hunger as a weapon of war and conflict.”
Gustav feels very humble and proud to be part of an organisation of 18,000 people, their partners and donors who all work together to ensure that the 690 million people who are hungry worldwide do not go to bed worrying about where they’re going to get their next meal.
What is blockchain? A its core, blockchain is a fancy accounting technology with some interesting bells and whistles. From his perspective, Gustav sees blockchain as an amazing way to ensure a unified vision of the truth across participants in an ecosystem. This creates the opportunity for consensus to be shared between organisations that’s effectively coded into an underlying platform.
From an application standpoint it opens huge opportunities for collaboration and cooperation for use cases that considers the needs of an ecosystem and a common customer. Whether that’s a specific good that’s passing through a supply chain or an individual receiving tokens.
Blockchain is a great way for the WFP to drive transparency, consensus and a unified vision of the truth.
About the World Food Programme (WFP)
Created in 1961, the WFP’s purpose is to eradicate global hunger because one in 11 people worldwide doesn’t have enough to eat.
The United Nations World Food Programme (WFP) is one of the largest UN agency with 18,000 employees serving 138 million people worldwide across 83 countries. Every year the WFP gives out 15 billion food rations and $30m in cash. At the moment the WFP is probably one of the largest operating airlines in the world with over 100 aircraft along with 30 ships, 5,500 trucks actively moving goods and people to deliver humanitarian responses around the world.
The World Food Programmes Building Blocks
Houman Haddad, is the founder of the WFP’s Building Blocks which launched in 2017 as part of their Blockchain for Zero Hunger initiative.
What Houman realised was how inefficient cash transactions are from the creation of beneficiaries accounts to the way transaction are performed.
The majority of cash delivery processes in humanitarian organisations is done through the creation of virtual accounts with a financial service provider. They hold custody of those accounts as in many cases refugees are not given the ability to open their own named accounts. Some from of authentication mechanism is created for the refugee's virtual account via a card or via biometrics for a transaction to take place between the financial service provider and the merchant which has been contracted by the humanitarian organisation.
That process creates significant costs. In Jordan for example the WFP is servicing 140,000 beneficiaries across two refugee camps, four merchant shops with each transaction costing a fee between 2 – 3%. With 300,000 – 400,000 transactions a month this transaction cost can rise significantly.
With Building Blocks,
Susan Joseph is the CEO and co-founder of HealthTrends.ai, a trusted third party delivering ongoing authoritative health data that's independently auditable and has legal weight. In this podcast we discuss the challenges the US Health Sector has regarding collection and distribution of health data and what role Smart COVID data on the blockchain can have to help fight the pandemic.
Susan is both a consultant and attorney with startups and enterprises in a variety of settings, including financial services, data usage, ESG, and digital assets. She is also a consortium advisor to the Mining and Metals Industry Blockchain Initiative and is the Executive Director of Diversity in Blockchain, a 501(c)(3) entity that provides education and resources to support diversity and inclusion in the blockchain space.
What is blockchain? Susan views blockchain as a communications network layer on top of the internet that allows direct peer to peer transactions. To accomplish this, it requires cryptography, incentives such as game theory, other economic incentives, and computing power. It can be applied to a wide range of transactions from anything such as currencies to data usage which is where HealthTrends.ai jumps in.
In our previous podcast together entitled “Innovation & diversity in the Insurance Industry”, Susan had a more technical definition of what is blockchain. Now she views blockchain more as a social, political, economic and computing tool.
Challenges the US Health Sector has regarding collection and distribution of health data The quality of public health data that is available to collect and act upon is the first defence at the beginning of a pandemic. The current pandemic has demonstrated that the manner in which the US captures public high quality health data, with which to make hard decisions, has been a stress test on every aspect of its healthcare system. That type of data, whilst published, is not easy to access, sort and aggregate thus making it really hard to make decisions in a timely manner in its current published form.
In the US, every state is charged with issuing out public health information and publishing it. But they're not told how to publish it and in what form to make it available. They just put it up on their website in an unstructured manner. This creates challenges on downloading active data in a timely fashion.
Every state has in a sense, their own standard to the data, making it difficult to have a uniform dashboard where data is easily aggregated or sortable.
The data that the states are publishing has legal weight. It is important to recognise that the state themselves have not been recipient of a lot of infrastructure funds and they do the best they can with what they have. Susan wants to give special recognition to the “data nerds” and public health officials for collating and getting health data every day since the beginning of the pandemic.
She sees HealthTrends.ai as upgrading the data layer by empowering organisations to access the data to make the necessary decisions.
About HealthTrends.ai Susan, is the CEO of HealthTrends.ai a company she co-founded at the beginning of the pandemic. They are a trusted third party, delivering ongoing authoritative health data that's independently auditable and has legal weight. They’re the trusted data source that spans legacy and cutting-edge technology solutions, allowing innovative organisations to access both.
Their mission is to help any organisation turn health data into something actionable that they can use and base their decisions upon. The first tool they developed is the Coronavirus API that runs Coronavirus statistics. It is a free tool to support first responders who specifically use the data to confirm trends, assess risk for non-compliance, and create predictions to help manage their populations. Similarly, this type of data is used in insurance, economic projections, supply chain logistics,
Laurent Benichou, is Head of Blockchain Europe & US, that sits within the Group Emerging Technologies and Data team at AXA. In this podcast we discuss the main takeaways from his experience with Fizzy and more importantly we discuss how can blockchain and insurance be good bedfellows. Laurent shares with us some of the main mistakes insurers make with blockchain but he also the main blockchain opportunities that exist in insurance.
What is blockchain? In August 2018, Laurent defined on Insureblocks blockchain as:
"A blockchain is a fully distributed database. This means it has no single point of failure and no central managing authority.
Blockchain’s technical characteristics, such as its immutability and cryptographic verification, create numerous convenient features including fast and easy payments, smart contracts and the ability to indefinitely store information."
At that time his answer was a very technical one which he believes misses the essence of what is blockchain. Today, Laurent defines blockchain as a digital system of uncensored value transfer. The winning present blockchain use cases are ones around the exchange of value, such as Bitcoin and lending with stable coins.
Main takeaways of Fizzy
In September 2017, AXA launched Fizzy. Fizzy is a fully automated flight delay insurance policy that runs on the Ethereum blockchain and allows customers to get indemnified as soon as they arrive to their destination. The process is fully automated, with a smart contract deciding whether customers are eligible for indemnification.
In November 2019, over 2 years after its launch AXA closed Fizzy. Laurent describes Fizzy as an opportunity to test out a new type of product based on blockchain technology. It provided his team with an incredible experience, which grabbed a lot more media attention that they had anticipated. They gained a lot knowledge during that experience on things such as: how to use a blockchain, how to handle gas fees on Ethereum, importance of auditing a smart contract, and much more.
Taking the learnings from Fizzy, Laurent has the following top tips for aspiring blockchain projects:
It’s always easier to convince people with a functioning proof of concept than with a PowerPoint. Never underestimate the cost and complexity of distribution especially when it comes to a B2B to B2C model. All new digital services need to be API and mobile first
Does blockchain and insurance make bad bedfellows? On the 24th of August 2020, Laurent wrote on Medium an article entitled “Navigating blockchain opportunities in insurance”. The first line of his article states: “Unifying Insurance and Blockchain has so far been the most difficult task of my entire career”. Laurent believes that insurance can play a part in protecting the crypto sector. He also believes that at their core both blockchain and insurance share a common element together which is about the exchange of value. However, they both tackle this common element in very different ways. Because of that difference it can be very difficult for them to work together in spite of the benefits blockchain can provide to insurance and insurance to blockchain. He is hopeful that the two will be able to work together.
In the article Laurent lists out some mistakes he has witnessed while seeing “Blockchain projects” being developed, boosted or stopped in the insurance industry:
Blockchain with or without tokens Add blockchain but leave the rest unchanged Ignoring the most obvious opportunities Refuse cryptocurrencies their status of financial assets Assume you can catch up later
Mistake 1: Blockchain with or without tokens? Most insurers look at blockchain and decided to focus on the technology without looking at the tokens themselves.
Looking at blockchain technology without the tokens is minimising the number of total use cases you could look at. Laurent gives the example of using blockchain t...
Sabine Brink, Global Lead of Blockchain at Shell, shares with us how Shell is using blockchain technology within the energy industry. She walks us through a number of interesting blockchain initiatives they’ve worked on, such as decentralised digital passports, the Energy Web Foundation, LO3 Energy and VAKT. We conclude this podcast with her views on how decentralised technologies can support the fight against climate change.
What is blockchain?
Sabine recognises that there are many definitions to blockchain. One of the definitions that Shell uses is blockchain as an immutable tamper proof shared ledger of state changes of a digital asset. Technologies that enable blockchain such as algorithms, cryptography, and distributed systems have been around for decades. What makes blockchain unique is the combination of these technologies.
Shell’s Blockchain Centre of Excellence Sabine’s blockchain team sits within the digitalisation organisation within Shell. The team was set up in early 2017 with the aim to help guide Shell through this increasingly decentralised world. They are also tasked to ensure that they accelerate the adoption of blockchain technology within Shell but also in the energy industry.
The Blockchain Centre of Excellence has the following focus:
Partnering with all the Shell businesses to help them realise the benefits of blockchain Ensure that the right technology choices are made Building the capabilities, toolkits and skill sets to enable Shell to accelerate their adoption of blockchain
Sabine gave us an example of how that would work where they would partner with the new energy business to develop ideas and concepts for decentralised strategies. The approach they take is first and foremost to understand what is the problem they’re trying to solve.
They would run exploratory workshops where the focus is on understanding the problem that they’re trying to solve, how big of a problem it is and identifying what is the best technology that can help them resolve this problem. If blockchain is the best technology as defined through a clear set of assessments, Sabine’s team would guide the business unit through the process of taking an idea to a proof of concept, pilot and ultimately deployment.
Sabine is passionate about the combination of a disruptive technology like technology and what it can do within the energy industry. She’s very interested in how new technology brings disruption into existing systems and/or in creating new economies.
Sabine initially started off as business analyst within the team before becoming its technical lead and ultimately growing into the lead of the blockchain centre. Her team is now working on 10 different blockchain projects and are very excited about the combination of blockchain technology within the energy industry.
Shell’s early years with blockchain Shell was an early adopter of blockchain technology and started investigating its use in 2015. In the early years Shell had a small blockchain team testing out concept and running proof of concepts with different business units and building up their technical capability. From the learnings gained in proof of concepts in different business units they were able to formulate a clear strategy early on. This strategy helped them to understand where blockchain makes sense and where it doesn’t make sense.
Shell’s blockchain strategy is defined in three key pillars:
Reimagine current processes with blockchain technology to deliver cost savings, increase efficiency and drive standardisation. This includes creating digital ecosystems with Shell’s partners to remove inefficiencies and standardising non-competitive processes. Reimagining the operation of end-to-end value chains to find new value propositions, particularly in emerging or rapidly evolving markets such as the electricity market, carbon and mobility markets. Shell sees blockchain as an opportunity to revolutionise those ...
Sergey Nazarov is the co-founder of Chainlink, a decentralised oracle network that provides reliable, tamper-proof inputs and outputs for complex smart contracts on any blockchain. In this podcast we discuss the fundamental opportunity blockchains along with smart contracts, connected to real world data via oracles, can provide in creating a level of hyper reliability for transactions to occur that hasn’t been possible up to now.
We also discussed how blockchain, smart contracts and oracles can create better insurance products and transform insurance cash flows into securitised tokenised assets.
What is blockchain? Blockchains are tamper proof data structures that end up creating an immutable highly reliable record of smart contract state or contractual agreement between parties.
The way they do that is through the use of cryptography they prove that the data and the proof within a blockchain is actually reflective of what happened.
For Sergey the fact that you have a system of record and a system of executing transactions that’s hyper reliable is actually a very unique innovation in the history of contracts and in the history of how people interact with each other. Because traditionally what you would have had are multiple parties, within a transaction, keeping their version of what happened.
That means two important things. (1) that version of history, is their vision of history, whether it’s right or wrong. That version for example may have been corrupted or manipulated to their benefit. (2) It's a version of history that they can't easily present as a reliable proof of what happened to other parties, whether that's the counterparty or whether that's a regulator. This inability to prove what's happening in a transaction or prove what the underlying value of an asset or prove what happened in an insurance kind of agreement is what leads to the big problems in the global financial system as was seen in the 2008 financial crisis.
The 2008 financial crisis was really a problem of proving that certain assets were in a certain state, and that certain people were in a certain state of solvency. Because everybody had their own version of history, and no one had a unified, single trustworthy version of history, the markets became dislocated and disconnected from reality.
Blockchain provides the ability for all parties in a transaction to have one single, hyper reliable form of history that everyone knows is true. And therefore, nobody even needs to keep their own copy.
Smart contracts A smart contract is a tamper proof digital agreement that is represented on a blockchain. Blockchain provides a data structure, where the data about a transaction is hyper reliable. With smart contracts you now have a certain logic and conditions that gets executed, as coded into the contract. This is a hyper reliable system that sits outside the control of any of the people in the contract.
Sergey believes that smart contracts should instead be named tamper proof digital agreements. Smart contracts take standard digital agreements and provide a level of unique guarantee that digital agreements can’t provide because they’re not secured cryptographically on a blockchain.
Trust in a brand vs cryptography The relationship and the brand of an insurance company or financial institution is there to assure you of solvency and of reputational loss if the contract is mishandled, misrepresented or not executed properly. Reputation brand is essentially a mechanism to guarantee reliability.
The internet has created a paradigm shift by being able to reliably guarantee a relationship between a user and the outcomes they expect from an internet based agreement. In those situations, people abandon brand and relationship and simply go towards the quality they can get at the best price.
In addition, publicised failures from recognised brands like WireCard and Enron to name a few,
George Alayon – Assistant Director in Insurance Supervision at the Bermuda Monetary Authority (BMA). George leads a small team whose responsibility is for pushing the insurance agenda of the authority. They oversee the insurance regulatory sandbox and Innovation Hub as well as the supervision of innovative insurers here in Bermuda. In this podcast we discuss the influential role the BMA plays in fostering innovation in the insurance industry.
What is blockchain? Blockchain is a digital ledger where information can be stored, duplicated, and distributed across a network of computers whilst being cryptographically protected. For George, it is the opposite of the traditional way of storing information in a centralised manner where there is no single point of failure. This traditional process also may or may not result in the production of digital assets.
Introduction to the Bermuda Monetary Authority (BMA) The BMA is the sole regulator of insurance companies, banks, trust companies, investments, the Bermuda Stock Exchange and credit unions. Recently they were given the mandate to regulate digital assets.
Locally they issue the Bermuda currency which is pegged to the US dollar.
As the sole financial services regulator on the island, they pride themselves to being responsible for maintaining Bermuda’s reputation as a top jurisdiction of choice especially for insurance and reinsurance.
Bermuda is one of a few jurisdictions in the world that have gained full solvency to equivalence from the EU, as well as having obtained both qualified and reciprocal jurisdiction status from the US NAIC.
In 2018, Bermuda was one of the first countries in the world to offer a comprehensive regulatory framework for digital asset businesses.
Evolution of insurance and digital assets BMA defines digital assets to be anything that exists in binary format, and comes with the right to use it and includes a digital representation of value.
In George’s view, blockchain technology is a gateway to revolutionise the financial sector. Blockchain technology allows for the seamless exchange of information related to the basic elements of a contract including the consideration. In the case of insurance, consideration includes the premium paid by the insured in exchange for payment of claims in case of a loss event.
Historically the insurance industry has been heavily reliant on manual processes. The arrival of blockchain technology has given rise to a thriving digital asset business sector, which has forced the insurance industry and the rest of the financial services sector to rethink the way they operate and the future role they will play in this ecosystem.
Over the next two to three years, George sees a lot more market acceptance with the integration of digital assets, as a medium of exchange for insurance policies, as well as a utility pass or access to DLT based ecosystems.
Regulators role The insurance industry is inherently risk averse.
One of the regulators biggest concerns is whether these technological breakthroughs have policyholder protection has as top of mind? Do they disclose enough information for parties to make an informed decision? How are companies thinking and preparing for the worst case scenarios? How do they intend to protect the data of their customers? Who is responsible for what in this decentralised network? How is the usual risk management process being replaced with this new process? At the end of the day all these questions are here to answer the question about how the interest of the policyholders will be protected?
George recognises that regulators need to think outside of the box and try to understand the technologies themselves.
In addition to performing their legislative mandate, policyholder protection, they can take a more active role in encouraging innovation. For example, by utilising technology to improve their own internal operations,
Richard Brown is the Chief Technology Officer at R3. He leads the team that has invented, designed and brought to market the Corda blockchain platform. He now also leads the team that’s building out their second major product line, called Conclave a platform to securely share and analyse data using confidential computing.
What is blockchain? Previously Richard gave Insureblocks a definition of blockchain from an enterprise perspective. A blockchain like Corda is all about allowing multiple firms in a market to be in sync with each other about facts, they care about such as loans and trade deals. Documents which are shared between firms such as notification of loss for an insurance policy, will invariably evolve over time. The claim gets reviewed, processed and authorised. All those business processes are executed within a firm. Other firms across the ecosystem that have a stake in those documents need to be in consensus about their status.
For Richard, blockchain is all about ensuring that all the participants in an inter firm business process are in sync and remain so. The key value proposition being that “what you see is what I see”. Since our last podcast together in April 2019, Richard believes that his original definition of blockchain has been mostly validated by projects R3 has successfully run such as Spunta, by ABI (the Italian Banking Association). Spunta is about ensuring Italian banks are in sync with each other, that their balances reconcile and all the details are correct.
Security on the web – the padlock on your browser
We rarely think about how computers work or what promises they make. This can lead to some unexpected or often problematic outcomes.
When browsing the web, including going onto social media sites like Facebook, we are trained to look out for that padlock next to that URL within our internet browser as it gives us a sense of security. What that padlock tells us is that the connection between ourselves and Facebook is secure. That we are talking to the real Facebook.com and that connection is with servers controlled by Facebook.com.
This means that whatever data you are exchanging with Facebook is protected in transit as it leaves your computer and goes across Facebook servers.
However, what it doesn't say is what Facebook will do with the data, it simply tells you that they are the ones who will receive it. Once Facebook receives that data they can do whatever they like with it. Something which of course has led to some press scandals as the Cambridge Analytica one.
Social media sites today haven’t deployed any technological measure to constrain or control how they use your data. As consumers we rely entirely on social and legal measures to constrain what they do with that data.
The padlock in the browser effectively gives us a false sense of security, because whilst it gives protection to the data as it moves it doesn’t do anything about how the data is ultimately used by the receiving party.
This problem of course isn’t just for consumers but also for businesses. Banks will route client orders to exchanges to buy or sell shares. Insurance companies will send data to government agencies or third party credit agencies. A lot of the data that is being sent may include personally identifiable and risky information. As a company, the only way you can get comfortable with that is by investigating the reputation and procedures of that firm.
For firms to get a better understanding of their market share or how they compare with their competitors they have two ways of doing that. Share information with their competitors which most wouldn’t want to and even if accepted is usually prohibited in numerous jurisdictions. The other approach is sharing it with third parties such as Bloomberg in the financial industry. Financial institutions share with Bloomberg information regarding trades they’ve done and at what price. Bloomberg aggregates all that data,
David Palmer is the Blockchain Lead and IoT at Vodafone Business, In this podcast we discuss the convergence of blockchain, 5G, AI and IoT (Internet of Things). In addition, we discussed the evolution of internet of things to internet of value and some of the exciting work Vodafone is doing in this space from Smart Cities, to supply chain and to the Energy Web Foundation.
David has been working in the telco sector for the last 20 years. He has worked on broadband, ADSL rollout, satellite broadband and for the last 10 years on IoT including combining it with blockchain for the last 4 years.
What is blockchain? Blockchain is a distributed ledger that is shared between different parties. When you combine that with transactions you get to the basis of the first use case of blockchain which is Bitcoin. Bitcoin demonstrated how you can build trust by having transactions written on a shared and distributed ledger where different parties validate the transactions and provide its security through their combined computational power.
David notes that this is a simple definition of blockchain. Over the last three years there has been an evolution of blockchain. On one end you have public blockchains such as Bitcoin, Ethereum versus private blockchains with permissioned access formed by consortiums. Issues of interoperability arise when you try to bring those different blockchains together. In addition there are different protocols and consensus mechanisms that come in to play from DAG (Directed Acyclic Graph), proof of stake and proof of work.
Blockchain is a continuously evolving technology, but at its core it is a technology about trust. David mentions that there is a lot of friction today in everyday process. These are essentially processes built to establishing trust. The real power of blockchain is in providing a trusted shared platform to automate those process to remove that friction. Blockchain’s role in digital transformation is in the removal of the trust issue, it’s in the automation of processes which will give rise to a new evolution of automated business models and processes.
Explosion in IoT devices Source: Statista
Statista is forecasting end-user spending on IoT solutions to reach $1.6 trillion by 2025 from 21.5 billion IoT devices. These are staggering numbers! With the increase adoption of 5G these IoT devices will be able to provide large amounts of data within nano-seconds.
Vodafone has a Global IoT platform called Global Digital Services Platform (GDSP). This platform is at the very heart of the IoT offering to Vodafone’s customers, and is also offered as an IoT platform to other Telco’s. The GDSP provides all the management facilities for customers and channels to manage their individual IoT SIM estates.
Vodafone has been a leader in IoT for the last 10 years as recognised by Gartner’s Magic Quadrant.
What IoT allows businesses to do is to digitise their assets. It allows for those assets to produce data which unlocks new business models and monetisation opportunities. This is a space that Vodafone has experience in which it has been putting to use in helping its clients.
David has seen supply chain as a key industry that is seeing a large growth in IoT devices. For example with recent conversations of the Pfizer vaccine that has to be kept at minus 70 degrees, how is that ensured? You need data from devices at the manufacturer, to supply chain, to delivery which can be provided by IoT devices.
Getting the trust in the data and provenance of the information will need some form of distributed architecture and distributed solution, so that the parties in that can have trust in the data that's been produced.
Pfizer and the vaccine distribution is a prime example of where new emerging technologies such as IoT, AIs to help manage the risk and blockchain can come together to make a real difference.
Transition of Internet of Things to Internet of Value
Sarah Downy is the Managing Director of FINPRO and co-leads the DART, Digital Asset Risk Transfer, team. In this podcast Sarah shares her insights of the crypto insurance market for 2019 and 2020 along for the need for more education of insurers on the opportunity to serve the need of companies who build blockchain technology and of companies who hold or interact with digital assets.
What is blockchain? As an insurance person, Sarah defines blockchain technology as a technology that stores digital information on a public database with a number of interesting features such as immutability, transparency and traceability. The way blockchain works is that it stores transactions on blocks that are verified and assigned a hash.
She also notes that insurers often confuse blockchain technology with crypto and illicit behaviour. A perception that Sarah and her team are working very hard to change.
Overview of the Crypto Insurance Market in 2019 Sarah, describes the crypto insurance market in 2019 as very hesitant and uncertain. The cost of insurance was very high and coverage was very limited. The process for clients to get coverage was both complicated and a lengthy one. Marsh’s clients were mainly focused on two types of insurance:
D&O insurance Commercial crime and specie market coverage
D&O insurance, director’s and officer’s liability insurance protects the individuals running the company. It covers claims brought by investors, shareholders, regulators, against the directors, officers and employees associated with things like a breach of a duty, securities violation, regulatory investigations, or proceedings.
Commercial crime is the coverage that reimburses companies for loss due to theft, disappearance or destruction of property. In the case of digital asset, it protects warm and hot storage wallets as compared to the specie market coverage provides coverage for the loss of digital assets from internal and external theft, damage or destruction of private keys.
A hot wallet is a digital wallet that is online whilst a cold wallet is one which is completely offline. The specie market is insuring vaults that custodians are using to store the private keys.
Sarah notes that if a company is building blockchain technology the pricing should be more favourable and the insurance capacity should be more readily available as opposed to a company that holds a large amount of digital assets or is working with digital assets. However unfortunately companies that build blockchain technology are not being treated in a similar manner to a normal company building legacy or well known technologies as insurers still think of blockchain technology as crypto and elicit behaviour and they can't separate them out.
However 2019 was also a year of innovation for Marsh as it is the year they launched their Blue Vault facility.
5 key trends evolving in the crypto insurance market in 2020 In spite of COVID19 five key trends have emerged in the crypto insurance market in 2020:
More regulatory certainty Transitioning market More insurance purchasing Crypto maturity Testing of an untested market
More regulatory certainty In the insurance industry we are seeing a desire for more regulatory certainty around the digital asset space. Many insurers are tracking what the SEC (US Securities and Exchange Commission) is doing. For example: Spotlight on Initial Coin Offerings and Digital Assets.
Insurers are also watching the OCC (Office of the Comptroller of the Currency) who for example recently published some favourable guidance letters around the use of and storage of digital assets for regulated banks.
With increased regulatory certainty comes more comfort from the insurers.
Transitioning market Commercial insurance markets in general, are becoming much more challenging, and some might even call them hard markets. Unrelated to digital assets,
Oliver Oram – CEO & co-founder of Chainvine & Dr. Rajiv Mathur – CTO and co-founder of Chainvine walk us through a use case they worked on with HMRC and a number of other participants to reducing friction in international trade. We also discussed in some detail the key challenges around consortiums, IP and openness. A must listen for blockchain initiatives debating through those various points.
What is blockchain? Oliver answers this question by explaining why from a business perspective Chainvine uses blockchain as an engine for its platform whose fundamental principles were to have solid identity, self-sovereign data and security.
Rajiv reminds us that there are many different types of blockchains or distributed ledgers. The best examples of blockchains are public ledgers like Bitcoin and Ethereum. Distributed ledgers also come in many different forms with many not actually being blockchains but more as shared ledgers and some who are hybrids between the two. Chainvine takes an agnostic point of view to blockchains and distributed ledger technologies and utilise the most relevant one depending on the use case and problem they are trying to solve.
About Chainvine The name Chainvine is derived from blockchain and vines. The background of Chainvine is in enterprise and supply chain whose original focus was on fine wine. However, since then they have worked with many other commodities from steel to fair trade coffee.
The challenge of paper in supply chains On 15th September Lord Holmes publishes a new report, “Reducing Friction in International Trade” (RFIT). Oliver, resumed the challenges of supply chain to one word, “paper”. As part of the research into the writing of the report, it was identified that 80% of the cost of importing grapes in the UK is down to paperwork. The COVID crisis has demonstrated that that the physical way of doing things in trade, in the usage of paper is actually a critical failure in our supply chains.
For Oliver, it is imperative for the UK, to adopt new technologies whether it is blockchain, DLT, AI or machine learning, to become resilient and sustainable to trade internationally.
Intelligent Wine
Chainvine was invited to participate at an event organised by HMRC, where Oliver and Rajiv presented the tale of the ‘intelligent wine” that had travelled with them across Europe gathering intelligence through different data mechanisms, such as distributed ledger, the Chainvine platform, and internet of things (IoT) devices.
This story essentially showed to the HMRC attendees that Chainvine is able to demonstrate where a good is as it moves across borders, how much it’s worth, what condition it is in and with whom that good is. This wasn’t about talking about blockchain this or blockchain that, but about how it was being used in this particular use case.
For Oliver this isn’t about tearing down regulations or standards, it's about making them easier to comply with, and making it easier for government to absorb that information and ensure that compliance and regulations are being met. It isn’t either about tearing down standards but ensuring that they are better met with this type of technology than it would ever be with any sort of paper system that is being used at the moment. The technology brings a higher level of resiliency and sustainability.
Managing the challenges of consortiums, IP and openness Post conversation with HMRC which had expressed an interest in Chainvine’s solution, Oliver and his team were introduce to the Wine and Spirits Trade Association (WSTA) who expressed an interest in their solution. This was partially due to the challenge that WSTA is facing with VI-1 documentation requirements from the British Government. The WSTA estimates that full VI-1s for EU wines would mean 600,000 additional forms at a cost of £70m in additional processing.
There was a strong desire by the WSTA and its wine importers and exporters to experiment...
David Behrends, Founder & President at Farmer Connect and Managing Partner and Head of Trade at the coffee trading company named Sucafina, joins us along with Diana Kaliff, Business Development Manager at Farmer Connect to discuss coffee on the blockchain. In this podcast we get to learn about how Farmer Connect is helping to not only to digitise their industry but also in bringing transparency and traceability to all players within the coffee supply chain industry from farmers to the end consumer.
What is blockchain? Diana describes blockchain in how they use the technology at Farmer Connect. For them blockchain is a secure database that enables to both securely store and share data between different business partners.
For Dave, blockchain is like the arteries in our bodies:
Arteries have thick, strong walls, that make them resistant to high pressure that exists near the heart. This is similar to blockchain’s cryptographic level of security. Each major organ in the human body has their own special kind of artery that delivers the needed supplies. This is similar to blockchain in the sense that you have public blockchain, private blockchains, permissioned blockchains each one of them with their own specific use case. Arteries take oxygen away from the heart and distribute it very efficiently to all the body's tissues. This is similar to a blockchain that has lots of complex data, standardising it and allowing it to seamlessly flow from one participant to another.
Challenges of the coffee industry and its level of digitisation
The coffee industry is characterised by a large amount of smallholder farmers who are facing a lot of issues around traceability and sustainability.
Consumers on the other hand, especially with millennials and post millennials really want to know two things:
Has the coffee been responsibly sourced and has the farmer been paid a fair price Are the farmers themselves sustainable? Do they take care of social and environmental issues on the farm?
Being able to track both of these points is very difficult and to some degree impossible in the past. However, with the arrival of new technologies such as satellite imagery which can be used to measure deforestation. Soil samples analysis allows farmers to understand how much fertiliser is the right amount to be used for their farm. This kind of precision agriculture allows farmers to use less fertiliser and lower their environmental footprint. Both of these examples produce a lot of data.
In addition you have companies like Starbucks who have announced their intention to go resource positive - storing more carbon than it emits, eliminating waste and providing more clean freshwater than it uses.
All of the forementioned bring up lots of challenges and opportunities around how data is captured? How is it integrated? How is it stored? How is standardised? However, Dave believes that the biggest challenge is concerning the ownership of data. In the past many of the small farmers had zero technological capacity. In the past firms would send an agronomist to the field, they would “harvest” data of the farm, enter it into a table, hop back into a jeep back to the office and upload it into the company’s database to share the data with their clients. That wasn’t a really good model nor did it scale effectively.
Now with mobile phones, farmers can be empowered to own their data, to control their data and hopefully to monetize it as well.
An introduction to Farmer Connect
Farmer Connect is an industry led initiative, based out of Geneva, that is here to tackle the challenges of the coffee industry explained above. Farmer Connect is here to provide end to end connectivity between farmers at the beginning of the supply chain with the consumers on the other end. The vision is to humanise consumption through technology, because they believe that technology should bring people together,
Dale Chrystie is a Business Fellow and Blockchain Strategist at FedEx who has been in the transportation industry for over 30 years. He also serves as chairman of the Blockchain in Transport Alliance (BiTA) Standards Council, and is a member of the Blockchain Research Institute. In this podcast Dale walks us through the work FedEx is doing in the blockchain space and his view on why he believes the future of blockchain is an open source one instead of a consortium one.
What is blockchain? Dale believes that to effectively define what is blockchain to as wide an audience as possible you need to use basic language and basic concepts. He boils blockchain down to five words: digital, ledger, permanent, transparent, and shared. Blockchain is a digital ledger that is permanent and uses cryptography. Once an entry is added to the ledger it can’t be changed. It’s transparent to all relevant parties and it is shared which is to say it exists on the cloud.
Having said that, Dale is also known for characterising blockchain at conferences as boring and useless. Because blockchain is just a database that sits amongst many other tried and tested databases that are fast, process millions of transactions, are enterprise ready and ruggedised. Blockchain isn’t quite there yet. It isn’t very fast, scalable or mature. However, what it does, it does really well. For example, where authenticity and provenance matter, blockchain will completely change worldwide supply chains.
Challenges of the logistic industry and the role blockchain can play The logistics industry is one where information systems use paper legal documents and electronic data is transmitted via electronic data interchange (EDI) and where documents are often shared via email, fax and courier. In the freight industry or the Less than Truckload (LTL), industry as it is known in the US, has been using paper process with bills of lading, documents and manifests for decades. Dale believes it is ripe for moving forward into the digital world.
In 1978, Fred Smith founder of FedEx, is famous for saying "The information about the package is as important as the package itself." For Dale, Smith was way ahead of his time as that statement still holds true today. He believes that we are at this very unique intersection of the physical world and the digital world. Where on one side you have the physical world and on the other you have a digital twin of it which contains data about the package.
Blockchain is the first technology where companies will be able to share selected data in a peer to peer fashion without the need of middlemen.
For Dale, blockchain has opened our eyes to what is in the realm of the possible. He doesn’t think of blockchain as process improvement. He thinks of it as a breakthrough technology. As he states if you look at blockchain as process improvement you can do this with existing legacy technology. If you look at blockchain within the breakthrough realm then no existing legacy technology could have changed the art of what is possible and the nature of the conversation as blockchain has done.
Fedex blockchain journey Fedex’s blockchain journey started around a process in the dispute resolution area that was causing freight claims for a couple of million dollars a year. Around that time Walmart had a few early use cases in the food safety space which had inspired Dale on how blockchain could be used. The identified issue was for a three party dispute resolution scenario involving a receiver, a shipper and a carrier. The issue was that the receiver was ordering hypothetically 100 items from the shipper via a purchase order. The shipper then received it and fulfilled it. In their fulfilment process they pushed it to the warehouse in two pallets of 40 items and created a bill of lading. The two pallets of 40 and the bill of lading is given to the carrier and ultimately delivered to the receiver.
Ran Zhao is Founder of Blockchain Business Bridge and Innovation Officer at Innovation Centre Denmark, a public organization under Ministry of Foreign Affairs and Ministry of Higher Education and Science of Denmark. In this podcast Ran walks us through the opportunities blockchain projects have to expand in the Chinese market by sharing her experience of such a project for Danish companies.
The innovation Centre Denmark helps Danish companies to build up their innovation and technology development and connect them to international resources.
The Blockchain Business Bridge is a non-profit platform for knowledge exchange, and business communication between China, Denmark and the world. The project serves as a launchpad for Danish businesses to take their blockchain activities to the next level.
What is blockchain? To define what is blockchain, Ran took us throough a journey across time. From the Stone Age to now trade and transactions have always been the engine of economic growth. Transactions however have become more complicated. Transactions are not just physical goods but services, solutions, stocks and property. The marketplaces themselves have also become more complicated. Technology has enabled trade to move from offline to online as it increasingly becomes more digital. Both the number of participants and locations of those participants has increased, thus complicating trade.
All this complexity leads to one fundamental problem, a problem of trust. To solve this trust issue, we have resorted to the use of centralised intermediaries such as banks, financial institutions and big companies who have excellent credit records.
Big corporates can invade your data privacy, financial institutions have gone bankrupt and banks can deceive us as recently demonstrated in the FinCEN files where major banks like JPMorgan, HSBC, Deutsche Bank and a number of other big banks have defied money laundering crack downs by profiteering from illicit funds from Russian oligarchs and drug lords. Centralised intermediaries are usually inefficient and have numerous points of friction creating increased transaction costs.
Blockchain technology enables stakeholders in a complex ecosystem to coordinate with each other transactions in an efficient and cost effective manner. Blockchain technology has the following attributes:
Cryptographically secure Distributed ledger where stakeholders can keep their own record of their data in a privacy adhering manner A consensus mechanism to facilitate agreement between the stakeholders Smart contracts to automate transactions based on codified rules
Commercial and industrial applications can be built on top of it to create a whole new ecosystem of digital economy.
The Innovation Centre of Denmark Ran works at the Innovation Centre Denmark in Shanghai, part of the Trade Council of the Ministry of Foreign Affairs and Ministry of Higher Education and Science of Denmark, whose mission is to help Danish companies and higher education institutions explore possibilities in some of the world’s leading innovation hubs, such as in Shanghai, Silicon Valley, Seoul, Boston and Munich.
On one hand they help Danish innovative companies, start-ups and SMEs to enter and scale up in international markets. They help them improve their business models and polish the business plans and help them research of local industry players and potential partners / investors.
On the other hand, they pull the knowledge and experience from all their innovation hubs to Denmark to keep Denmark’s competitiveness, innovation and tech. Blockchain Business Bridget is an example of such projects by bringing the experience on how to develop a blockchain ecosystem and business model from China to inspire Denmark.
Chinese blockchain ecosystem China is seen as a front runner of blockchain technology and applications. China has the highest number of patents in terms of blockchain and DLT.
Robert Barnes is the co-founder and CEO of TradeIX and the co-founder of the Marco Polo network. TradeIX is the network operator that runs the Marco Polo network a consortium of banks and corporates that transact both domestically and globally. In this podcast Rob, takes us through how Marco Polo is able to drive trade and working capital innovation with blockchain technology.
What is blockchain? Rob, looks at blockchain from a distributed ledger technology (DLT) standpoint because their interest is in peer to peer permissioned transactions.
Rob, explains how there are different types of blockchain from the broadcast model, also known as public blockchain, such as Bitcoin, to the peer to peer model like Corda. A blockchain that has financial transactions, needs a peer to peer network that is highly permissione where only the participants to the transaction have visibility over it.
For Rob, blockchain is a platform that facilitates the sharing of data between different legal entities that are permissioned to have visibility over a transaction.
TradeIX / Marco Polo also use the same technology to run stateless calls. A stateless call is where you’re using the communication protocols of blockchain to call something or to request something that doesn’t need to be written onto the blockchain. By doing this you avoid the use of APIs between the various legal entities, companies and customers. APIs are used to connect into large corporates’ back end systems, ERP systems or underwriting ones to name a few.
DLT breaking down silos in trade finance When you look at the financing part of trade it is about interactions between corporate entities and their bank. This could be as simple as a payment. Whatever the interaction it happens via silos that need to talk to each other. Most of the time this communication happens via emails with PDFs, via API calls or sometimes it requires the entity to join a particular business network to get access to the data within a silo. If they do join a business network the power is usually centralised, owned by a third party and more importantly you get into issues of data residency.
Blockchain / DLT provides the opportunity for everybody to control and manage their own data within their desired jurisdiction and shared with the counterparties that they are doing business with globally. This enables the breaking down of silos as parties start to communicate and transact between each other across the DLT, whilst providing all the permissioned ones with access to this single version of the truth in an immutable manner.
Having access to this single version of the truth enables all parties to avoid the unnecessary cost of data reconciliation and verification. For Rob, blockchain / DLT at its core affords the ability to take risk and cost out of everyday processes that are done today.
TradeIX TradeIX started out its journey by being super focused on the actual financial transaction within trade. As they started working with banks, insurers and corporates their journey evolved into solving problems of communication between businesses, financial institutions, and the various ecosystem participants. For example, it enables corporates to exchange purchase orders and invoices between themselves without having to go through a centralised business network, use paper, or email.
Marco Polo
Rob had been involved in trade and trade finance technology for a number of years. He had been looking at a few technologies that were starting to converge which could make a huge difference in the way in which businesses transact and do business globally. Those three technologies were blockchain, cloud and artificial intelligence (AI) / Machine Learning (ML).
Rob felt that if you could bring these three technologies together in a way that created and broke down the silos and created efficiencies in communicating information and documents in a digital way across the globe you coul...
Rebecca Hofmann is Chairman of the Blockchain for Energy Consortium (previously known as OOC Oil and Gas Blockchain Consortium) a collaborative effort of 10 major energy companies to learn, lead and leverage blockchain technology for the energy industry. Additionally, Rebecca is Head of Innovation at Equinor, a Norwegian based global energy company operating in 30 countries, where she focuses on the strategy and innovations dealing with blockchain technology.
What is blockchain? Rebecca looks at blockchain from a business perspective as a back-end technology, with the potential to truly transform how we work. It's a shared digital ledger, that is allowing to have a more seamless way of working with a central source of truth in which business activity can be self-executed, recorded in real time, in a transparent way, with no central point of failure, that's making it more secure.
Challenges of the Energy Industry
The energy industry has been facing challenges like never before. There has been extreme price fluctuations in a negative way affecting all of the entire industry. This situation has stimulated the industry to work in a new way and to embrace digitalisation to help them achieve that.
Source: Statista 2020
Low energy prices, the threat of companies having to either merge or actually go out of business has helped the industry to push digitalization in a way it would have been uncomfortable doing in the past.
Additionally, it has pushed the industry to collaborate even further to share the cost of R&D, share the cost of development, share the risk and share subject matter experts to create the right solution that all the companies need.
Rebecca’s journey into blockchain Rebecca’s journey into blockchain started off when a colleague of hers at Equinor gave her his ticket to attend a conference at Rice University on this new emerging technology called blockchain. During the conference, Rebecca rapidly realised that this technology was about a collaborative tool that also enabled interacting with external parties.
She wrote an email up the chain at Equinor expressing the need to pay attention to blockchain technology and she wanted to be part of it. Equinor already had started some blockchain initiatives and she was able to bring them together into her team as Head of Innovation.
Journey to launching the Blockchain for Energy Consortium In December 2017, Equinor alongside BP, Shell, ABN AMRO, ING, Société Générale and others launched VAKT a commodity post trade management company. Rebecca describes VAKT as the first real blockchain solution to enter the energy industry in Europe, from which they have gained a lot of learnings from.
After Rebecca’s participation at the blockchain conference at Rice University, representatives from Exxon Mobile and Chevron reached out to her to discuss how they could keep discussing about blockchain as a group of three. As the three of them kept meeting others started joining in and participating in the conversation. As the number of participants grew they decided to formerly start a forum called the US Oil and Gas Blockchain Forum in February 2018.
They met across the year and it rapidly grew to 17 operators. The operators were starting to open up to the idea of collaboration and agreeing that on some use cases that they shared common pain points. They also consciously made the decision not to focus on blockchain as the tool but on the pain points that as an industry they can solve together.
Throughout the launch of the forum they embraced the mantra of “Learn, Lead and Leverage”. They organised a lot of events by bringing experts from different disciplines to expand the learnings of the forum’s members.
Towards the end of 2018 the idea was floated to the17 members of the forum on who was willing to put some money together, some subject matter experts and be willing to work together to actually test the technology around specific use ...
Ralph Chami, Assistant Director at the International Monetary Fund’s Institute for Capacity Development, isn't a tree hugging hipster. He is a financial economist whose interest in whales has unlocked a well known fact by scientists but not by the general public. A whale during its lifespan is worth $2m in carbon capture and carbon sequestration services, whilst a dead whale's meat is worth $50,000.
An African Forest Elephant's tusk is worth $40,000 but an elephant's carbon capture and carbon sequestration services as a living creature is worth $1.75m! Today we have a market for dead creatures but we don't have a market for the services rendered, in terms of carbon capture, by living creatures such as whales and elephants.
Join us in this incredible podcast to hear how blockchain can help build a living and regenerative market that not only protects those magnificent creatures but build a circular economy that is a win-win for businesses, governments, local communities and societies around the world.
What is blockchain? Blockchain is an electronic ledger that ensures that all parties in a contract can record their transactions in a transparent, permanent and permissioned manner on an end to end basis. It also removes the need for intermediaries.
From the IMF to an article on Nature’s Solution to Climate Change Ralph works as the Assistant Director at the International Monetary Fund’s Institute for Capacity Development. The institute is tasked with training staff of the IMF which includes over 1500 economists as well as the training of the 189 member countries of the IMF.
Ralph’s hobby is studying the great whales. A friend of Ralph belongs to the Great Whale Conservancy group which operates out of the Sea of Cortez in Baja, Mexico. Four years ago his friend managed to get him an invitation onto a research vessel to study the great whales, including the blue whales, fin whales and gray whales.
For Ralph this was a life changing experience. Shortly after the expedition Ralph had dinner with members of the expedition whose scientists shared with him the role of whales in carbon capture and carbon sequestration – long-term storage of carbon dioxide or other forms of carbon to either mitigate or defer global warming and avoid dangerous climate change. This information completely changed Ralph’s life as he had no idea about this fact that scientists have known for a long time. It impacted him in two ways:
First was the immensity of the role whales play in carbon capture. Whales capture carbon on their body and capture carbon indirectly through what we call primary fertilisation, the amount of carbon dioxide that the whales contribute to keeping out of the atmosphere, directly and indirectly, is equivalent to that captured by thousands of trees! Second was the frustration that scientists had in their failure to effectively communicate the first piece of information to saving the whales. Nobody was acting upon it.
Ralph realised that the problem in the conversation between the scientists and the policy makers was that they were speaking in a different language. When scientists put forward plans to save the whales, policy makers only saw costs. The benefits of saving the whales was in the realm of science whilst the costs were in the realm of dollars and cents.
What we had here as Ralph would say from one of his favourite movies, Cool Hand Luke, was a “failure to communicate”. Scientists would communicate the benefits of saving the whales in scientific terms whilst policy makers heard costs in dollars, the units talked about were different. Ralph realised he had to translate the scientific benefits into dollars so that policy makers could understand the cost of mitigation is X and the return in benefits is Y. Ralph made the case in economic terms, in a neutral manner, that demonstrated that the value far exceeds the costs. His article was published on the IMF’s Finance and Development Magazin...
Gleb Dudka is a Blockchain analyst at T-Systems and author of the Blockchain Infrastructure Thesis. In this podcast we discuss opportunities for financial services to work with IT service provider in securing the Web 3.0 and exposing themselves to numerous revenue opportunities. We also discuss the differences between proof of work and proof of stake and the role T-Systems play in providing public network infrastructure to the Web 3.0.
What is blockchain? Gleb looks at blockchain from a technical, business and economic standpoint.
From a technical standpoint it’s a combination of three key parts:
A distributed database that stores information with multiple parties working together on synchronising and keeping the ledger up to date. Smart contracts - scripts and if then functions which allow for executable business logic that sits on top of a shared ledger. Digital assets – tokens which sit on top of blockchain. They play a critical role in incentivising trust-less parties to synchronise and maintain public blockchains such as Bitcoin and Ethereum.
The second dimension or standpoint in which to look at a blockchain is as incentivisation machines. Each blockchain is designed to fulfil a certain goal or a certain value. In order to fulfil that purpose the blockchains rely on some form of infrastructure providers such as miners which need to be rewarded. Incentives are their support the blockchain for it to fulfil its goals.
The opportunities public blockchains have for digital assets and cross company collaboration In Gleb’s opinion, what makes blockchains really unique is the digital asset layer. Distributed database and smarts contracts aren’t particularly unique to blockchain. The digital asset layer provides the ability to transact value for a trusted digitally scarce asset.
Digital assets enable to bootstrap public blockchain networks by creating incentives for people to participate in these networks. Without these incentives it’s very hard to get people to participate and use a blockchain network. This is a main advantage public blockchains have over private ones as it provides participants with the incentives to join the network and for it to scale.
Gleb believes there is an opportunity for public blockchains to help interconnect private blockchains which effectively sit in different silos. The jury is still out with regards which public blockchain or application specific blockchain could do this whether it’s Ethereum, Polkadot or others.
Enterprise blockchains Gleb believes they are quite interesting from an innovation standpoint. However as most enterprise blockchains only use distributed database and smart contracts without digital assets, it makes very hard to argue what is the benefit of that technology compared to a centralised database. He would recommend that enterprise blockchains need to develop a digital asset strategy to ensure the long term feasibility and return of their initiatives.
Proof of work and proof of stake
Proof of work Proof of work is a consensus algorithm used to make a public blockchain secure and to ensure that you don’t have situations where double spending is possible. This is achieved by having miners which calculate hashes (complicated algorithms) and consume a lot of electricity. This requires powerful hardware and lots of electricity to run those calculations. Anyone attempting to “hack” their way through would need to take control of 51% of the network, i.e. purchase all the necessary hardware and electricity to overcome 51% of the network. This is why Bitcoin and Ethereum are secure.
Proof of stake Proof of stake has the same goal which is to secure the public network. The only difference is that it's not secured by the hashing rate of the blockchain, but by the amount of the native digital asset of the network participants have at stake.
Ethereum which is at the present using a proof of work consensus algorithm is mov...
Genevieve Leveille, Founder and CEO of AgriLedger, a blockchain solution built on R3’s Corda which has been used to support fruit growers out of Haiti. In this podcast, Genevieve shares with us how their solution enables supply chain through the use of value chain – value transfer and value retention throughout. She also shares how AgriLedger has helped farmers in Haiti get a 750% increase in revenue per kilo of quality mangos sold.
What is blockchain? For Genevieve, blockchain is an infrastructure technology. Blockchain is a mechanism to allow different parties, with different needs, to collaborate and create information exchange. It’s about capturing data in a fashion that is known to be true at the moment of capture.
Genevieve is interested in the application of blockchain technology for the food industry. She explains that having food poisoning is usually due to the fact that you don’t know where the food came from, if it had the right refrigeration and other factors which blockchain could address.
Challenges of the Agro-Food Industry Source: Stock image - iStock/Getty
According to the Food and Agriculture Organisation of the UN (FAO):
“An estimated 30% of the food produced for human consumption globally is lost or wasted somewhere along the food supply chain.” the world’s population is predicted to reach 9.1 billion by 2050 and this will require an increase of 70% in food availability. “Smallholders provide up to 80 percent of the food supply in Asian and sub-Saharan Africa.”
At the Rio+20 Conference on Sustainable Development in June 2012, UN Secretary-General Ban Ki-moon announced a new global challenge for world leaders and individuals from all sectors: create a world where no one is hungry. He emphasized that there is enough food in the world to feed our population, so the challenge comes from making sure that everyone has access to the food they need to live happy, healthy lives.
Ban called this initiative the Zero Hunger Challenge. The Zero Hunger Challenge has five pillars:
100% access to food and nourishment all year round Ending stunting among children under two years of age Making all food systems more sustainable Doubling productivity and income for smallholder farmers Reducing food waste and post-harvest losses
In spite of efforts to meet the zero hunger challenge, global hunger has been increasing even before the coronavirus pandemic, the United Nations has warned, putting its Zero Hunger 2030 target in doubt.
An annual study estimates almost 690 million people went hungry in 2019 – up by 10 million from 2018 and by nearly 60 million in five years according to the latest edition of The State of Food Security and Nutrition in the World (SOFI).Across the globe, the Covid-19 crisis could tip over 130 million more people into chronic hunger by the end of 2020, the report predicts.
According to Oxfam: “COVID-19 is deepening the hunger crisis in the world’s hunger hotspots and creating new epicentres of hunger across the globe. By the end of the year 12,000 people per day could die from hunger linked to COVID-19, potentially more than will die from the disease itself.”
With classrooms closed due to the COVID-19 pandemic, two UN agencies are urging governments to act now to shore up the futures of the 370 million children worldwide who depend on school meals.
Genevieve disagrees with the point that 30% of the food produced is wasted as this only measures food going from the farm to the table. It doesn’t measure the amount of food that goes into the fridge and that is ultimately thrown out.
In her opinion it isn’t that we’re not producing enough food to feed everybody, it is that we’re wasting so much of it, or we don’t know where it is and it isn’t going to the right places. She believes that if we change and we reduce the amount of ways we handle food we can get closer to zero hunger.
In addition to those challenges as there is a dro...
Marianne Schoerling, Head of Stakeholder Engagement at Geneva Macro Labs in Switzerland, joins us to discuss how blockchain can support reaching the UN Sustainable Development Goals. Recognising that blockchain is not a panacea to all sustainable development challenges, it is though an important tool to consider when looking at its costs and benefits and potential impact to affect the well-being of communities around the world.
Marianne has a wide range of professional experience including working at the UN Environment Programme at with several NGOs.
What is blockchain? Marianne has two answers to the question of what is blockchain. A contextual one and a technical one.
From a contextual perspective she would describe blockchain as a chronologically set of arranged digital blocks that will enable the decentralisation of trade. It will allow peer to peer transactions with a reduced need for intermediaries like companies or banks. It entails an entirely new set of preconditions and possibilities for participation and membership in societies and communities.
This is why blockchain can be seen as a social transforming technology because blockchain combines three different aspects:
Decentralisation Cryptography for account authorisation and automatic execution New social pattern for companies, schools, universities, organisations and governments to participate within the societies they represent
From a technical perspective blockchain is a system that enables the addition of data to it without the ability to change or remove previous data within it. This is done through a consensus mechanism between distributed parties that do not necessarily need to trust each other. Proof of work being one of the most famous consensus mechanism.
The UN’s 17 Sustainable Development Goals (SDG)
Marianne introduces the 2030 Agenda for Sustainable Development as a global framework designed to be like a roadmap for collective action towards a productive, vibrant and peaceful life for all on a healthy planet.
There are 17 United Nations Sustain Development Goals which range from poverty reduction to healthy lives and wellbeing for all, to economic growth and partnerships. They reflect the fact that actors from different levels from communities, to cities to national governments all have to collaborate to provide transparency and accountability of the 2030 agenda.
Progress to reaching those goals are tracked via 232 indicators and 169 targets via the UN’s SDG Tracker.
There are two goals that dominate our current time period because of their conditioning nature for sustainable development:
SDG-3: Good health and well-being SDG-17: Partnerships for the goals
SDG 17 is the most fundamental goal as it’s a process focused goal as it promotes decentralised development, co-operation, and engagement of all stakeholders.
With just under 10 years left to reach the SGDs and in spite of commitments by nations there are massive global challenges that remain in particular with climate change, migration, technology and trade.
SDG Index and Dashboard Report by the Bertelsmann Stiftung and Sustainable Development Solutions Network has shown that right now, there's not a single country that actually has shown sufficient progress on meeting the goals.
source: Sustainable Development Report 2019 by Bertelsmann Stiftung and Sustainable Development Solutions Network.
About Geneva Macro Labs
Geneva Macro Labs leverages the unique institutional, financial and economic capital of Geneva to build a platform and a collective intelligence network. They co-develop policy measures, incubate new concepts and are hosting conversations on emerging technologies such as DTL and sustainable development.
Geneva Macro Labs advocates for solutions that are co-created with their community. These solutions are then used to advice policymakers, business leaders and institutions in their decision making...
Matthias Goessler, CEO of Ritablock and Jean-Pierre Fischer, Markets Director at Ritablock join us in this Insureblocks podcast to discuss their reinsurance accounting blockchain platform called Ritablock and their experience of integrating it into B3i’s recently launched Fluidity Platform.
Matthias has been working in the insurance industry for 25 years and has been Ritablock’s CEO since October 2019.
Jean-Pierre has been working in both the insurance and reinsurance industry for the last 35 years.
What is blockchain? Jean-Pierre defines blockchain from a non-technical standpoint. For him the block is the digital information that can be reinsurance accounting information or claimed information. That block can be stored in a public blockchain or as in the case of Ritablock stored within a private network on a database.
Challenges of technical accounting and claims data in the insurance industry The administration process within the insurance industry has a very high admin costs due to too much paper still being used along with PDFs and unstructured files being exchanged along the value chain.
This creates long processing times along with a lack of transparency, inefficiency and inaccuracy. The slow process leads often to inaccuracy in technical and financial accounting, especially for in-house reinsurance within larger groups.
Whilst there are global standards such as ACORD, their implementation on the primary insurance side is very costly leading to a limited adoption of it. This creates problems for reinsurance companies who don’t always get standardised data from the primary insurer.
Jean-Pierre mentioned that there have been studies that showed that by digitising this process and using standardised data formats would lead to a drop of 30-40% of running these admin processes.
Matthias mentioned that one of Ritablock’s clients mentioned that using their system allowed them to run admin processes that typically would take 2 weeks down to a few seconds.
Differences between primary insurer and reinsurer Jean-Pierre mentioned that the primary insurer isn’t incentivised to send data to a reinsurer in a standardised digital format as the reinsurer will take accounting data in any format today. However, Jean-Pierre believes that as new tech savvy university recruits continue joining primary insurers there will be a push to digitise their processes.
Primary insurers have two issues for sending accounts: (1) they’re not incentivised to implement digital standardised formats and (2) the price of using such standards.
Ritablock’s proposition to primary insurers is for them to send their existing form to Ritablock who will convert it into a digital standardised format when delivering it to the reinsurer. This is done for the primary insurer at a low yearly fee within four digits.
Who is Ritablock?
Ritablock was founded in 2019 by Consurance, a consultancy company and Inveos, a software company.
The idea of Ritablock was born over 4 years ago during a project with a client who wanted to build a flexible interface into their system. When starting this project and developing the software they reached a point where it became too complex due to the need to develop too many interfaces for all the different formats.
From the ideas of this project, Ritablock was co-founded by Thomas Jäschke, (CTO) who built a blockchain prototype and Bernd Zimmermann who developed the business solution.
Ritablock is built on R3’s Corda. Since Corda was developed by the financial industry the Ritablock team felt it had the necessary security measures in it. Every customer of Ritablock will have a node on the Corda Network where the Ritablock app sits. The reinsurance systems, from the sending and receiving party will connect to Ritablock. Accounting systems like ProRis from Inveos, SAP FS-RI and RAIS are already connected to Ritablock and conversations with NTT Data are already happening.
Susanne Somerville is the CEO of Chronicled, builders of enterprise blockchain solutions for the life sciences and healthcare industry. In this podcast Susanne introduced us to both Chronicled and to MediLedger whilst sharing some insights on how they are tackling some of the inefficiencies in the US healthcare system.
You will also hear about some of her learnings about the differences of launching blockchain solutions based on regulatory compliance compared to one of ROI.
Susanne’s prior experience is in the life sciences where she ran supply chain for pharmaceutical and biotech companies like Genentech and Hoffman LaRoche.
What is blockchain? Blockchain is a decentralised ledger that can keep record of transactions or data exchanges. Because of its decentralised nature, no individual party can change the data of the recorded transactions or the rules that blockchain is enforcing. For Susanne it is the magic in this decentralisation and immutability that makes a lot of things possible for enterprises that weren’t possible before.
What is the state of US healthcare industry and how digitised, connected and standardised is it? Photograph by Robert Kaufmann
According to the Centers for Medicare & Medicaid Services, the US National health spending is projected to grow at an average annual rate of 5.4 percent for 2019-28 and to reach $6.2 trillion by 2028.
In comparison to many other countries the US healthcare system is private, which has spurred on a lot of innovation. Due to that a lot of the innovation was done on an individual level, creating many disparate systems across the country. Susanne’s experience is that US healthcare companies are analogue native instead of digital. A lot is still being done on paper and on fax machines. All of this has contributed to create a disconnected US healthcare industry.
A recent report mentioned that even in exciting technology such as AI (artificial intelligence) there was only a 2% adoption rate of it in the US healthcare industry.
Chronicled & MediLedger Chronicled is based out of San Francisco and it has been tackling connecting the physical to the digital world since 2014. They were looking at a variety of industry use cases and found a sweet spot in the life sciences. In 2017 they launched the MediLedger project to bring together industry leaders to see how blockchain could play a role in meeting regulations and fixing a lot of the issues in their industry.
Since 2017, the project has morphed into the MediLedger Network. Chronicle is the builder of the software solution and is the custodian of the network. The consortium members of MediLedger run the infrastructure and the solution so that they have control over how the network grows.
Building the MediLedger consortium Susanne recognises that building the consortium at the beginning wasn’t easy but they did benefit from a couple of key points:
Credibility: The Chronicled team had both the deep industry expertise and the technological capability Regulation: the Drug Supply Chain Security Act that requires an electronic interoperable system by 2023 to manage the track and trace of prescription medicine in the event of suspect product
Ironically a lot of those organisations actually came to the initial working groups to rule out blockchain as an option but now four years later MediLedger is going strong!
The Drug Supply Chain Security Act Around 2005 and 2006 there was an increasing amount of pressure in the United States from individual states who wanted to improve the security of drugs. Even though the US drug supply is safe, there are cases of products stolen.The question was how to design legislation that could protect consumers against that?
Whilst there a variety of state laws that protect the consumer it was decided in 2013 that there needed to be a federal level law created with the industry as having 50 unique state laws wasn’t practical to handle.
Dan Salmons, CEO of Coadjute and John Reynolds, Founder and COO of Coadjute take us through the work they are doing to digitise the real estate industry using blockchain technology. They also explain to us the differences and advantages of using a SaaS (software as a service) blockchain model instead of a consortium one.
Coadjute from Coadjute Ltd on Vimeo. Dan Salmons is the CEO of Coadjute. His background is a mix of large scale executive jobs in banks, head of innovation and head of strategy and CEO to a number of innovative fintech companies.
John Reynolds is the COO of Coadjute. John has spent the last 20 years working within organisations helping with their digital transformation from Dell, to Fujitsu and Lockheed Martin’s digital arm. What John has learned in 20 years is that digital transformation is partly about technology but it’s really about people’s hearts and minds and business change aspects.
John featured in an Insureblocks podcast on the 30th of November 2019 entitled: “Ep.86 – Real estate on the blockchain – insights from Coadjute”.
What is blockchain?
As John gave Insureblocks a definition of what is blockchain in our last podcast, Dan offered his definition of blockchain by using the analogy of the Glass Box Theory.
Dan invites us to imagine that you have a locker room at school amongst others who have their own locked lockers. Imagine you want to be sure that no one has stolen your favourite pair of trainers. The traditional central hub type solution is asking the teacher who has a set of keys that can open everyone’s locker, to go and check if the trainers are still there. As the teacher is trusted you trust that they won’t add or remove items from the locker.
The alternative solution is the blockchain one where you have glass doors on the lockers and you don’t need the teacher to check if anyone’s taken the trainers as everyone can see in everyone’s lockers and verify it. The trouble with that is that everyone can see everyone’s lockers. The alternative solution is a DLT one as the R3 Corda’s where you have two doors, one glass and one metal. In this scenario you can only let certain individuals within your class to open the metal door amongst themselves and you can give them permission to check if the trainers are still there. However, they still can’t access what’s in the locker.
Challenges of the real estate industry Dan believes that the property industry as a whole, in comparison to other industries, is one that spends the least on technology and on innovation. It does have pockets of innovation and digitisation. For example, whilst sectors of the industry such as estate agents might be digitised, it is not digitised on an end to end basis. That’s where the main problem resides.
The challenge is that every player is using their own internal operational systems and their own CRM systems. What this means is that they’re using their core operational software for the day to day activities within their business but every time they want to connect and interact with someone else they use email or telephone.
An easy way to resolve this would be to build an application, a database or a destination portal for the estate agent, the conveyancer, the mortgage lender and everyone would have a single source of truth. This has been tried but the problem is that every one of those businesses have their own operational software and the last thing they want is another portal. John states that feedback from industry players was that even if a new portal was offered, that was better than the current one and was free, they wouldn’t use it.
The reason for that, is as John states, people forget the cost and effort involved in putting in a CRM system, it is significant as is the time to build the operational processes around it. So, the possibility of getting all the players to rip out all their systems simultaneously and move to a new one is very hard.
Carl Wegner is the CEO of Contour, a blockchain-based open industry platform to create, exchange, approve, and issue Letters of Credit on Corda, R3’s blockchain platform. In this podcast, Carl talks through the challenges the trade finance industry faces in terms of digitisation since 2005 and how blockchain can represent an opportunity to reach that objective.
Carl has been working in the Fintech space for the last 30 years in Asia. Twenty years in large banks such as Bank of Boston, Standard Chartered and Deutsche Bank on transaction banking, trade finance and cash management. Ten years in tech working at GT Nexus, at R3 setting up their Asian operations and now at Contour.
What is blockchain? To define what is blockchain, Carl prefers to take it down a notch and instead define what is distributed ledger technology (DLT). DLT is an opportunity for enterprises to manage their own data within their own database instead of via a central database. DLT participants own their data and have a protocol to share it. In comparison to blockchain where data is broadcast to everyone with a method of consensus, R3’s Corda, which Contour is built on, allows everyone to have their own database with a protocol to share their data in a selected manner.
International trade and the trust deficit In 2018, the global trade finance market was valued at $39.7 billion, according to Allied Market Research. Whilst, an ADB’s (Asian Development Bank) 2019 Trade Finance Gaps, Growth and Jobs Survey found that the global trade finance gap remains at around $1.5 trillion, nearly 60% of respondents expect the gap to increase over the next 2 years.
Source: WTO& ICC
In international trade you have a trust deficit between buyers and sellers in far off countries. With the internet that trust deficit has been somewhat reduced. Prior to the internet buyers had to put money down for a shipment that may turn up three months later without necessarily knowing who the seller is.
The challenge for SMEs is related to data. A bank as a lender, a facilitator of credit is looking not to make a mistake. The challenge for SMEs is to have sufficient information to fit the requirements of a bank’s traditional credit scoring sheet.
Organisations like ADB and other development banks will step in and provide some support either directly with guarantees, with training to help SMEs on how to present themselves to banks and other actions. Fundamentally though, the challenge is around data. SMEs being able to provide the right data and bank’s understanding on how to use the data outside of just the traditional model. COVID-19 has created a “digital transformation opportunity for banks to use data in different ways to be more efficient with it and offer credit to a wider range of customers.
The state of digitisation in the trade finance industry
Carl Wegner from FNian
In 2005, Carl Wegner participated at the APEC Paperless Trading Initiative where he produced a set of slides “Successes and Best Practices of Financial Supply Chain Automation in Asia. 2005 APEC Symposium on the Assessment and Benchmark of Paperless Trading, Beijing”. At that time, it was hoped that in 2 – 3 years all the APEC (Asia-Pacific Economic Cooperation) countries would digitise all of their documentation. The deadline for achieving that objective kept being increased until it was ultimately dropped.
The idea of digitalization of trade isn’t new. How you set standards is one challenge. For example, the ten countries of ASEAN (Association of Southeast Asian Countries) couldn’t agree on a set of standards that worked for all the countries. Each country didn’t want to give up on their own personal set of standards.
When a bank lends money to a small factory owner they don’t know whether he will buy a sports car or the raw materials for the order. If he buys the raw materials the risk has to go down. If he has produced half of the goods the risk has to go...
Cecilia Chapiro, is the Investment Adviser & Blockchain Portfolio Manager at UNICEF Ventures. Her focus is on sourcing investments across developing and emerging markets, managing blockchain portfolio of investment as well as other frontier technologies. In this podcast she introduces us to the UNICEF Venture Fund and to 3 startups use case studies: OS City, Atix Labs and StaTwig.
Cecilia, is also an entrepreneur, having co-founded Yunus & Youth an organisation working to support the growth of social entrepreneurship.
What is blockchain?
Cecilia, chose to define “what is blockchain” by assuming that we’re all at a party and we’re playing the telephone game also known as Chinese whispers. It’s essentially a word game, a communication game within a circle of friends. Let’s imagine that within a circle of 20 friends one person comes up with a first phrase and starts a chain of communication by whispering that phrase to a person on their left. Each person then takes what they heard and continues the chain of communication by whispering this same phrase to the following person.
This continues until it reaches the end of the circle back to the original source of truth. What usually happens is that the message gets distorted either intentionally or unintentionally. But because there's only one source of truth, any individual within that network who receives the message has no idea how truthful the statement that they received, is.
However, on the opposite end, if we think about that first person, the original source of truth, the creator of that phrase. If he/she announces the phrase to the entire group at the same time, then even if one individual decides to distort the message, there’ll be enough members of the group who can attest to the one source of truth. The truth is determined by the majority.
For Cecilia, this is what blockchain is all about. It’s distributed data that allows any member within the blockchain network to have a copy of all the data at all times, thus ensuring maximum security of the data.
UNICEF Venture Fund Source: UNICEF
The UNICEF Venture Fund is a $30 million pooled funding vehicle focused on identifying, piloting and growing technology startups that improves the lives of children. They focus on startups that can impact more than a billion people and lie in $100 billion markets, in other words technologies that can impact large groups of people and be financially sustainable.
Blockchain is one of those key technologies that the fund focuses on. The fund’s main objective is to scale the successful technology solution into digital public goods to ensure open access to these new tools and the benefits that these tools can generate globally.
UNICEF Venture Fund provides startups with up to $100,000 of equity free funding. For this year’s cohort the investment opportunity is a blend of both USD and cryptocurrencies thanks to the UNICEF’s crypto fund that was launched in October 2019. This crypto fund is the first cryptocurrency denominated fund within the United Nations.
UNICEF doesn’t get a financial return on the investment but instead gets a return on the social impact their investment can have. They only invest in solutions that intend to be licensed as open source technologies.
The open source technology that the UNICEF Venture Fund makes available to the world is basically their equity.
Why blockchain? The Venture Fund sits in the UNICEF Office of Innovation, a team that explores the potential of frontier technologies to improve the lives of the most vulnerable children in the world.
Blockchain is not the only technology the Office of Innovation focuses on, but it's definitely one of the main ones. The reason being that while there's not enough proof to understand the impact of the technology, in full, there's enough evidence to indicate that the benefits to society are worth exploring and prototyping. That's why for now blockchain explorations sit...
Chris Ferris is an IBM Fellow and CTO for Open Technology and Governing Board Member of Hyperledger. In this exciting podcast we discuss "is open source the future of blockchain"? Open source has increasingly converted enterprises to both use its technology and contribute to its code base. In a similar manner open source in the form of its open governance approach has some important lessons for blockchain networks to analyse and adopt. Have a listen and let us know if you think open source is the future of blockchain?
What is blockchain? At its essence a blockchain is an audit log of successive records where each successive record in that audit log is cryptographically bound to all of the log entries before it. Blockchain can be used as a means of ensuring that there hasn't been any tampering of the contents of that audit log. There are other technologies that are built out around it to give it purpose.
What is open source? The formal definition of open source is that it's software whose source code is made freely available and can be redistributed and it can be modified.
The Open Source Initiative has ten dimensions defining what is open source and the terms for its distribution:
Free redistribution Source code must be included in program Derived works can be modified and freely redistributed Integrity of the author’s source code No discrimination against persons or groups No discrimination against fields of endeavour Distribution of license License must not be specific to a product License must not restrict other software License must be technology-neutral
History of open source & why are enterprises contributors to open source
In 1983 open source was known as the “free software” movement with Microsoft labelling it as the “enemy”. In 1998 “free software” evolved into “open source”. Microsoft wasn’t the enemy anymore and it along with Red Hat, Intel, Alibaba Group, Google, Facebook and of course IBM became some of the biggest enterprise contributors to open source.
What is important to understand is that whilst open source is free many firms such as IBM, Red Hat or Microsoft offer services to support the software or build commercialised versions of open source software.
Brian Behlendorf, Executive Director at Hyperledger was also involved in the original formation of the Apache Software Foundation. At the foundation they have an expression called Do-ocracy, which is where you roll up your sleeves, you get down and you do the work. From an open source perspective, even from a corporate or an enterprise engagement in open source perspective it really is about the notion of do-ocracy.
Enterprises like IBM, Microsoft, Red Hat and others get involved in open source projects because they’re of strategic interest and/or they’re using that technology as a function of a platform, offering or tools they they’re selling. Their contribution to open source projects is out of self-interest.
Chris gives the example that if IBM is using Kubernetes to power the container orchestration within the IBM Cloud, “..well, then we would be silly not to contribute to Kubernetes to keep it, you know, functioning to add new features and capabilities, improve the performance, and so forth”.
Hyperledger & the Linux Foundation
Jerry Cuomo, another IBM Fellow had been working on a skunkswork project internally around building blockchain technology for enterprises. Jerry discussed with Chris on whether or not to open source this blockchain enterprise technology or to have it as proprietary.
Chris stated to Jerry “.. this isn't going to be successful if it's just proprietary IBM technology, how are we going to get other companies to buy into an IBM only capability? I said, so I think it really needs to be open source and it needs to be open source under an open governance model”
Chris brought a proposal to Jim Zemlin,
Mariam Al Muhairi is the Head of the UAE’s Centre for the 4th Industrial Revolution and Project Manager at the Dubai Future Foundation. She joins us to discuss the UAE’s blockchain deployment case studies and learnings. She also shares some fascinating results of a survey conducted with over 100 stakeholders from more than 60 various governmental and non-governmental entities across the UAE regarding top blockchain implementation challenges and success factors.
What is blockchain? Mariam likes to see things in the form of physical blocks. For her blockchain are blocks, identifiable by a unique code, that stores information, and stores who is transacting with the information. Each transaction is verified through a process that involves miners on a public blockchain which creates great security. This ultimately also helps to avoid blocks being tampered and used in a fraudulent manner.
Dubai Future Foundation The UAE’s Centre for the 4th Industrial Revolution is an initiative under the Dubai Future Foundation. The Future Foundation was established in 2016 with a main mandate across five departments to look into the future of Dubai and identify trends that will benefit both the economy but also the society and other areas within the Emirates. The five departments include:
Foresight and imagination – development of trends Content dissemination – the aim is to fill the gap in the dissemination of scientific and technological content in Arabic to the UAE and MENA region Capacity building – an academy where people can take courses but also a platform where experts present to the public A platform to facilitate the partnering up of startups with government entities Museum of the future is due to open next year as both a touristic attraction but also as a policymaking tool to see how people react to different ideas or different scenarios of the future
UAE’s Centre for the 4th Industrial Revolution, which Mariam leads is a collaboration between the World Economic Forum and the Dubai Future Foundation. The Centre focuses on policy development for emerging technologies such as blockchain, artificial intelligence and precision medicine.
Dubai Blockchain Strategy & The Emirates Blockchain Strategy
The Dubai Blockchain Strategy, launched in October 2016 by His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Executive Council, was the result of a collaboration between the Smart Dubai Office and the Dubai Future Foundation to continuously explore and evaluate the latest technology innovations that demonstrate an opportunity to deliver more seamless, safe, efficient and impactful city experiences. Additionally, it was about creating an industry and a market around this emerging technology as well as figure out how it could be used.
The strategy establishes a roadmap for the introduction of blockchain technology for Dubai and the creation of an open platform to share the technology with cities across the globe. The Dubai Blockchain Strategy is built on three pillars of government efficiency, industry creation and international leadership.
Government efficiency: under this pillar, the strategy will contribute to increased government efficiency by implementing blockchain and enabling a paperless digital layer for all applicable government services. Industry creation: this will support the creation of a blockchain industry by providing an enabling environment that encourages start-ups and businesses. Leadership: Dubai aims to lead the global thinking on blockchain technology and become the hub for blockchain intellectual capital and skill development.
Since then the Dubai Blockchain Strategy was used for authoring the Emirates blockchain strategy which has more of a federal strategy. Each time the strategy is reviewed it is scaled, from Dubai to the UAE and hopefully the next time it will be outside the country and into the ME...
AI loves data, the more data it has the more accurate the models are which leads to better business outcomes and better research outcomes. A lot of the data today is locked behind closed walls. To unlock the digital economy and to train AI models, you need to unlock private data, that is exactly what Ocean’s Compute-to-Data is doing. It’s unlocking private data while preserving privacy. Join us and Trent McConaghy, Co-Founder of Ocean Protocol, as we discuss how to unlock data in privacy manner in order to monetize it.
Trent has a background in AI and has been working in the real of blockchains for the last several years with a focus on data. His initial work was around IP and data, and then on big data with a blockchain database.
What is blockchain? A mundane definition of blockchain is that it is a database with three special characteristics: decentralised immutable assets:
Decentralised as in, no single entity owns or controls it. If for example you have tens of thousands of people running it then it starts to act and look like a public utility just as a gas company or the internet itself. This public utility records “state”. Immutable means once you’ve written onto it, it’s there for good. This is very useful characteristic for tracking provenance whether of financial instruments or of a fruit flowing from a farm in one country to a supermarket shelf in another. The idea of assets is if you have the private key, or password, to something then you own it. For example, if you have a Bitcoin private key then you own approximately $10,000.
Since that initial inception of blockchain a few new characteristics have been added:
Smart contracts which are essentially unstoppable scripts that run on top of a blockchain automatically when they have received the appropriate inputs. Blockchains are seen as incentive machines to get people to perform certain actions. Bitcoin for example gets people to add to the security the Bitcoin network through hashing, known as Bitcoin mining. People are willing to expend computational power to do this hashing, add security to the network, in the hope of getting paid in Bitcoins by the Bitcoin network.
About Ocean
Ocean Protocol is a decentralized data exchange protocol to unlock data for AI, launched in 2017. Leveraging blockchain technology, Ocean Protocol connects data providers and consumers, allowing data to be shared while guaranteeing traceability, transparency, and trust for all stakeholders involved. It allows data owners to give value to and have control over their data assets without being locked-into any single marketplace.
The data economy In July 2019, Trent recorded his first podcast with Insureblocks entitled “The Data Economy – Insights from OceanProtocol”. He sees that the data economy is already a true economy in that there is buying and selling of data but the key is that it’s really hard to see it. You could nearly characterise it as a sort of shadow data economy, where there's buying and selling data, but it's mostly behind closed doors.
On the one hand it’s visible if you’re buying data feeds from Bloomberg regarding stock prices. On the other a lot of data is bought and sold behind closed doors that you don’t hear about. For example, we don’t hear about the 150 plus organisations that Facebook is buying data from in order to mine people better to sell ads to.
“The more data you sell, the less valuable it becomes. Instead, if you work with privacy-preserving tools and you allow other people to develop applications and derivative products, using your data, without ever giving you a copy of your data to anyone else — you get all the revenue without the increase in supply. This means, whenever someone wants to do anything with this kind of data, you still have billing power. And secondarily, you also have better pricing power,” concludes Andrew Trask
Compute-to-data and extracting value out of private data
Marc Taverner is the executive director of the International Association for Trusted Blockchain Applications (INATBA) since the middle of January 2020. He has been active in the global blockchain ecosystem for more than five years, working across 20 countries, engaging with organisations from core crypto currency companies to governments and financial institutions, through to large corporates and industry associations.
As executive director of INATBA, Marc is committed to positioning INATBA as the only international organization truly equipped to convene public and private industry partners with the credible support of powerful allies like the European Commission and key advisory bodies
What is blockchain? For Marc, blockchain is a type of distributed ledger technology (DLT) where transactions are recorded with an immutable cryptographic signature called a hash. These are added into a chain of blocks, with each block, validating the prior block and creating an immutable audit trail that in turn creates trust.
Distributed ledger technology is a decentralised database managed by multiple participants across multiple nodes.
The reason why blockchain and distributed ledger technology is important is because it finally helps us solve the issue of trust by applying technologies such as cryptography and governance models such as consensus mechanisms.
What is INATBA?
To answer the question of what is INATBA, Marc took us on his journey that ultimately took him to INATBA. In the 2014, Marc was introduced to the world of blockchain and bitcoin when he met Valery Vavlivo, CEO and co-founder of Bitfury, who made him Global Ambassador & Markets Development at Bitfury.
Whilst at Bitfury, Marc learned that trying to get large blockchain applications to scale, such as the Land Registry one for the Republic of Georgia or the one the Ukraine’s Government plans to auction seized assets on a blockchain, would come up against a number of friction points. These frictions points weren’t only technology ones but also one of policy and of interoperability both between nations and between technology stacks.
All these applications were interesting for those governments and created a great deal of interest with other governments around the world who wanted to leverage those applications and others. But the friction points were preventing the adoption of blockchain based technologies at a massive scale.
Some of these issues are rooted around the lack of standards and interoperability between technology stacks which would cause governments and large potential customers of this technology to recoil a little from making early decisions for the fear of either putting themselves into a vendor locking position, or a situation where they've made the wrong strategic technological decision.
INATBA exists to address some of those friction points. They bring a number of parties together from governments and supranational bodies in the public sector to startups, SMEs and enterprises in the private sector, to try and achieve commonality across standards, good governance and interoperability. By reducing those friction points they hope for blockchain to be massively adopted.
Interoperability Establishing standards and interoperability from a technology perspective is absolutely needed and very critical for the industry to be able to develop further. But equally important is the focus on governance structures and legal structures.
INATBA established the Standardisation Committee, to work across all working groups with the aim to convene discussions with parties from different standard setting bodies, policy makers and all the elements of public sector and the private sector to reach an agreement on standards and levels of interoperability across technology, across legal structures, and across country boundaries.
From a governance standpoint, INATBA promotes an open, transparent and inclusive global model of governance...
Caroline Malcolm heads the Global Blockchain Policy Centre at the OECD, assessing its policy implications & building solutions to ensure governments across the world can access and respond to the opportunities and challenges it raises.
In this podcast she discusses with us the interesting work the OECD is doing around understanding the potential blockchain can bring to the its members, how they collaborate with other international institutions and she also invites you all to participate in the upcoming OECD Global Blockchain Policy Forum 2020 .
What is blockchain?
Caroline agrees that there is a wide range of views regarding defining what is blockchain.
For the OECD, blockchain is just one type of distributed ledger technology (DLT) and refers itself to a combination of technologies. These technologies create a digital, shared and self-updating ledger of verified transactions or information amongst parties on a network. These blockchains and DLTs more broadly use various types of consensus mechanisms to validate and record those transactions or transfer of information.
They have various governance systems with various degrees of control for the different parties on the network. Blockchain applications have been developed across lots of different sectors, and is often described as the Internet of value.
What is the OECD?
The Organisation for Economic Co-operation and Development (OECD) is an international organisation that works to build better policies for better lives. Their goal is to shape policies that foster prosperity, equality, opportunity and well-being for all.
The OECD is an international organisation with at the present moment 37 members, including Colombia who recently joined. Together with governments, policy makers and citizens, the OECD works on establishing evidence-based international standards and finding solutions to a range of social, economic and environmental challenges. From improving economic performance and creating jobs, to fostering strong education, informing the impact of emerging technologies such as AI and blockchain, to fighting international tax evasion, they provide a unique forum and knowledge hub for data and analysis, exchange of experiences, best-practice sharing, and advice on public policies and international standard-setting.
The OECD Global Blockchain Policy Centre For the last 6 years the OECD has been looking at cryptocurrencies and their impacts and potential for financial markets. In 2017, the OECD launched a project called Going Digital which broadly looked at digitalization across the policy spectrum. Within 18 months of that project being underway the OECD members decided that going forward they would put their focus on artificial intelligence and on blockchain.
In 2018 the OECD Global Blockchain Policy Centre was created and in 2019 the OECD AI Policy Observatory was created.
The OECD Global Blockchain Policy Centre was created to support governments to address the challenges raised by DLT and their applications as well as to seize the opportunities it offers for achieving policy objectives. The Centre focuses a significant amount of effort on education – capacity building and focusing on what that means for policy makers.
Caroline and her team recognised that there was a huge lack of understanding about why this technology was not just like any other emerging technology. The decentralised aspect of the technology was what policymakers and regulators need to be paying special attention to.
The Centre created their own course for policymakers to help them get a better understanding of what is the technology, what it’s useful for, what it’s not useful for and help them understand how it is changing the policy implementation environment.
Caroline recognises that striking the balance between a healthy scepticism about blockchain technology and the hype associated with it to recognising with a certain humility that we have see...
For this week’s podcast we had Christina Lomazzo, Blockchain Lead within the Office of Innovation at UNICEF. and Ariana Fowler, Blockchain Strategy within the Office of Innovation at UNICEF, join us to discuss how UNICEF and other UN agencies are using blockchain for social good.
What is blockchain? Christina and Ariana produced a report entitled “A Practical Guide to Using Blockchain within the United Nations”. As per its guide blockchain is a type of software made up of records of digital transactions that are grouped together into “blocks” of information and shared securely across computers on a shared network. When a new block is added, it is connected or “chained” to the previous block, making it difficult to change past information. All computers on the shared network retain a complete record of transactions as they occur, representing the entire blockchain. These computers are called nodes. Transactions submitted to a blockchain can only be added and previous data cannot be removed or modified. This is sometimes referenced as an immutable proof of record.
What is UNICEF?
UNICEF, the United Nation’s Children’s Fund, is a 70 years old entity that is part of the United Nations. UNICEF works in over 190 countries and territories to save children's lives, to defend their rights, and to help them fulfil their potential, from early childhood through adolescence. UNICEF works to serve children and women around the world, in the areas of education, child protection, child survival such as vaccination, health, and water sanitation. Last year UNICEF responded to over 300 emergencies around the world, on gender issues, and supply chain.
The Office of Innovation at UNICEF is a team that looks at emerging technologies and how this will have an impact on UNICEF and the work it performs. A data science team that looks at artificial intelligence and machine learning. A team that looks at drones and how those can be used in a variety of scenarios. Most recently a blockchain team was put together that focuses on a number of areas:
A venture fund that makes early stage investments into start-ups in UNICEF programme countries. The blockchain team acts as technical mentors to those start-ups working on a variety of use cases Support internal UNICEF countries office teams who might be interested in building blockchain applications or exploring where blockchain may play a role in their process Running UN courses on what is blockchain and with young people around the world, teaching them about blockchain and Web 3.0
“A Practical Guide to Using Blockchain within the United Nations’ The UN innovation network is an informal, collaborative community of UN innovators interested in sharing their expertise and experience with others to promote and advance innovation within the UN System. Under the UN Innovation Network, Christina and Ariana produced a report entitled “A Practical Guide to Using Blockchain within the United Nations”.
The purpose of producing this guide was to give an introductory resource in what blockchain is. It helps to identify if blockchain is the right technology for a use case. The guide has a number of sections:
A high-level introduction to what is blockchain Tools, flowcharts and discussion points to determine whether blockchain is the right fit and if so what type of blockchain Examples of where blockchain can be used with some examples of how it is being used across the UN Resources within the UN to approach blockchain in a systematic way.
Fungi & Mycelium
In the report, fungi and mycelium were used as a metaphor to explain what is blockchain. There were two reasons for using this analogy. First reasons, the practical guide is accompanied by a tool called atrium a glass space that has some greenery growing in a sheltered environment.
Second reason, as they started developing the paper and thought about using the atrium, as a greenery,
Emmanuelle Ganne is the Senior Analyst at the World Trade Organisations’ Economic Research Department. She is an international trade expert with over 15 years of experience in international trade, trade policy, global governance, and diplomacy. In this podcast we discuss whether or not blockchain can revolutionize international trade.
via GIPHY
Her blockchain adventure started at the WTO in 2017 and it was ‘love at first sight”. Because her direct colleagues at the WTO didn’t quite understand the technology and its transformational opportunities for international trade, she decided to author the book "Can blockchain revolutionise international trade?". The book tried to build a bridge between the private sector and the IT community on the one hand and trade officials on the other.
Emmanuelle’s journey over the last two or three years has been to help people understand this unique technology and to create an enabling environment that allows it to be deployed on a large scale to make a difference for international trade.
What is blockchain?
Emmanuelle took the interesting approach of defining blockchain from the perspective of how she explained it to her teenage niece. At that time her niece’s school had a Pokémon craze going on. Every day, she would bring to school a big box of Pokémon cards that she would trade with her friends.
To explain blockchain Emmanuelle, asked her niece to try and imagine if she had an app on her mobile that would store digital twins of all of her Pokémon cards. Having such an app meant she wouldn’t need to bring her big box of Pokémon cards to school. She could digitally trade them as each card has its own unique digital twin like a fingerprint of that paper card.
Normally you can make copies of digital documents very easily but with blockchain you cannot. The mobile app can thus also allow her niece to trace the history of the card including which one of her friends previously owned that card.
Blockchain is like this mobile app. It’s like a giant repository of digital records stored in a specific order that ensures transparency and is highly secure as it also provides the guarantee that the information hasn’t been tampered with. This is achieved because everyone has a copy of the transactions. What you see is what everyone sees. These factors combined provides an environment of trust which means Emmanuelle’s niece can trade with not just her friends but with other individuals knowing that the digital twins of the cards aren’t fake and that all transactions are real and recorded.
Emmanuelle’s explanation of blockchain has some similarities to how Bettina Warburg explains what is blockchain to a 5 year old, a teen, a college student, a graduate student and an expert.
Can blockchain revolutionise international trade? In November 2018, Emmanuelle published a comprehensive report entitled “Can Blockchain revolutionize international trade?” and then a year later in November 2019 she published the report “Blockchain & DLT in Trade - A Reality Check”. Whilst both of these reports are WTO publications, Emmanuelle clarifies that the opinions expressed in these publications are hers and are not meant to represent the opinions of the WTO and its members.
Blockchain is a technology that presents a unique set of features that make it truly interesting to facilitate trade in terms of:
Traceability of transactions Removing the need for trusted third parties Preventing double spending
Recorded data on the ledger is virtually immutable and its timestamps enhances the transparency of supply chain and traceability of transactions. For example supermarket shoppers can scan the QR code of fresh tuna to trace if it was sustainably sourced and slave labour free. It can be used to check if the small farmer that grew the cocoa beans of chocolate bars was paid a fair price or if the luxury bag being purchased wasn’t a counterfeit.
Dr. Jemma Green is the co-founder and chairman of Power Ledger. Power Ledger is a four year old technology company, with 20 power projects in over nine countries, that facilitate two things - the trading of electricity and the trading of environmental commodities using blockchain technology. In this podcast we discuss with Jemma how their platform is revolutionising the power industry and how it is being used to democratise power.
What is blockchain? Blockchain is a like a database that can be used in many different ways. It is a common record keeping system which creates more efficiencies in the transaction process between counterparties who in the past would have had their own record keeping system. Using a blockchain enables an entry in a ledger to contain both the payment and the physical statement of a digital asset. This reduces the settlement risk or the need to reconcile and settle payments which can be very costly for the transacting parties.
With smart contracts, which sit on the blockchain, you can also perform complex commerce transactions.
The Energy Industry For the last century or so electricity markets have remained relatively unchanged. It is characterised by large power stations, typically, coal and gas fired power, bringing electricity to people's homes brought by transmission and distribution networks, the grid.
In the past 15 years, a new paradigm has begun to emerge as citizens and business have installed rooftop solar panels on their homes and office buildings. More recently, battery storage is being installed inside homes and businesses, as well as large scale solar and wind farms.
Technology can help facilitate the dispatch of electricity via virtual power plants to stabilise the grid which historically has suffered from volatile prices creating significant problems in the market. Surplus rooftop solar power can be stored in batteries, and that market mechanism, facilitated by Power Ledger’s technology, can help the grid deliver low cost, clean and resilient power.
These power technologies, along with the connectivity of blockchain to bring communities together, serves as a kind of citizen utility which provides a certain level of empowerment that has the potential to drive the next wave of innovation to democratise power.
There are numerous drivers towards the democratisation of power. For some it is about getting a better price for electricity whilst for others it is their concern regarding air quality and the potential to electrify transportation in their city.
Jemma believes that overall people are very engaged in the topic of electricity and becoming much more sophisticated in what they understand of the markets and what they expect of them.
Power Ledger introduction
Power Ledger is a technology company that uses blockchain to facilitate trading of electricity and environmental commodities. Their vision is leading the global democratisation of energy movement. To give people access to energy and to participate directly in energy markets and improve their lives and the lives of others. Power Ledger would like to be recognised as a major contributor to transforming energy markets and sustainability globally and positively impacting the lives of 1 billion people. That’s Power Ledger’s big ambition that makes the, want to get out of bed every morning and do what they do.
Power Ledger the Uber / AirBnB of electricity Blockchain enables buyers and sellers to transact with each other directly without the need for an intermediary. In the case of electricity, households with rooftop solar panels could sell its surplus electricity to its neighbours in much the same way as Uber and AirBnb allow people to monetize their cars and spare rooms.
Power Ledger works with electricity retailers in providing them with its trading platform to facilitate the retailer’s customers to trade electricity between themselves. Blockchain provides all parties with the source ...
Welcome to the Insureblocks first Blockchain Bistro. Blockchain Bistro is a new show that we are adding to our range of podcasts. It's a live webinar on Linkedin Live where we aim to discuss interesting subjects with a panel of experts. For this first show we had the pleasure of having Patrick Schmid, Vice President of RiskStream Collaborative.
Patrick was recently on the podcast to discuss "COVID19 and the economic downturn’s effect on P&C insurance: An opportunity for technology?". For this first Blockchain Bistro, Patrick was joined with two Insureblocks partners: Mark Simpson and Rory Unsworth.
Together we discussed whether or not if COVID19 and the economic downturn’s effect on P&C insurance is an opportunity for technology? We also took a number of questions from the community live in the webinar.
We hope you’ll enjoy this new format and feel free to reach out to us on Linkedin or on Twitter or just add a comment below to give us some feedback or suggest some themes you’d like for us to discuss.
Patrick Schmid is the Vice President of The Institute's RiskStream Collaborative a risk management insurance blockchain consortium. In this podcast Patrick discusses with us the impact of COVID19 and the economic downturn’s effect on P&C insurance and whether or not this represents an opportunity for technology. What is blockchain? Blockchain is a distributed ledger that maintains a constantly growing list of chronologically added records in the form of blocks. Blocks contain data such as transactions or smart contracts. They’re verified and confirmed through a decentralised consensus process. This process is why blockchain is often seen as providing the decentralisation of trust without the need for an intermediary or a centralised party.
In this period of economic downturn, due to COVID19, Patrick believes that blockchain can provide the much-needed operational efficiency at a time when privacy and security are of high concern.
Medium article: COVID-19 and the economic downturn’s effect on P&C insurance: An opportunity for technology? A board member of The Institute challenged Patrick and his team to think about the impact COVID19 would have on insurance and how to think about RiskStream’s strategy for the remainder of the year. This prompted, along with Patrick’s concern about the economy to write the article: “COVID-19 and the economic downturn’s effect on P&C insurance: An opportunity for technology?”
The article analyses the economic impact of the outbreak of COVID19 and the lockdown is having on the US economy and the fallout it will have on the P&C insurance industry. It looks at how it will strain underwriting profits and the impact a decline in interest rates and financial markets will have on net investment yields.
40% estimated fall in US GDP
In the first quarter of 2020 GPD was estimated to have declined by 4.8% with JP Morgan predicting an estimated 40% fall in GDP in Q2. According to the US Department of Labour US unemployment rate rose to 14.7%, an increase of 20m in April, representing the highest unemployment rate increase since the Great Depression. Some economists are predicting that the unemployment rate could increase to 30% before this pandemic peaks. This has led to an unprecedented rise in unemployment claims with an additional 3m claims on the 14th of May bringing the total to 36m.
Source: US Bureau of Labor Statistics
A perfect storm? Whilst the P&C industry as a whole has taken these events in its strides it isn’t insulated from the economic fallout.
The impact on business activity is expected to be felt in commercial lines and the effects from declines in residential activity and consumer activity in general, are expected to show up in personal lines.
The effects are expected to impact the P&C combined ratio through changes to premiums, losses and expenses. A combined ratio above 100 indicates the industry is paying out more money in claims then it is making from policies. Due to effects on policies and losses the industry should expect an increase in the combined ratio. Adding to industry stress, net investment yields are likely to decline as well. The industry typically invests very conservatively, so interest rates are a good measure to track as a proxy. On the 15th of March the US Federal Reserve in its most dramatic move since the 2008 financial crisis announced it is cutting its benchmark interest rate to near zero and said it would buy $700bn in Treasury and mortgage-backed securities as it attempts to head off a severe slowdown.
The decline in P&C investment yields related to lower interest rates will constrain P&C insurance profitability further. The duration of zero-interest rate policy will specifically impact areas of insurance with longer time horizons. Some are even saying there’s the potential for negative interest rate policy which would further stress P&C insurance profitability.
Source: Patrick Schmid
Peteris Zilgalvis is the Head of Unit, Digital Innovation and Blockchain, Digital Single Market Directorate at the European Commission. In this podcast he walks us through the European Commission’s approach to blockchain by listing out a number of the key bodies and initiatives that are furthering the development of blockchain across the EU.
Peteris is a lawyer by background having a JD degree from the University of Southern California. Since Latvia, Peteris’ home country, joined the European Union in 2005, he has been the Head of Unit at the European Commission working on blockchain and digital innovation.
Peteris has a strong passion for blockchain since 2012. He is the original co-chair of the Fintech Task Force. From both the financial services side and the digital single market, Peteris has been working in legislation, policy, funding infrastructure, research as well as working with stakeholders and international cooperation.
What is blockchain? From a technical standpoint blockchain is ledger composed of a growing list of records of blocks that are cryptographically linked and managed by a peer to peer network whilst adhering to a protocol for communication between the nodes to validate new blocks.
Essentially it’s a way for validating transactions of data in an immutable and permanent way to ensure that the transaction:
Hasn’t been tampered with Avoid double spending Can transfer value
From an EU perspective the EU sees blockchain as a set of distributed ledger technologies which also include Hashgraphand Tangle for example.
Peteris also makes the very permanent remark that decentralisation isn’t black and white. It is a gradient between something that is fully centralised to something that is nearly fully decentralised. This is what makes it so exciting, for Peteris, as it allows for a diverse group of actors to work together whilst preserving their autonomy.
EU Institutions furthering blockchain Digital Innovation and Blockchain Unit Peteri’s unit is the policy leader on blockchain as a technology. His unit isn’t composed of programmers but instead of engineers, economists and lawyers looking at digital policy.
Within the unit they have the EU Blockchain Observatory and Forum whose mission is to promote blockchain in Europe by mapping existing blockchain initiatives, analysing and reporting on important blockchain themes, promoting blockchain education and knowledge sharing and holding events to promote debate and discussion.
The European Blockchain Partnership is composed of 29 countries, 27 EU member states along with Norway and Liechtenstein, who are building a European Blockchain Services Infrastructure (EBSI). The European Blockchain Services Infrastructure (EBSI) is a joint initiative from the European Commission and the European Blockchain Partnership to deliver EU-wide cross-border public services using blockchain technology.
EBSI also acts as a regulatory sandbox where EU and national legislation is reviewed to facilitate the adoption of blockchain. For example, they are working to ensure that there aren’t different requirements for smart contracts across the digital single market.
The Digital Innovation and Blockchain Unit collaborates with the International Association of Trusted Blockchain Applications (INATBA) and with the Fintech Task Force to look at possible legislation on digital assets.
EU Blockchain Strategy By the end of June, the Digital Innovation and Blockchain Unit will be presenting its blockchain strategy to the European Commission commissioners to review and possibly adopt.
The strategy document will talk about the European Blockchain Partnership initiatives to building blockchain services infrastructure between the member states and the European Commission along with the European Court of Auditors. It will talk about utilising a regulatory sandbox approach to ensure that the EU has a pro innovation regulatory fram...
Nadia Hewett is the project lead at the World Economic Forum (WEF), in blockchain and digital currency. In this exciting podcast she takes us through her very comprehensive report entitled the “World Economic Forum’s Blockchain Development Toolkit – Supply Chain Focus” that was recently published on the 28th of April 2020.
WEF is the international organization for public and private sector cooperation with a mission to improve the state of the world. It is well known for its Davos event in Switzerland that happens every January.
Nadia is based in the San Francisco at the World Economic Forum Centre for the Fourth Industrial Revolution where her colleagues and her work on the foundational technologies that will change the world from blockchain, artificial intelligence and internet of things to address governance gaps in those technologies.
What is blockchain? To answer this question, Nadia takes a supply chain focus. A typical supply chain normally involves thousands of business transactions on a daily basis across a large number of parties. For example, a product moving from raw material, suppliers, manufacturers, factories, through to retailers, importers, and then to the end customer.
As a product travels from its origin point to its final destination in the supply chain many organisations will have been involved with each of them having their version of the truth about that product’s journey with regards to its location on that journey and all relevant and necessary information. That version of the truth about a product’s journey will be recorded in a ledger. The problem occurs when those multiple ledgers, or those versions of the truth, don’t necessarily align across the supply chain.
A supply chain will typically have 30 or more hand over points. These points have numerous blind spots that often leads to errors, fraud, and delays. Manual updates to a ledger will also often lead to errors.
Blockchain, is a type of distributed ledger technology that can reduce these complex bilateral communications and information links by providing a single shared ledger across all the parties. What this means is that “what I see” is “what you see”.
Blockchain also has a set of unique characteristics:
Immutable / tamper evident – increased trust and transparency in the data Transactions in a blockchain are typically confirmed by all participants through a consensus mechanism Security and increased resiliency from having a multi-node architecture instead of a centralised server
The World Economic Forum Blockchain Development Toolkit The World Economic Forum accelerated the release of the toolkit after witnessing the need to improve both the pandemic and endemic responsiveness and readiness. But also, to address the weaknesses exposed in supply chains. The toolkit is freely available online for organisations to use when embarking on a journey to improve their supply chain systems.
The toolkit is a gold standard in blockchain deployment. When an organisation has identified a use case applicable for blockchain there are a number of tasks they have to tackle such as bringing their ecosystem together, address compliance, optimization and interoperability issues. The toolkit provides the A to Z of both technical and non-technical factors for success for blockchain deployment.
More than 200 organisations have participated in co-creating the toolkit by sharing the set of tools, insights and resources they use when implementing blockchain solutions. This enables new organisations looking to experiment with blockchain to avoid costly missteps in their blockchain deployments.
Source: World Economic Forum
Why a focus on supply chain? Prior to the pandemic $16 trillion of goods were shipped across international borders each year. International trade plays a critical role in the wider economy. Blockchain technology has the potential to reduce trade barriers,
Areiel Wolanow is the CTO of Blok BioScience and Managing Director of Finserv Experts. In this podcast we get to learn about the exciting work Areiel and his team are doing in developing end to end solutions against COVID-19. You’ll hear insights about how they developed a self-sovereign “immunity passport”, population testing protocols, supply chain capabilities, and a sophisticated analytical and insights dashboard for governments and enterprises to better appreciate and combat this pandemic. You’ll also hear about the conundrum on how to work with contact and trace applications in a manner that protects the principles of self-sovereignty.
What is blockchain? Blockchain is a technology that allows multiple companies or people to share a single version of the truth without having to spend any time, effort or money on reconciliation, messaging and synchronization to name a few. The benefit from sharing allows the opportunity for completely new business models and new ways of solving problems to arise.
Areiel, previously featured on Insureblocks to talk to us about “Unlocking investment in blockchain projects”. What has changed in his view regarding blockchain is a very welcome maturation of thought. It is a toolkit for solving problems and for accomplishing what previously what would have taken large numbers of people, or expensive software solutions can now be taken for granted.
What is Blok BioScience?
Blok BioScience is a team of thought leaders in the medical, technology and supply chain industry who’ve grouped together to develop rapid solutions that deliver the best possible medical diagnostic and supply chain capability to fight the unprecedented impact COVID-19 is having on the world. Areiel’s Finserv Experts have entered into a business partnership with Blok to provide technology delivery capability.
Addressing the COVID-19 Ecosystem The scientific community does not use words like immunity or protection lightly or without a great deal of consideration. When somebody says this vaccine confers immunity to this disease, they are encapsulating and summarizing, in most cases years of scientific study before they're willing to make that claim. When the WHO (World Health Organisation) recently came out and said we're not sure that the IgG (Immunoglobulin G) antibody is a marker of immunity, all that they’re saying is that they have not subjected that claim to a level of scientific rigor that would allow them to say yes, the IgG antibody confers immunity.
As the world’s economy has come to a standstill the world is demanding answers of the scientific community far faster than they are normally required to give those answers. And that results in a great deal of uncertainty.
Providing an answer needs to address all of these questions in a holistic way and provide not only say a test capability or a set of scientific studies, or a technical platform, but a holistic end to end solution that encapsulates all of that. And that's really the ambition that Blok was set up to tackle.
Immunity passports
The WHO issued a warning about immunity passports:
“Some governments have suggested that the detection of antibodies to the SARS-CoV-2, the virus that causes COVID-19, could serve as the basis for an “immunity passport” or “risk-free certificate” that would enable individuals to travel or to return to work.”
This warning is entirely correct. Just because you have an attested digital or even paper certification that says you have this antibody does not necessarily mean you're immune to anything. It means you have the antibody via an attested record.
For Areiel what is critical is that the data that is contained in an immunity passport belongs to the individual who had the test. It should not belong to the government, it should not belong to the person's medical insurer, or their employer. Now, that creates a little bit of a conundrum because employers need to understand their emp...
Stephanie Hurder is the Founding Economist and Partner at Prysm Group. She’s also a CoinDesk columnist and an academic contributor to the World Economic Forum. In this podcast she joins us to discuss a recent article she published in CoinDesk entitled “Why Enterprise Blockchains Fail: No Economic Incentives”.
What is blockchain? Blockchain is a type of distributed ledger. A ledger is a database, which is usually maintained by a single organisation like a bank to track the ins and outs of our bank account. The bank is responsible for maintaining and updating that ledger.
A distributed ledger is a shared ledger where multiple different stakeholders, such as banks or insurance companies, collectively control and update the ledger. They have a process called the consensus process, where in order to make a change or an update to this shared database, there needs to be a certain level of agreement among the different stakeholders. This ensures that not a single organisation or entity controls this shared database.
Blockchain is a particular type of shared ledger in which though the transactions or the updates to the shared ledger are processed in blocks. Smart contracts is a feature that often is associated with blockchain.
Enterprise blockchain is in the doldrums On the 2nd of March 2020 Stephanie published an article on CoinDesk entitled “Why Enterprise Blockchains Fail: No Economic Incentives”. In the article she stated why “Enterprise blockchain is in the doldrums”.
As an active participant working in many different blockchain projects Stephanie noticed a familiar patern where numerous enterprise blockchain initiatives, often established by consortia, would announce that they have a proof of concept or that they’re going to do a pilot for a specific use case. But then a year later many of those pilots would either fail to launch or wouldn’t work.
Blockchain has the ability to deliver a lot of economic value to consortia and groups using it to solve business problems. However, it is very important for all the parties to be very clear about what is driving the value creation and who benefits from it and how that value is being distributed. Without a clear understanding of that, it becomes very difficult to set up the necessary infrastructure for a successful project.
Blockchain platforms as economic systems Blockchain consortia are established to create economic value either to help companies save money, allow for synergies, or generate new revenue opportunities. There’s an economic rationale for almost every blockchain project. Members of the consortia have to agree on who are the different stakeholders, their incentives to join and how is value create and distributed.
Stephanie notes that too many blockchain projects take a technology first approach instead of an economic one.
Value creation in a blockchain project In a blockchain based consortium, value creation can be looked at in terms of three layers;
Value from the features of DLT Role of network effects Synergies - value, cost and network
Value from the features of DLT The first layer is what is the value that the features of distributed ledger or the blockchain is, that it bringing itself.
The Prysm Group has a framework called the 3 C’s: coordination, commitment and control. The different features of a distributed ledger or blockchain create these levers of value depending on the different use cases.
Stephanie gives the example of a use case with smart contracts. One of the big economic frictions is with regards contract certainty. How difficult it is to monitor and enforce contracts. One of the promises of enabling smart contracts is that whenever the conditions of the contract are met the contract automatically executes it. This creates value in the form of commitment.
The second layer is the network effect. As the number of participants and type of participants grow the value to the network is go...
Maria Mateo Iborra is the co-founder of the IBISA Network. Maria has a background in telecommunication engineering and has been working for 15 years in satellite communications in the space industry. In parallel to that she has also co-founded several companies and start-ups and experienced both successes and failures. Since 2015 she discovered blockchain and was excited by its transformational capabilities. In 2019 she co-founded IBISA which stands for (Inclusive Blockchain Insurance using Space Assets), a platform that enables micro insurance for weather related risks in agriculture in developing countries.
What is blockchain? For Maria the fundamental point of blockchain is that it solves the double spending dilemma for peer to peer transaction. In an internet world you can send data more than once but you can’t send money more than once in a blockchain world. With blockchain we can evolve from the internet of data to the internet of value. This enables two trust less parties to be able to perform a transaction of value without intermediaries.
From space and satellite communication industry to blockchain Maria is very passionate about technology and the impact it can have in our society. During her 15 years in satellite communication she has done a lot of work in the field across the world and has seen first-hand the massive impact of bringing internet or television to non-connected population.
For Maria blockchain is the next evolutionary step. She recognises that it will take a long time for mass adoption but it is similar to opening the world to the internet of value. The ability for people to transact around the world in a peer to peer manner is very powerful.
Maria was interested by Bitcoin in its early days, but it was the launch of Ethereum in 2015 that peaked her interest in the actual blockchain technology.
About the IBISA Network
IBISA Network’s mission is to enable agriculture insurance, for agricultural entrepreneurs, everywhere and in an easy manner. To achieve, that IBISA leverages technology and data to build innovative and commercially viable protection products together with its local partners.
IBISA is here to fill a gap, which is not touched by traditional insurers, for providing insurance to small scale agriculture. Whilst there has been a lot of innovative solutions developed for this market, no one has yet developed a commercially viable model.
IBISA’s approach is to partner with local mutuals, insurers, and micro-finance institutions and provide them with a platform and tools to provide their customers with weather related risk protection.
The IBISA platform is a full stack from underwriting to policy handling, customer administration, and loss assessments. IBISA’s partners can now have a platform to provide commercially viable and scalable protection.
About the small-scale agriculture market Risk sharing, mutuality, is an ideal model for high frequency, low severity events. This is the case for small scale agriculture where you have every three or four years a drought and the insured amount is small as the premiums the farmers pay are also small – high frequency and low severity.
According to the World Bank there are approximately 500 million smallholder farming households that produce between 70 – 80% of the world’s food. The insurance market potential to covering the basic needs, revenue stability and accessing credit, of those small farmers is €9 billion per annum.
A small scale farmer has between half to one acre of land. This farmer will pay a premium of about €18 per year. In a normal insurance situation between the administrative overhead costs, claims handling and other costs this comes out to 20%. However, in micro insurance this overhead is sometimes higher than the premium because of all the costs associated to provide the farmer with information, onboarding the farmer who is in a remote location and of course the processing the claim....
Lisa Butters, is the General Manager at GoDirect Trade, a marketplace for used aerospace parts, part of Honeywell . Used aerospace parts is a $5 billion a year industry of which almost none of it is done online. Numerous emails and phone calls along with paper work is used to close a transaction. Blockchain was felt to be an applicable technology to manufacture digital trust between buyers and sellers in the used aerospace parts industry.
What is blockchain? Honeywell uses blockchain technology in an enterprise manner. Lisa defines blockchain as a highly secure way to crowdsource a decentralised database. Traditional enterprises will have a centralised databased with a walled garden approach to data collection. With blockchain technology you’re using the technology so that you can get the data from various enterprises and parties in a secure manner.
Who is Honeywell?
Honeywell is a $40 billion company that operates in numerous industries. Lisa’s particular area is focused within aerospace. Within the aerospace industry Honeywell is an OEM, original equipment manufacturer, of components and piece parts all the way up to engines. Honeywell is the largest repair facility for aerospace parts across the world. Honeywell are also traders who trade used aerospace parts in the market.
Challenges of the used aerospace parts industry
According to Global Market Insights the global aerospace parts market will be worth $14 billion by 2025.
Lisa notes that there are some interesting parallels with the used aerospace parts industry to the used car industry. When buying a used car, buyers are compelled to negotiate on price, or else they don’t feel they’re getting the best price. In the used aerospace parts industry people don’t feel responsible if they’re not negotiating the best price on the parts.
There are fundamentally two reasons why that industry is so manual with emails and phone call:
High dollar transactions - On GoDirect Trade transactions can go anywhere from nuts and bolts all the way to multimillion dollar engine, with the average transaction at around $10,000 Safety - The parts being sold on GoDirect Trade have to be safe enough to reinstall back into an aircraft. This requires a very high bar of safety within the aircraft aerospace industry.
The combination of high dollar transaction and safety of parts to be reinstalled back into an aircraft are the two reasons why it has been difficult for buyers and sellers to move their transactions online. That are the reasons why Honeywell found blockchain technology so interesting for this space because it helps to manufacture that trust for people to start checking out online.
Guaranteeing the quality of use aerospace parts According to NTSB data compiled and analysed by the NVC Bar Area Investigative Unit, unapproved aviation parts played a role in nearly two dozen crashes that killed seven and injured 18 others since 2010.
Lisa states that she has around 20 competitors in her space that list products for sale and facilitate some kind of online transaction. GoDirect Trade though is the only platform that requires price, product images, and quality documents for a product to be listed for sale. This ensures that the bar for quality standards is set very high and that all purchased products have their associated quality documents.
GoDirect Trade’s blockchain enables the quality documents to be scanned and listed with their associated products so that they’re easily searchable and accessible.
Lisa recognises that prior to blockchain technology there were attempts to launch marketplaces by ensuring the listings were transparent and that products had the right quality documents. However, she believes they’re failing was in not setting the “bar high on these kind of documentation standards and really keeping the bar high”. For example, they would enable their sellers to provide document to the buyers but it wasn’t required....
Joan Zerkovich, Senior Vice President, Operations at American Association of Insurance Services (AAIS) walks us through how AAIS have expanded their OpenIDL blockchain application beyond streamlining regulatory reporting for carriers. In this episode she explains to us how OpenIDL helps insurers develop a network data strategy that provides data standards and a secure, scalable and cost-effective platform for carriers.
What is blockchain? Blockchain is a distributed ledger of which a copy of the ledger is available to all the participants of the network. Blockchain solves a key problem that other data technologies didn’t provide which was an immutable record. It provides a secure way to store data, transparency in how the data is being used and an immutable record that is so critical to trusting any activity that happens on the network.
It enables to create systems networks for a wide variety of solutions such as transactional networks or in the case of OpenIDL as an analytics platform.
What is the American Association of Insurance Services (AAIS) In the United States, the insurance industry is regulated at the state level. A National Advisory organisation exists to provide consistency between all the state regulations. AAIS is formed by regulation and is licensed in all 50 states to do the following:
Serve as a bridge between the carriers and the regulators in the way they exchange and share data Through that exchange the AAIS uses some of that data to create products such as a homeowner’s policy with a rating plan or an auto plan. AAIS brings consistency across all the states in the way those products are delivered to the market. Carriers pick up the AAIS products to add value on top of them.
AAIS has been doing this for over 80 years. They realise it isn’t as efficient as it should be and that it needed to be modernised due to the different data needs in the industry today.
The Open Insurance Data Link (OpenIDL) https://youtu.be/4Z6SDGtKgtE
In September 2018 we featured Joan Zerkovich on Insureblocks to tell us about the Insurance Regulatory Reporting using Blockchain – AAIS introduce openIDL.
Joan reminds us that her team didn’t know they were going to create OpenIDL when they started off on that journey. They knew that they had a problem in the way they were collecting data and sending reports over to the regulators. There were a lot of pain points in the participants in that process. The old-style statistical data plans that had been used for the last decades didn’t contain enough information the AAIS as an advisory organisation needed. The regulators also found that the stat plans didn’t have the necessary data for them to answer the questions they were getting from their legislators.
Consequently, the regulators would go around the advisory organisations by making data calls directly to the carriers to get the data they need. This caused a lot of pain points with the carriers who saw an increasing volume of data leaving the security of their data centres beings transferred to third parties without any oversight in how the data was being used.
Through a number of design thinking sessions AAIS was able to identify those pain points and look into possible solutions. The available data technology platforms had a number of problems in terms of data security, transparency of how the data was being used and of course as a regulated industry the need for an auditable and immutable record was required.
This lead Joan and her team to the use of blockchain technology. They started off with a prototype that solved the problems for both the carriers and the regulators. They went through one pivot in their architecture, changed what’s stored on chain and how to ensure the privacy of data.
https://youtu.be/B3QUkUtjDiA
Today the OpenIDL is an open blockchain network that streamlines regulatory reporting and provides new insights for insurers, while enhancing timeliness,
Krystal Webber is the Global Design & Strategy Leader at IBM Blockchain Services. She helps her clients understand how blockchain might solve their business problems in a way that maximises benefits in the shortest amount of time. In this podcast she shares her deep experience in blockchain network design from a governance, business value and technology design. A must listen for anyone looking to launch and scale a blockchain network.
What is blockchain? Krystal calls answering that question her “blockchain party pitch”.
In today’s world we do business with each other. Where two companies, who have a business relationship, will each keep a record of the work they do together. From time to time records don’t match up. This can create disputes which are both time consuming and frustrating.
Blockchain is about having a shared set of records where both parties agree on the correctness of records before they get written onto that shared ledger. Once you have a trusted shared set of records you can start to automate business processes on top of it. With consensus you have records which are valid, true and trusted. Encryption ensures that the whole blockchain is super secure.
What is design? Design means a lot of different things to different people, from graphic design, to fashion design or how things look. The Oxford English Dictionary definition of design is the “purpose, planning, or intention that exists behind an action, fact, or material object.” Said another way, design is the intent behind an outcome. Design is about being intentional.
Krystal and her team when they think about design what they are thinking is “what is it that we're trying to achieve? And how do we strategically and intentionally achieve that?”
What is a blockchain network design? There are three elements to a blockchain network design:
Governance design - is the strategy and the operational model behind a business network. Business value design – is the monetization strategy that is underpinned by an incentive strategy which allows the realisation of revenue, efficiencies or savings from the network. It’s also about stimulating collaboration between members to creating network effects. Technology design – creating digital products that are human centered, easy to use, scalable and stable on the back end to reach the business objectives for that network.
What is important to understand is that these three elements are very interrelated. So, decisions made in one work stream really impact decisions made in another work stream.
Governance design
At IBM they use an acronym called BOLT which stands for: Business, Operations, Legal and Technology. They believe that when looking at governance you need to look at it from those three areas.
Business from a governance perspective This begins with the network of intent where the aspiring network have to answer the questions of “why are you here?”, “Why do you exist?”, “What are you trying to accomplish in the marketplace?” Then there are questions on the “network model”. “Are you trying to be differentiated in the market?”, “Are you creating some level of market utility?”, “Are you trying to create an entire new market?”.
Answering these questions will provide the strategic direction when looking at governance design, business value design and technology design. It will also influence the branding of the platform, sales, recruitment, adopt and what’s going to get participants to join the platform. Metrics and measurements will have to be put in place to determine what is important to be measured.
Operations from a governance perspective There are a number of questions around operations that need to be answered;
How are the members going to act together in good faith? Will there be committees, an advisory council, a CEO, working groups? How will each of those groups look like? How will they all work together?
Humayun Sheikh is the CEO & co-Founder of Fetch.ai. Fetch.ai is an 18 months old company that develops solutions around multi agent systems that utilises the principles of the technology behind blockchain. In this podcast we discuss Fetch.ai and how autonomous economic agents can transact and settle transactions autonomously in an economic manner to facilitate the exchange of insights and inferences without the sharing of data sets.
Image taken on the 27th of February prior to social distancing
What is blockchain? For Humayun, blockchain is just a record keeping mechanism that has the unique feature that enables people to interact with it in a decentralised manner without the need for a centralised entity to control it.
Its other interesting feature is that you can exchange economic value on it which makes it a key differentiator from a centralised database.
Challenges of today’s suboptimal digital world In today’s digital world we use a lot of technology. Unfortunately, it is done in different pockets of different things. The challenge is that as we try to connect them all we are faced with issues of interoperability.
For example, how does an individual’s train timetable get connected to their personal assistance? How does their calendar become aware of the train timetables and its possible delays? These examples illustrate some of the very inefficient interconnectivity that people have to deal with in their lives.
Attempts to connect all these services require an exchange of economic value to enable the settlement of these services. Because of these reasons, Humayun believes we are living in a suboptimal world because you can’t build a centralised system from top down which can account for all of these problems. These challenges has led to an increasing move towards software defined systems and autonomous systems.
Whilst APIs are an attempt at trying to facilitate interconnectivity between disparate systems they still require software to be written to connect them up. Additional code is also required to extract the data and process it in a meaningful manner. Because of these reasons Humayun doesn’t believe we are solving the problem because organisations are still building solutions to connect different things together.
The other side of the problem is how do you discover those APIs? How can an organisation rapidly identify an API and connect with it without writing any code in a near real time basis?
What is Fetch.ai and its mission?
Humayun describes Fetch as a connectivity and intelligent connectivity solution. He defines connectivity as having three components:
How do you find something to connect? How do you actually connect? (the technical aspect of making a connection) Once you have connected, how do you connect economically?
These three components are effectively the different components of Fetch. Fetch is a layered solution that provides a substrate where the economic value exchange, the search and discovery and where the actual physical connectivity can take place.
These three components are delivered via Fetch’s:
Distributed ledger Open economy framework Autonomous economic agents
Fetch’s distributed ledger technology & smart contract With a multitude of existing distributed ledger technology (DLTs) which exist, Humayun explained why Fetch built their own ledger. In order to run autonomous software which is going to do search and discovery, which is also going to do a value exchange and do all of that in real time, you need a ledger system.
The nodes within that system facilitate the search and discovery. The system needs to facilitate near real time economic exchange. It has to be very fast because all the economic agents on the system need to exchange small amounts of value in high frequency with a high throughput. In addition, the incentives have to be aligned to support this kind of economic exchange of value.
Silvia Attanasio, is the Head of Innovation at ABI (Italian Banking Association). Previously to that role she worked for 17 years at ABI Labs, the centre of research and innovation at ABI. Her present mission is to support the innovation amongst the banks within the Italian Banking Association. In this podcast she shares with us the exciting journey ABI has taken in launching a blockchain for Italian interbank reconciliation. We are also very grateful for her to be recording this podcast with us from her home in Milan during the Coronavirus Pandemic.
What is blockchain? From Silvia’s point of view, blockchain is a way to organise a history of events and guarantee the integrity of the data in order to make it easy for a group of people or companies to agree on it.
However, Silvia also wants to say that blockchain isn’t a cost cutting technology. She agrees that the technology has the potential to bring efficiency gains but from her point of view we have yet reached that point.
What is Spunta? Spunta is the reconciliation of bilateral accounts, a sort of nostro and vostro account. It’s a process aimed to clear the mismatch in a double entry bookkeeping.
Quick definition: (source: Investopedia)
A Nostro account is a reference used by Bank A to refer to "our" account held by Bank B. Nostro, is a shorthand way of talking about "our money that is on deposit at your bank." Vostro is the term used by Bank B, where Bank A's money is on deposit. Vostro is a reference to "yours" and refers to "your money that is on deposit at our bank." A Vostro account is like any other account held by a bank. The account is a record of money owed to or maintained by a third party, typically another bank, but it can be either a company or an individual.
In Italy the way bilateral accounts are used is where you have a single account, co-owned by two counterparties that have an automatic matching process. After that the operators deal with the suspended movement – operations that need to be confirmed before being registered in the bilateral account. This interbank process, based on bilateral registers, can be quite complex because it is based on a single account that requires the point of view of Bank A and of Bank B to match on the same ledger.
To complicate matters even further, there is a rule that states that the ownership of that single account has to switch every three years form one bank account to another. When a bank has ownership of the account they see all the information, movements, and balance. But when the ownership switches to the corresponding bank, they can’t see the information anymore and have to request it from the corresponding bank via phone calls, emails and fax. This is a very cumbersome process.
Opportunities and challenges to updating Spunta In 2010 ABI attempted to reform this process. However, it was realised that there wasn’t the will to issue a new banking agreement. The Spunta process is ruled by an interbank agreement dating from 1978. It was only when ABI discovered blockchain technology that the necessary commitment was found by the banks to explore reforming this process for two different reasons:
Individuals closely linked with the Spunta process were eager to try new approaches to reform the process Innovation departments within the banks were looking for opportunities to run experiments with new technologies
The interesting thing was that no one from the Spunta world knew about blockchain and no one from the blockchain world knew about Spunta.
ABI had studied the possibility to use traditional centralised technology. However, there were two main obstacles which led them to explore the usage of blockchain technology:
With a centralised technology, the banks would have provided the data to the centralised database but they would have continued using their traditional systems for Spunta. Thus, you have a verification solution and not a process solution
Dante Disparte, is the Vice Chair and Head of Policy and Communications at the Libra Association. Dante returns to Insureblocks to share his experience of being at Libra and what the insurance industry can learn from that experience.
It is worth nothing that Dante is the Chairman of the Risk Cooperative, a member of the FEMA National Advisory Council and a Forbes contributor. He has also participated in two podcasts on Insureblocks: Blockchain vs. the insurance trust deficit in April 2018 and A retrospective look on blockchain for 2018 in Feb 2019. We are absolutely delighted to have Dante back on our show in 2020.
Insureblocks’s 100th episode! I’m Walid Al Saqqaf, your host. Since the 19th of March 2018 we’ve produced weekly podcasts on blockchain in the insurance, pharmaceutical, supply chain, banking and many other industries from case studies, PoCs, pilots and production grade roll outs.
We’ve also covered topics around the convergence economy, how AI, IoT and blockchain converge. We’ve covered the subject of diversity, blockchain for social good, digital identity, tokenisation and much more. Today’s episode is our 100thone! We all can’t believe we’ve just reached this milestone. It feels like just yesterday when we recorded our first episode with Gary Nuttal.
We want to thank all our speakers and all of you, our listeners, for making this show such a success!
What is blockchain? In last year’s podcast, Dante had defined blockchain in a slightly philosophical way, using words like trust, decentralisation and self-sovereignty. Whilst he believes those ideals very much still matter he now sees a growing wave of enterprise blockchain efforts and investment and adoption that are starting to give the technology a real opportunity, not in its own, but together with other emerging technologies to drive real change in the market.
What is Libra & the Libra Association
The Libra Association is an independent, not-for-profit membership organization, headquartered in Geneva, Switzerland that was first announced on June 18th 2019.
The goals of the Libra Association are threefold:
Develop a blockchain based payment system that would support low friction high trust payment on a peer to peer basis. Today there are 1.7 billion people who are on the margins of the formal economy. Libra is developing a blockchain based system that can help support pulling more of them into the formal economy Building a payment system that supports competition and innovation. The third objective of the Libra Association is to reach the above objectives in a regulatory compliant manner.
The fundamental promise of blockchain and cryptocurrency technology is with notion of financial empowerment. The Libra project is a consortium of member organisation who have a common cause, with a wide range of enterprises, public sector actors and stakeholders to effectively address the insidious issue in the global financial system. 1.7 billion people who are unbanked, 1.3 billion who are under banked who to send a cross border payment or remittance costs on average 7% worldwide.
Roughly a billion people have access to a mobile phone. In a world where the mobile phone can become a payment endpoint, with Libra you could send a basic payment to someone as cheaply and as quickly as you can send an email message or other transaction.
The Libra payment token is known as a stable coin. The concept behind the Libra payment token is to effectively borrow the intrinsic value and the economic stability of underlying assets and give those assets some unique properties.
One of those unique properties is the ability to make micro payments. This is very important for two reasons:
Most of today’s payment networks are not digitally native For very small transactions the cost is often superior to the transaction value
Consequently, the payment network that Libra is building is an open and innovative one that will not onl...
Chris Ballinger is the CEO and founder of MOBI – the Mobility Open Blockchain Initiative. MOBI is a non-profit smart mobility consortium working with forward thinking companies, governments, and NGOs to make mobility services more efficient, affordable, greener, safer, and less congested by promoting standards and accelerating the adoption of blockchain, distributed ledger, and related technologies in the mobility industry.
About Chris Ballinger Chris started out in monetary economics and worked briefly for the Council of Economic Advisors in the United States. Chris moved into Fintech in the early days of the derivates market. More recently he joined Toyota as the CFO of their financial service organisation, the same year that Lehman Brothers went bankrupt.
Whilst at Toyota he eventually went on to work at the Toyota Research Institute, which is Toyota’s arm in Silicon Valley that does the development of autonomous vehicles and robotics and AI.
Whilst he was there, Chris developed his thinking on new mobility services and how blockchain and distributed ledger's might be able to improve the new mobility service economy. Two years ago, Chris left the Toyota Research Institute ,and launched along with others MOBI.
What is blockchain? Blockchain is a particular kind of distributed database that is append only where the rules for appending blocks are designed to make sure that the information is agreed on by the participants.
But more generally, blockchain is common usage, it’s a broad collection of technologies, including cryptography, open databases, payments, perhaps identity, and probably quite a few other things.
Blockchain’s potential for redefining the automotive industry For Chris blockchain and related technologies broadly bring four unique capabilities to the table:
Digital twins: bringing digital identities to physical things. Micropayments: Today’s banking system is relatively expensive as is the variety of other trust services related to payments. By reducing the cost of those trust services and enabling peer to peer payment, the size of the payment you can do goes down. Once that goes down you can pay for more things with micropayments, thus enabling things that aren’t monetizable today to become monetizable. That may include the buying and selling of data from a car. Charging for city infrastructure in small increments for congestion pricing, pollution pricing, carbon footprint pricing and all these kinds of things might become possible with lower overhead costs for payments. Trusted shared data. When Chris was the CFO at Toyota, most of the financing was through securitization. Securitization, is the main financing mechanism for vehicles where a collection of auto loans get sold off to third parties. The overhead costs for that process, such as legal fees, accounting fees, reconciliation fees and trust are 1 to 2% of the value of the loan. Being able to have an open database that everybody can look at, share and agree as the single source of truth can potentially reduce the cost for transacting quite a bit. Data privacy and protection – the ability to control user data or third-party app data at its source, instead of it being shipped to a central database where it can be a single point of attack.
These are the four basic capabilities that blockchain can bring to the mobility industry. They can be combined in various different ways to create a lot of interesting use cases.
For Chris the single most interesting one is the ability for vehicles to pay as they go for things.
The combination of blockchain, IoT and AI that gives anything that is connected with a modicum of sensors and intelligence, the ability to have an identity, act intelligently and autonomously in its ecosystem, and to participate in an economy autonomously. With respect to vehicles what that means is vehicles moving around and being able to interact with their environment as economic agents.
Mance Harmon, CEO of Hedera Hashgraph has returned to Insureblocks to discuss the exciting news of Google joining the Hedera Hashgraph Governing Council. We also discussed the addition of Hedera’s new service entitled, Hedera Consensus Service, which brings interesting opportunities for enterprise blockchain platforms such as Hyperledger and Corda to embrace the opportunity to create verifiable timestamps and ordering of events to a public level trust.
What is blockchain and what is hashgraph? Blockchain as a term refers to two things:
A data structure which is a chain of blocks of transactions A consensus algorithm that enables a community of participants, each of which holds a local copy of that chain of blocks to come to an agreement or consensus on which block to put next on the top of that chain in order for everyone to keep a consistent chain of blocks
Unfortunately such a blockchain is designed to be slow for a number of reasons:
Proof of work, the use of a really hard cryptographic puzzle, to reach consensus is time consuming From an architectural standpoint, having a single chain that everyone uses is also limiting
Hashgraph, similarly is a term that refers to both a data structure and a consensus algorithm. Hashgraph’s data structure is a graph, in a mathematical sense, whose nodes or vertices are linked together with hashes cryptographically.
Its consensus algorithm makes it possible for those that have a copy of the hashgraph to calculate how the other nodes in the network would vote in order to come to an agreement on the order of transactions.
Because it’s a graph rather than a chain, all of the transactions are flowing into the network, can be processed simultaneously without the need for proof of work.
Hashgraph thus removes the two constraining factors of blockchain: no need for proof of work and a graph instead of a single chain. The result is much higher performance and higher level of security due hashgraph using asynchronous Byzantine fault tolerance.
What is Hedera Hashgraph?
Google joins Hedera’s Governing Council
The Council was designed to provide a governing body that the market would trust in doing a good job in terms of shepherding this global network to full maturity and beyond. The Council makes decisions on a wide range of topics such as product roadmap and in control of treasury management. Council members can serve up to two or three year terms. The Council will ultimately be composed of 39 members to represent the full range of use cases across industries, geographies and through time. The council members are chosen to be the largest and most respected members in their categories and geographies. Today there are 11 members: Swisscom blockchain, Tata communications, Nomura, IBM, Boeing, Google, Magalu, Deutsche Telekom, FIS, DLA Piper, and Swirlds.
On the 11th of February, Google became the 11th member of the Hedera Governing Council.
Hedera is a Delaware based LLC, which is a business vehicle with a legal existence separate and distinct from its owners. Council members are members of the LLC in the legal sense. What this means is that full diligence, M&A and approval by the CEO / Board of that organisation is necessary for them to becoming co-owners of Hedera Hashgraph.
The council functions in a very similar fashion to a standards body and has oversight of the organisation itself by committee. Members sit on committees related to their level of expertise for example a tech steering committee, a legal & regulatory committee and marketing committee amongst others.
How to avoid collusion between council members? As the council members have a little over two thirds of the Hedera Hashgraph tokens there is only a third of the tokens in the market in circulation. This ensures that the risk of a Sibyl attacks are removed. As you don't have to worry about a bad actor buying up a third or more of the token supply an...
In this exciting podcast we get to hear about how blockchain is used to track the coronavirus. We had the pleasure of having Jim Nasr, CEO of Acoer, developers of the blockchain coronavirus tracker, talk to us about the challenges the healthcare industry faces and opportunities for innovating it.
What is blockchain? Jim looks at blockchain in terms of three pillars:
Technology Token economics Distributed computing
The first pillar is with technology of distributed ledgers themselves.
The second pillar is with regards to the value creation attribution specifically to public blockchains. This is where blockchain provides a reward in a public setting in a transparent manner for the creation of value. In the Bitcoin network for example miners are rewarded with 12.5 Bitcoins for completing a mathematical challenge for which they would have used electricity and processing power.
The third pillar is regarding distributed architecture and distributed computer. For Jim this is fundamentally a question of culture of distributing power instead of a few central figures or central servers and removing intermediaries.
The Coronavirus Tracker Acoer coronavirus (COVID-19) blockchain tracker
On the 3rd of February Acoer announced the launched of its coronavirus tracker. Acoer is a software development company narrowly focused on modern, open and interoperable healthcare software.
Acoer has created a data visualization tool to track the deadly coronavirus. The tool, known as the HashLog data visualization engine, interacts in real-time with Hedera Hashgraph’s distributed ledger technology. This allows researchers, scientists and journalists to understand the spread of the coronavirus and its trends over time through visuals presented on Acoer’s HashLog dashboard.
John Hopkins coronavirus (COVID-19) tracker
In creating this tool Jim had looked at existing trackers, particularly the Johns Hopkins one and felt they could add a more global perspective on it, use the existing visualisation engine called HashLog to make it their tracker more usable, dynamic and filterable.
Jim has been a huge believer that when it comes to public health data surveillance, blockchain can be a source of truth and a source of accountability. If you tuned the token economics and the game theory correctly, you can incentivize good data collection and you can disincentivize bad players from gaming the system.
Acoer are constantly growing their data sources. Today they have clinical data from the CDC and other sources that show relevant clinical trials that are happening for treating coronavirus. Google Trends and social media provide in context data.
Why blockchain? It was pointed out to Jim that as the Acoer coronavirus tracker the Johns Hopkins one is using the same data as theirs from the CDC and the WHO but it does it with APIs, Application Programming Interface, and not with a blockchain.
Jim points out that their tracker also uses APIs. APIs are the modern way for different systems that are unaware of each other to communicate with each other with standard protocols. For example the clinical trails data, Acoer gets is through APIs from https://clinicaltrials.gov/.
For Jim blockchain is supplementary to APIs. The blockchain ingests all this data from all kinds of sources via APIs. The blockchain can confirm whether or not the integrity of this data has been changed at any stage. Acoer can thus confirm that it hasn’t manipulated the CDC data for example as they can provide a real time audit trail of the data on a public Hedera DLT.
The reasons for using a public blockchain is to provide clear references to the data provenance.
Why Hedera Hashgraph? Having experimented with numerous public blockchain, Jim wanted a near real time responsiveness for the coronavirus tracker, and Hedera’s consensus algorithm is mathematically proven to be the most optimal.
This week we’re joined by the CEO of Vinturas, Jon Kuiper. Jon was the former head of Koopman Logistics Group and has years of experience as a senior executive and a CEO in the Finished Vehicle Logistics (FVL) industry. He joins us to talk about how Vinturas is using blockchain technology to revolutionise the FVL industry.
What is blockchain? Jon Kuiper explains what blockchain technology means in the FVL industry. Blockchain technology or distributed ledger technology allows Vinturas to create an infrastructure which fosters collaboration between FVL companies and all other stakeholders in the ecosystem. This in depth collaboration allows for a single source of truth amongst all players in the FVL ecosystem, which in turn can bring huge benefits for all network participants.
The finished vehicle logistics industry According to The Association of European Vehicle Logistics, Finished Vehicle Logistics (FVL) are the activities that take place after a new vehicle leaves the factory until the point when it reaches the customer. The FVL industry is a highly specialised sub-section of the transportation industry with dedicated storage warehouses and skilled drivers to ensure smooth delivery without damages to the high-value product.
FVL is part of the automotive logistics market which according to a study by Global Market Insights is valued at over USD 115 billion in 2018 and is estimated to grow to USD 170 billion by 2025.
The key 3 challenges in the finished vehicle supply chain industry Supply chain visibility In 2017 Supply Chain Worldwide Survey surveyed 623 supply chain professionals across 17 different countries and concluded that only 6% of firms were able to offer any type of supply chain visibility. This, more than ever presents a huge problem across supply chains which need to be addressed.
Complexity The finished vehicle supply chain is very complex and the complexity is only increasing. Cars can be transported from the original equipment manufacturer (OEM) through potentially 4 modes of transport road, rail, maritime and river before it reaches the car dealership further increasing the complexity. FVL often spans different countries and these countries have their regulations and rules which will need to be abided to. Also, it’s not one firm which controls the whole supply chain. Products are often passed between 3 or 4 LSP’s in the supply chain before it reaches the car dealership creating multiple handover points between different logistic service providers.
Customer demands Amazon certainly leads the way in producing extremely efficient supply chains having spent billions in R&D in the last 20 years perfecting their supply chain. The ‘Amazon Effect’ has meant that expectations of supply chains in many industries have risen in recent years. Now consumers expect shorter delivery times, are less tolerant of mistakes or late deliveries. Importantly customers expect to know where their product is and how long it’ll take to reach them so like Jon Kuiper says they know ‘if he can use it to go on holiday or not."
Forecasting A problem with opaque supply chains is that it removes OEM’s ability to forecast or plan. This means that they are not able to update customers, nor are they able to execute last mile processes. The fleet owners have no information on the vehicles and the reasoning behind their vehicles being held up. If it’s because of damage it will have a large impact on their business. The overarching problem with the inability to forecast is that all stakeholders in the supply chain can’t manage the process.
Inefficient operations and processes in the finished vehicle supply chain industry Before the supply chain process begins a tendering process occurs to see who can cover the supply chain service at the lowest price but there are well-known disadvantages of this process. The tendering process means that profit margins reduce.
In this exciting podcast, we are joined by Bruce Pon, co-founder of Ocean Protocol, to discuss how to monetize and tokenize data. Almost 6 years ago Bruce and Trent McConaghy, previously on Insureblocks regarding “The Data Economy”, got into the blockchain space by seeing how the concept of Bitcoin could be applied into non-financial use cases like data.
What is blockchain? Bruce, refers to blockchain as a general purpose technology. He states there are only about 30 to 35 general purpose technologies that have ever been discovered on Earth, by humankind. You start off with agriculture such as the domestication of plants and animals to the steam engine of the industrial revolution to electricity and railways to the last century. In this decade we’re going to see things like AI, blockchain, bioengineering infuse themselves across the entire world.
At the highest level, blockchain is one of those fancy technologies that is going to change the world over the next 30 years. At a more in-depth technical level it is a way use technology where you don't need to trust an authority.
Bruce read an interesting concept which states that it was science in the Enlightenment era which took us away from believing in authority, the Supreme kind of knowledge of authority from priests and/or kings. That Enlightenment era made us take a different methodology for understanding the world around us, which was the scientific method. Blockchain is taking us away from believing that we need a central intermediary to hold things of value for us like a bank, like a government, or any other enterprise that holds for instance our data. Blockchain allows for data to now be held in a way that there is no authority to control your own data.
Just like the internet 30 plus years ago allowed the general public to get access to information in a way that was never before possible. Blockchain is going to allow us to get access to control our own assets in a way that was never before possible.
Ocean Protocol
In 2013 Trent McConaghy and his wife found the idea of Bitcoin as an interesting global database that allows people to have perfect knowledge about who controls what? Along with Bruce they found that this could be applied to intellectual property with copyright. Who owns the copyright? Who owns the rights to control the distribution of music or books?
In 2014, they started a company called ascribe to do exactly that to try to put intellectual property copyrights, trademarks, all these types of things on the Bitcoin blockchain. 18 months later they realised that Bitcoin wasn’t the appropriate infrastructure for metadata for copyrights. They then created BigchainDB, a database that was built on blockchain technology to store metadata to solve the problem with ascribe. After running 50 to 100 industry proof of concepts they came to realise that who needs data with provenance? Who needs control of their data? It is either the people providing the data and/or trying to sell the data to the AI consumer. As it is AI that is actually absorbing all the data in order to feed its algorithms. The more sources of data, the better the AI algorithm. If provenance, ownership, and origin of data can be ensured then you have the potential to change the economic model for society when it comes to non-financial use cases such as intellectual property.
Bruce recounts how in the mid 90s there was a valuation made of all the land and all the intellectual property in the world. It turns out that their respective valuations where roughly equal. The only exception was there wasn’t a proper mechanism for valuing intellectual property nor was there the infrastructure to track who owns what.
Blockchain provides the infrastructure to track ownership of intellectual property globally. With the increase growth to the service economy, the knowledge economy is now going to be valued in a way that wasn’t possible.
The City of Dublin, Ohio, USA, is a city of 50,000 residents. Under the leadership of its Chief Information Officer, Doug McCollough it has been one of the first to launch a publicly owned fibre optic networks and also a digital identity project built on the blockchain. Join us in this exciting podcast to hear how Doug is ensuring that the City of Dublin not only doesn’t get disrupted but is also at the vanguard of innovation.
Dublin is a small city, really a suburb on the northwest corner of Columbus, Ohio. Dough really loves municipalities and is into smart cities, smart mobility, blockchain and all kinds of emerging technology and how they can help public sector organisations.
What is blockchain? Blockchain is a technology, infrastructure or innovation that combines existing technologies like databases, peer to peer networks, encryption, distributed computing algorithms, to form a different way of distributing compute, data storage and data security.
In its most basic form, it works by recording pieces of data into blocks that exist with a chain. The chain becomes more resilient every time new blocks are added to it. For Doug the most important thing to him is that as an infrastructure it is superior to other databases, networks, or distributed computing models. Especially for data transactions. It tracks what happened, when, where and with whom.
City of Dublin, Ohio, USA The City of Dublin, Ohio, USA, is a small community of 50,000. In spite of it’s size the city has a Chief Information Officer, a role which is usually reserved for very large cities like Boston, New York or Los Angeles. Most cities have an IT director whose job is to keep the technology running, not necessarily to envision what’s new and what’s new.
A few years ago, under Doug’s leadership, the City of Dublin started its path towards innovation by developing one of the first publicly owned fibre optic networks, called Dublink Broadband. Since then the city has earned a reputation of being techno centric as it embraces utilising technology to advance its economic development interests.
The city has the Global Institute for the Study of the Intelligent Community. The institute was established to help share what the City of Dublin has learned about intelligent communities and smart city development, and share those lessons with other communities. They aim to be a kind of conduit and light in showing how communities can use technology to improve the lives of their citizens.
Cities being disrupted Today cities around the world are facing an unprecedent amount of challenges:
There’s a declining and degrading trust in government which extends to cities Cities’ residents are increasingly concerned by a dangerous data privacy environment which can have a negative impact on cities and public transactions Budgetary constraints along with innovation around automation and bots have led to government bodies letting go of staff which in turn disrupts the service models that service people
Another core challenge is that cities themselves run the risk of being disrupted by digital native companies. If cities do not innovate they will be disrupted like any other business. Google Waze and Google Maps are more often used for information on which roads to travel on instead of government. Government isn’t effectively in control anymore for telling people where to drive or in restricting roads. That’s a disruption.
The work undertaken by smart cities is very much centred around transportation. The very nature of transportation, the roads, the traffic lights, how fast people go, a lot of that is being moved into technology vendors.
If you look at the technology that's going into connected vehicles it is from those same technology vendors. When these vendors get better at directing people, traffic, and at keeping them safer than governments are, then governments may stop doing it.
For this week's episode, we’re once again connecting with Christopher G. McDaniel the President of The Institute RiskStream Collaborative. In this episode, Christopher gives us an insight into the concept called risk singularity. We discuss the 3 phases that he envisions will preclude the risk singularity and what it means for insurers.
https://youtu.be/WMqMUPkpVfM
What is blockchain? Christopher defines blockchain as a mechanism where information can be shared between different parties who without this mechanism wouldn’t normally trust each other. What this gives each of these parties is a trusted mechanism. Once widespread, they’ll be no need for information to travel back and forth between different parties. Through this mechanism, everybody in the network will now have the data ubiquitously. When this data no longer needs to be transacted between different parties continually it opens up new possibilities for insurers.
The Institute RiskStream Collaborative
The Institute RiskStream Collaborative is a non-profit consortium. It’s a collaboration of close to 50 members, made up of some of the largest insurance carriers and reinsurers globally. The goal is to build real-world applications and use cases using emerging technology
Risk singularity So what’s meant by the risk singularity? First, the term technology singularity was made prominent by Sci-Fi writer Verner Vinge who in 1993 predicted that within thirty years, we will have the technological means to create superhuman intelligence and Ray Kurzweil through his book entitled ‘The Singularity is Near’. The term refers to a hypothetical point in time where technology advances to a tipping point and past that point technological growth becomes unpredictable and irreversible. Christopher defines risk singularity means that we get to a point where data, intelligence and process transformation have become so advance that the risk management industry undergoes a dramatic and irreversible change.
The impact of risk singularity to insurers Over the next 15 to 20 years Christopher believes the following
There’ll be a shift in that the majority of data will come to the company externally as adverse to what’s happening now where the majority of data comes from internal sources such as actuarial tables. It'll mean that insurers aren’t the ones to own individual’s data. Christopher envisions that eventually the individual will own their data on the personal lines side of insurance companies and individual’s will choose if they share it. If risk singularity occurs and data comes from external sources Christopher foresees more of a blurring of insurance business lines. Today everything in the industry is very siloed. Life insurance is siloed. Car insurance is siloed as are commercial lines. When data is available from numerous different external sources, new solutions will emerge that will cut across different insurance sectors and geographies. Solutions could be provided by any insurer worldwide as long as they’re in the network. According to Insurance Business UK based on the metric of net premiums written (NPW) in 2019 UnitedHealth Group based in America was the largest insurance company with $158.5 billion NPW. Second, AXA based in France with 104.5 billion NPW and third China Life Insurance Company with $97.6 billion NPW. None of these countries have a large presence outside of their areas. If consumer data is uploaded to a blockchain ledger and they’re in the network they’ll be competing directly.
For the risk singularity to be enabled what is referred to as the Web 3.0, the combination of blockchain, AI and internet of things (IoT) needs to happen.
Blockchain as a data sharing mechanism is the foundation. It is where the data will be uploaded onto the network and shared between the different parties. Along blockchain you will have AI and IoT. AI’s role will be analysing the data coming into the ledger to see what i...
Procure-to-Pay, in today’s supply chains, is a complicated and lengthy process for corporations and their suppliers across the world. Listen to Orapong Thien-Ngern, CEO of Digital Ventures a subsidiary of Siam Commercial Bank (SCB) in Thailand, as he talks to us about how blockchain technology has reduced procure-to-pay process time by 50% and costs by 70%
We had the pleasure of also being joined by Sharon Yuen, Head of ASEAN sales at R3 who manages the relationship with Digital Ventures. What is blockchain? For Sharon, blockchain is a technology that creates a decentralised records of all transactions in the network. Using blockchain technology, participants in the network can confirm transactions independently of a third party intermediary. There's no need for a central trust authority or a central server. From payments and audits to tracking inventory and assets, blockchain technology in supply chain can deliver a new level of trust and transparency, while enabling the procure to pay process to realise huge operational benefits.
For Orapong, whilst blockchain is a distributed ledger it is more than just technology. It’s a new way of thinking or looking at the world. What we believe is the world is going distributed. If we look at the world today things are quite centralised. You go to a bank for your money. You go to a telco if you want to use the telephone. You go to the hospital if you want to see a doctor. Each of those entity keep your record.
Orapong believes that with distributed ledger technology (DLT), all these information records will be distributed in the near future and people own their own digital records. This will fundamentally change the business model of not just banks but all kinds of businesses. Businesses in the future will rely very heavily on data. Once the data becomes truly distributed banks won’t be functioning in the same manner as they are today. Nor will tecos. Core banking infrastructure will change as will billing systems and we’re just at the beginning of this change. Because of all these reasons, SCB is very interested in blockchain and DLT.
Siam Commercial Bank (SCB) and Digital Ventures
SCB was established 140 years ago. It’s the first bank in Thailand. In terms of net profit and net assets, SCB is the number one bank in Thailand. But as in the rest of the banking industry, not just in Thailand, the industry is facing some serious challenges. Return on equity five years ago in Thailand was about 22%, now it’s about 9.8%. Price to book ratio used to be 2.2, now it is 0.98. SCB isn’t alone in facing those challenges, the whole industry is facing them. European banks in Europe have a return on equity of 7.4% with a price to book ratio of 0.58, which means it is significantly discounted on book value.
If you plot those two trends, of return on equity and of price to book ratio, Orapong believes that the banking industry is a “sunsetting industry”.
Siam Commercial Bank is very alert of these trends. SCB believes that traditional banking has to evolve as the present market dynamics are very stagnant. For example last year, SCB created what they believed to be the leading mobile application for banking. To introduce its launch and to gain market share they announced zero banking fees. Within half an hour all the other competing banks matched their offer. Ultimately no one gained anything because everyone is willing to do whatever it takes to protect their market share.
Within such a competitive environment SCB realised that for the bank to grow it would have to branch out from its traditional business. They started looking at the financial world through a different set of lenses. Could the adoption of new technology, creation of new product and services away from their traditional industry help them? It is within that frame of mine that they discovered and became very interested in the potential of DTL.
SCB created Digital Ventures in February 2016 out of the b...
Andrew Speers, Director of Product and Innovation at RBS, is passionate about user experience and developing customer centric propositions. In this podcast he discusses the important role blockchain can help as an enabler of other technologies to delivering great user experiences within the financial industry and beyond.
What is blockchain? Andrew recognises that there is no standardised definition to blockchain and his definition comes from as a business user instead of a technologist, engineer or coder. Blockchain is just a distributed ledger technology (DLT). That DLT sits on top of the internet. It is a network of nodes. A node has a unique identity and it stores data.
Applications are built on that network like apps in the app store. Nodes can participate in one or many apps, depending on the blockchain. Andrew reminds us of a few more truth regarding DLTs:
Not every DLT needs a blockchain Not every DLT has a crypto asset or crypto currency attached to it Not every DLT
Disruption within a fragment financial industry Consumer Connectivity Insights 2018 reveals over 69 percent of global consumers would consider changing their bank, retailer or insurance provider due to a disconnected experience. For Andrew this has happened due capacity utilisation within financial services firms.
The financial industry is fragmented and is being disrupted. It isn’t facing disruption it is being disrupted. The issue at hand is that the banking industry is focused on products along lines of technical expertise rather than building products along the user journey or the user experience. If an individual or a business has a multi-product need it fragments as it moves within the bank. The client first goes through an originations function, then into the credit assessment function, then into operations and/or bespoke product knowledge such FX trading finance, insurance risk and others. Complicated clients with complicated needs have to go through a number of different silos within a financial services firm which creates a hugely disconnected experience for them.
DLT is coming to a maturity point now where it's helping financial firms to knit some of this together to create client centric user experiences by having a distributed architecture with identifiable data from corporates. These can be seamlessly stitched together and bespoke user propositions can be created. Clients can now have a little of FX attached to a little bit of credit assessment, attached to a little bit of trade finance with the exchange of data can be automatically transacted on the distributed ledger thanks to smart contracts, thus improving the user experience.
Challenger banks and DLT Andrew recognises that these type of challenger banks are doing some great work. For specific parts of their business they are seen as challengers. RBS looks to embed the existing or incumbent technologies they’re using to catch up a little bit or to stop them taking transaction and their clients off the periphery as they build scale.
RBS is looking to DLT and how DLT allows banks to attach identity to client data and to their transactional data. It allows RBS to develop solutions with greater efficiencies as RBS does not need to constantly exchange information between the client and itself and their different departments internally, those fragmented silos that were mentioned earlier on. RBS doesn’t have to process, recheck and reprocess those same data points continuously.
It also means that for DLT clients sitting on a shared protocol such as R3’s Corda Enterprise, who have 57 other banks on their network, then theoretically they are accessible by anybody else which creates further user experience benefits and efficiencies as well.
Examples of blockchain initiatives in the financial sector that generate better user experience Identity Billions of people and corporations have an identity.
As smart contracts adoption on the blockchain continue to grow, ensuring end to end security is becoming more important. Oracles, trusted source of data, are increasingly seen as the weakest link in blockchain. In this podcast, Johann Eid, Product Manager and Developer Evangelist, at Chainlink explains to us the role decentralised oracles can have in providing this end to end security.
What is blockchain? Blockchain is essentially a decentralised ledger. It is transparent and can be public in a similar manner as to Bitcoin. Decentralised, transparent and permissionless technology such as blockchain can have a tremendous impact in the way people interact between each other. Bitcoin was the first type of blockchain before it was followed up with Ethereum. With Ethereum you can develop applications on top of the blockchain thus enabling new ways for people to interact with each other.
What is a smart contract? Contracts are useful when two people who don’t necessarily trust each other want to interact with each other. They give trust to a third party to enforce that the contract executes in a manner that it should. Presently, these third parties are law firms, accountants, banks, and large institutions. Smart contracts embed the logic and enforcement of those contracts on the blockchain.
The properties of smart contracts work in a manner where you have a deterministic input which generates a predictable and consistent output. Thus, whether you have an insurance contract or a derivatives one, due to the properties of blockchain and smart contracts you can have two trust less parties, based in different parts of the world, transact together.
Off chain connectivity for smart contracts Most smart contracts such as parametric insurance contract on the blockchain require real world data. Whether that is data generated by IoT devices or from legacy systems. For example weather related insurance smart contracts would need real world data provided by weather stations. Meaningful data is required to provide the deterministic input to trigger a smart contract.
Chainlink has estimated that 80% of smart contracts require off chain connectivity. Chainlink states that smart contracts are unable to connect with external data feeds, APIs, or any other off-chain resources on their own.
Chainlink acts as an all-purpose HTTP protocol-like equivalent (or HTTPS using a TEE) for messaging at the protocol and application level both on-chain and off-chain. Chainlink nodes are able to format messaging and data from public APIs into a readable format for smart contracts.
Are oracles the weakest link on the blockchain? Oracles is often the name given for a source of data from which a smart contract connects to. Blockchains high level of cryptography makes them very secure. Smart contracts sitting on the blockchain are also secure. However, the oracles that provide real world data to smart contracts, more often than not, sit off chain and are thus sometimes considered to be the weakest link on the blockchain.
Decentralised oracle networks, such as the one provided by Chainlink, provide a means to secure the integrity of the data that is provided to smart contracts. If for example 12 oracles are providing weather data to a smart contract and if one is compromised due to a technical error or malicious activity you still have 11 oracles providing reputable data.
Utilising a centralised, closed source, single oracle to provide a smart contract with real world data there is the risk of compromising the end to end security of the network. That oracle represents a single point of failure which defeats the decentralised nature of building a decentralised application (DAPP).
There are a number of risks involved with getting off chain data to a smart contract:
Data provider level:
If you have one data provider you are limited to what can be done to mitigate the risk.
Turlough O’Brien is Head of IT at Aviva Commercial and Aviva UK Blockchain advocate. In this podcast we discuss Aviva’s perspective and lessons learnt with blockchain technology. Aviva is the largest insurer in the UK. It’s a composite that spans right away from car insurance through to equity release products.
What is blockchain? Turlough defines blockchain as a mechanism for creating trust between peers in a distributed manner as opposed to today’s existing centralized trust models. From a technical perspective blockchain is a ledger of blocks. A block is comparable to a digital fingerprint or a unique representation of a piece of data, often a transaction. Once a new block is validated, it is then added to the ledger and cryptographically linked to the previous block. This creates the chain, which is then propagated across the network. This ensures that everyone on the network has confidence in the integrity of the chain.
Aviva and blockchain sAviva Ventures do a lot in terms of investing in start-ups having come through Founders Factory such as the recent investment in Acre which aims to streamline the UK mortgage, insurance and conveyancing process using blockchain.
Throughout 2017 and 2018 Aviva completed three pilots within the broader company:
a pilot to automate large parts of the supplier invoicing process within supply chains an Insurance Claims Fraud Detection pilot and an automatic property lease renewal pilot using smart contracts.
Moving beyond the pilots, Aviva continue to remain vigilant of the emerging opportunities with DLT. Aviva has an active working committee led by their group Chief Data architect to assess and triage opportunities coming through.
However, the focus has shifted onto consortia, whereby throughout 2019 Aviva has been actively involved in the consortia space and joined B3i.
Joining a consortium One of the things that Aviva learned from its pilots was the value of the network and having the participants on the network.
The decision to join B3i was predicated on the network effect, meaning that the value of a blockchain-powered solutions increases as the number of participants using the solution increases and so it was a realisation of the value of the network and not the technology.
The rational being that the technology is not as much a challenge as participation on the blockchain, to quote John Carolin “Blockchain should be viewed as a team sport”. Consequently there is a lot of value in the consortia versus the technology and having all participants in the insurance value chain on the blockchain is key.
We only have to look at the numerous attempts to modernise the insurance industry which failed to gain traction owing to the lack of adoption. From a commercial insurance perspective B3i probably has the broadest coverage of participation across the insurance value chain on the network. They spent a lot of time on engagement and building the network. It’s also a way of avoiding the “technology looking for a problem” scenario as the participants are required to realise the emerging business use cases.
When will blockchain be widely adopted in the insurance industry? For Turlough that’s the million dollar question. He believes that it is hard to gauge and that from a technical perspective, it's very tricky. Bearing in mind that technology that has been around for a long time such as EDI and XML messaging, API’s and mainframes are still active in insurance so it’s hard to gauge exactly when blockchain will become prevalent in insurance.
Turlough reminds us of Bill Gates’s quote: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”
For Turlough, re/insurance is a fertile ground for the decentralised nature of blockchain and distributed ledgers to prove themselves, noting the potential for significant savings around transaction costs,
In this podcast we look at the amazing opportunity reforming contracts with self-executing contracts can have on insurance, distributed ledgers and beyond. To take us through this journey we are joined by Rory Unsworth, who until recently was Swiss Re’s Director at Smart Contracts Counsel.
Rory has a background as a UK lawyer with a focus on insurance litigation civil law. In recent years he pivoted towards legal engineering as it is more fun than traditional legal practice because it is about solving new challenges, working in teams and delivering projects.
A legal engineer is someone who helps to change legal processes by leveraging and creating adoption. Both of those things, leveraging and creating adoption are tools, based on all types of technology, from text mining to blockchain, AI, semantic, whose purpose is to support lawyers and experts.
During his stay at Swiss Re, Rory had the chance to re-engineer the way Swiss Re works around its contracts and manages contract risk. He has now recently left Swiss Re and is moving into the consultancy space.
What is blockchain? Blockchain is a type of distributed ledger. A ledger is a type of record keeping system. It allows you to note the state of your asset or of your transactions with those assets.
A distributed ledger, it's a new concept because it's shared across a network
What are self-executing contracts? Smart contracts are bits of code that order the code to take action when a contractual condition is satisfied. They're not actually contracts. It's a misnomer. They are “if, then” conditions that execute individual actions, usually with a view to automating or driving contractual conditions. And those actions could be payments or value transfers.
Now a self-executing contract are like traditional contracts but executed by means of smart contracts. To compare it to the internet, it’s a bit like text with hyperlinks, you got the surface text, but there's another dimension underneath it which leads to an execution piece.
Example of iTunes When you used to sign up to iTunes you were presented with a massive click to accept contract which apparently was longer than Hamlet by Shakespeare in terms of word count. This was the traditional contract that came with clauses and so forth which limited the number of devices onto which you could share the music you had bought a license for. You could share the music with five devices but in the old style of contract enforcement if you had shared the music with more than five devices you would receive a nasty lawyer letter asking you to cease and desist or they would ask you to pay a fine for breaching that contract.
This of course would have been impossible for Apple to impose and would have never succeeded as a business model. Apple removed that friction by using a smart contract to do two things:
Contractual permission: to enable the customer to listen on several devices Contractual prohibition: to block the listening of music on more devices than were allowed.
In that sense contractual enforcement was automated and there was no need for lawyers. The code simply didn’t permit you to breach the contract.
Smart contracts potential to change the legacy landscape Rory likes to use the metaphor of how self-driving cars are going to change the way our roads will look like and how driving will look like, as an experience, to describe the impact smart contracts will have on legacy approaches.
Contracting and driving are both complex acts which has the potential to be fully or partially automated with lots of benefits to users.
In a future vision, contracts will more or less talk to each other. In a world of autonomous cars, there will be no stop signs and no traffic jams. In the world of smart contracts, the code itself will be programmed to pick up external data points, like in the world of cars, if a speed limit is automatically communicated to the car's operating system,
David Katz, is the CEO and founder of the Plastic Bank, a unique organisation that is using blockchain technology for social good. They make plastic waste a currency to fight ocean plastic and poverty. Listen to David as he explains to us how he transforms plastic waste into a unit of positive value that large brands are willing to pay for. Leading not just to the removal of plastic from entering the oceans but also providing a path to financial inclusion for some of the poorest communities around the world.
What is blockchain? For David, blockchain is really a database that allows him to understand who has been contributing or changing data. Blockchain is a technology that enables true authenticity. It enables for value (money or good quality recycled plastic) to be transformed between corporates and into the hands of the poor in emerging countries without the need of intermediaries such as government or the risk of it being hijacked by malicious parties such as the mafia. Plastic Bank corporate customers want to make sure that when they buy good quality recycled plastic from them that the value is truly transferred to the people who are collecting the plastic.
David looks at authenticity in a binary manner. He looks at good quality reliable data as having an authenticity value of one. Data that he can’t rely on has a value of zero. The Plastic Bank needs to ensure that the material has as much authentic value as possible to really make it an incentive for the world to collect it and purchase it. For the Plastic Bank that’s what blockchain is and what it enables without the need for audit. Audit’s take time and the ocean cannot wait around.
Your journey to the Plastic Bank
David has a very philosophical view on the journey that has taken him to founding the Plastic Bank. He recognizes that every single experience and decision is what led him to this very moment. It is a mixture of all his journeys from the good to the tragic ones. There may have been some things that may have been more relevant than others like 35 years ago walking the beach on his way to school every day and observing all of the marine debris and being aware of them. Or as a 15-year-old calling out a mayday in the middle of the ocean whilst sailing with his father who was having a heart attack. Or was it the images of decomposing birds, whose bellies were filled with plastic, whilst walking the beach on holiday. Or was it his journey as an entrepreneur?
In May of 2013, David attended a course at Singularity University, in the seminar on 3D printing, he was able to witness a solid strand of plastic be manipulated with a heated nozzle to be turned in to a belt. He was told that the sale price of the belt was $80 whilst the cost of the material was $10.
At this moment he realized that the only thing that was giving that plastic a $70 value was its shape. It was the perception and view the customer was giving to that plastic that gave it a value of $80 and not $10.
So the same way we look at packaging, bottling and other disposable plastic goods where our perception of those plastic items is worthless. So it came to David that we just had to change the perception of the material and not the material itself.
David challenges every individual to think how their perception of every plastic, packaging and bottling they encountered was worth $5. Would we see any of that plastic in the garbage, street, environment or ocean? David believes that would be none. It’s not the plastic, it has nothing to do with the plastic but it has all to do with the way we perceive it.
Tackling plastic waste
This week a third whale in just two months was found dead in the River Thames in the UK. Scientists found in the stomach’s whale was 100kg of litter from fishing nets, ropes, plastic bags, plastic cups and gloves.
Every minute there is the equivalent of one garbage truck of plastic waste that is dumped into the ocean.
John Reynolds is the CEO and founder of Coadjute. John has a background in enterprise technology and helping organisations optimize internally. In this podcast he talks to us about the exciting blockchain opportunity they've unlocked in the real estate and construction industry which is worth $10 trillion globally!
What is blockchain? John perspective on blockchain is from a workflow and synchronization angel. Blockchain enables different companies to work together by keeping their different databases to stay synchronized, thus enabling everyone to have the same version of the truth. Coadjute looks at blockchain as an inter-organizational workflow that allows organisations to stay in sync.
Property marketplaces around the world are broken In April 2019, John wrote an article entitled “Transforming the Real Estate Value Chain: Collaborative Innovation and Co-Operative Delivery”. In the article he states “Property marketplaces around the world are broken. It is slow, complex, confusing and costly to buy and sell both residential and commercial property.”
Anybody who has bought a house would recognize that it is a complex process because the consumer has to engage multiple businesses:
Visit an estate agent to view a house Visit a bank to see how much you can afford Visit a mortgage broker Visit a conveyancing lawyer Visit a surveyor
Whilst each of those verticals have digitized and perform their job correctly the process itself is broken because the entire value chain is fragmented and it is down to the consumer to knit it all together. This can take four to five months and could cost 4% of the property value. It is an expensive, frustrating and time-consuming experience for most consumers. At Coadjute they believe that distributed ledgers and decentralized workflows can fix this problem.
Do you really need a decentralized solution? There has been attempts to build a centralized platform fo the marketplace. In April 2007 the Land Registry invested £4.6m to the “Chain Matrix” a e-conveyancing type platform. It didn’t get the necessary adoption and was ultimately closed down in 2009.
Whilst in Australia the government mandated a e-conveyancing platform called PLEXA which was successfully launched in 2010 and has had over 4m property transactions of a combined value of $622bn go through it.
In the UK and other jurisdictions estate agents have invested heavily in their workflow tool and their internal business processes. Surveyors and conveyancers have their own tools that they have built up over 10 years. Banks have their internal systems. Taking a centralized platform approach would cost significant amounts of money, require heavy regulation which in turn could lead to a number of businesses shutting down. Because of these reasons a centralized approach probably wouldn’t work in the UK.
The API approach is an interesting one but one that still has challenges. How do you synchronize those APIs? How do you set the standards and processes to facilitate the synchronization of those APIs within a group of companies wishing to collaborate?
DLT and smart contracts allows those companies to orchestrate workflow across organisations and then use APIs to connect into their core systems. Essentially the APIs open up the data from the company’s internal systems, DLT keeps the data in synch and enables the automated execution of workflows.
What is Coadjute?
Coadjute initially started off as a research project trading cryptocurrency in an amateur way to understand the underlying technology. John has spent a considerable amount of time in helping businesses and the UK government digitally transform itself. He and the Coadjute team had a hypothesis which was, could they create a distributed ledger that kept government in sync and kept their databases in sync? To answer that hypothesis they started a research project in 2017, spoke at Parliament, presented at the Lords,
Atlas Insurance is the first European insurer to convert to a protected cell company. In this podcast, Ian-Edward Stafrace, Chief Strategy Officer at Atlas Insurance in Malta, talked to us about the advantages an insurance cell can provide to Insurtechs to rapidly innovate within the insurance industry by effectively becoming an insurance carrier themselves without all of the overheads and capital requirements. Etherisc, the blockchain insurtech company, used Atlas’s platform to rapidly prototype their flight delay insurance product.
About Ian-Edward Stafrace & Atlas Ian joined Atlas back in 2000 as a commercial underwriter. He rapidly got enamored by insurance by its logical approach since Ian has a technology background. Atlas is one of the leading insurance players in Malta and is structured as a protective cell company. Ian’s role evolved becoming a business intelligence analyst, a risk manager, a compliance officer, a data protection officer, to now as the Chief Strategy Officer. In 2006 Atlas converted from being an insurance company into a protected cell company, becoming the first European insurer to do that.
We first met Ian at the D1Conf on the 5th of November 2019:
What is blockchain? Ian defines blockchain from the set of benefits that are derived from it. There are three aspects:
Distributed database Smart contracts Potential for P2P activities
Distributed database gives multiple organisations, one immutable version of the truth, one database, eliminating all reconciliation processes that today tend to happen manually between those parties. This brings efficiency and transparency. The insurance industry has a very long value chain from insureds, brokers, insurers, reinsurers brokers, reinsurers and data providers such as telematics for cars and health care providers for health. Having a common distributed database brings numerous efficiencies and having a smart contract on top of it we have the potential for automated self-executing processes.
Smart contracts enable automated self-execution of claims, pricing determination, limits setting and transactions themselves which can happen away from the organization’s core systems in a way that is decentralised and trusted because the rules would have been set in advance of the events happenings. This is ideal for parametric insurance as there is a trigger, which can create a deterministic action upon a set of agreed rules.
The P2P side is more theoretical of bringing the insureds and the capital providers closer to each other. Automated matching of customers, carriers and investors depending on risk appetite.
What is a Protected Cell Company (PCC)? Protected cell legislation is found around the world in various jurisdictions sometimes called, segregated accounts companies or incorporated cell companies. Malta is the only full EU member state that has protected cell legislation applicable for insurance. The UK has insurance linked securities.
PCC as a structure has a single legal entity but its shareholding is structured in a way where cells can have their own separate set of shareholders which are completely protected from the liabilities of any other cell or the core. This means that the PCC can act as a hub or a platform with a single insurance license. Third parties can invest in their own cells effectively meaning they can own a piece of Atlas. Their investment will only be used for their business. When transacting with customers it is always made very clear which cell they are dealing with. From a tax perspective the cells are considered as though they are separate companies.
In a way it means that each cell is a mini insurance company that is built in a low cost manner riding on the insurance license of the PCC and on its platform. The PCC platform provides to the cell the hosting, risk management, compliance, internal audit, actuarial and regularly reporting. Each cell can thus focus on their specific business ...
Raghavendra Kulkarni, is responsible for developing new Innovation Strategies and Business Ecosystems at Bosch. In this podcast we discuss not just internet of things (IoT) but also the concept of Economy of Things and how blockchain is an enabler for combining IoT devices to business models.
What is blockchain? How we perceive Blockchain within Bosch. Three aspects to blockchain:
Decentralisation Immutability Exchange of consensus - collaboration
Web 2.0 has created centralised platform monopolies. Internet of things (IoT) coupled with a decentralised ledger operates well within a decentralised ecosystem. The second aspect is immutability where you can have an immutable trail of an identity or of data. The third aspect is where you have consensus which is driven by collaboration. In principle what Bosch believes in is blockchain as a technology which will enable decentralised algorithmic consensus in the context of things.
What is Internet of Things (IoT)? Raghavendra looks at Maslow’s Hierarchy of Needs for things and has identified three levels:
IoT can be looked from there levels:
First level is you look at a physical device. When the device is connected you look at what are the attributes of that device when it is connected to the web. The second level is making the connected device smart where you enable it to have automation attributes. The third level is making the device autonomous.
Raghavendra believes the IoT is all about the connection of the physical into the digital world.
IoT sits in all three aspects of the digital world:
Edge - the connection between the physical object and the activities around that physical object are Middleware - is where IoT have to operate into systems of subsystems Infrastructure - the pure data
Blockchain and IoT Bosch believes blockchain will play a very important role in enabling things from automation to autonomic.
IoT has enabled the automation of a number of things. Where blockchain comes in, is in enabling those autonomous devices to make decisions on their own, by making these devices into economic ones. That is the game changer opportunity in combining blockchain with IoT.
Bosch as a company predominantly operates as a company in sensor software and services.
In the context of blockchain, Bosch’s entire pursuit has been to enable sensing devices to become economic agents. When talking about economic agents, it’s about deriving value from those sensing devices, settling a value when you settle a transaction. Bosch believes blockchain would help connected smart devices become economic devices.
Bosch – Economy of Things
On the 15th of May 2019 at the “ConnectedWorld Event” in Berlin, Bosch announced a tagline “from the Internet of Things to the Economy of Things”.
Raghavendra explained that when we talk about IoT it is really a conversation that is restricted to the technology of devices being connected. Economy of things is the principle of taking a technology and combining it to a business model.
An example Raghavendra uses is if you take a machine and create a tender for it that states that for this machine to do an activity today it would cost $10. The operator would have to create cycles and set it all up. In an economy of things scenario, the machine could consider its own resources and availability and broadcast to a network its own contracts and availability. Once agreement is made it can also settle its own transactions.
Additionally, at Bosch they believe the acceleration of AI adoption will happen if it is on the blockchain. With blockchain AI gets the provenance of data, the provenance of the models and if the AI is self-learning or has unsupervised algorithms it resides on the ledger.
Democratising the internet Over the last decade the internet as a technology has really commodities the hardware. Whether it is a car or a machine the value that these things have i...
Addenda is the first insurance blockchain solution we have recently covered on Insureblocks from the Middle East.. For this podcast we were joined by Walid Daniel Dib CEO and co-founder of Addenda, the blockchain for insurance subrogation ecosystem in the UAE.
In September 2018 Walid and his co-founders registered the company in the UAE and in the Dubai International Financial Centre (IFC). They set out to build a few prototype which didn’t quite work including a life insurance solution that was more of a solution looking for a problem. However as Walid puts it, they “struck gold” with the motor insurance subrogation solution that they’re currently working on.
What is blockchain? Blockchain is essentially a decentralised network. Where information that's shared between two participants is also shared across the board and everybody else in the room. Depending on whether it's a private blockchain or a public blockchain, that data could be encrypted, and or shared with others without them knowing the content of that data. Within an “old school” blockchain the public blockchain rely on certain consensus mechanisms, such as proof of work, and proof of stake to operate but more enterprise friendly blockchains rely on different types of consensus such as Byzantine fault tolerance.
The road to motor insurance subrogation The focus on subrogation came be seeing the issues that exist in the UAE and in the MENA region in general with regards to how manual certain insurance processes are. Walid and his team wanted to start with something that’s both high volume and low value in claims. Property insurance has very high value but low volume. Medical insurance has a lot of personally identifiable information which can be tricky in the UAE. Motor insurance ticked all the boxes.
July 2018, Walid and his co-founders quit their jobs to focus building on their blockchain motor insurance which was ready by December 2018. They signed their first client in July 2019 and within the following month signed up seven more insurance companies.
Lack of Insurtechs in the Middle East? There are four or five Insurtechs in the Middle East, but most are aggregators in the space. In Walid’s opinion, the Middle East is still a few years away from having some deep tech startups. There is more demand for technical talent than there is supply. However with the recent exit of large startups such as Careem sold to Uber in March 2019 for $3.1 billion and Souq sold to Amazon for $580m in July 2017. There's now a bigger appetite for both investors, governmental entities and even clients to take Insurtechs, whether blockchain or otherwise more seriously.
Insurance market in the UAE In spite of being a relatively small country the UAE has more than 60 insurance companies. The top 5 insurers control more than 50% of the overall gross written premium whilst the vast majority control single digit percentages if not less of the market. There is now increasing activity in terms of mergers and acquisitions with a lot of gossip regarding a larger merger between Takaful.
The motor subrogation opportunity in the UAE If Car A hits Car B, and Car A is at fault and assuming both have comprehensive insurance policies. Both respective insurance companies will fix the cars, but as Car A was at fault, Car B’s insurance will chase Car A’s insurance for payment. A large number of documents will then need to be exchanged:
Three competitive quotations to show the cost of repairing the car A policy report copy Copy of the insurance policy Copy of the discharged receipts to show the repair has happened
On average over 20 documents need to be exchanged per claim. With over 2000 claims happening per day that’s 40,000 documents flying back and force via courier between the insurance companies. The more “technologically advanced” insurers are using fax.
In the UAE the governmental side of things are pretty advanced,
The GovChain Project is a wonderful project that aims to paint an accurate picture of the state of implementation and regulatory treatment of blockchain by the public sector around the world. Using a traffic light rating system, the report provides a rough guide to the varying levels of blockchain adoption across the targeted jurisdictions, identifying emerging patterns and trends.
We had the pleasure of interviewing two of the co-founders of this project:
Lucie Munier is the co-founder and lead project manager at the GovChain project. She has worked in the blockchain space for over two years now and was formerly working at Qadre, the main sponsors of this project. She is now manager of the Sharing Economy UK. Lavan Thasarathakumar a former advisor at the European Parliament where Lavan specialised mainly on economic and military affairs and within that more specifically on emerging technology. Since August 2017, he set up Thasa Consulting which provides advisory services on emerging tech policy for government, supranational organisations and firms. As part of that he is a consultant at Hogan Lovells working within the Tech Hub. Lavan is a co-founder of the GovChain Project.
What is blockchain? Blockchain isn’t particularly a new technology. It’s actually a combination of technologies we’ve had around for decades. It’s the combination of these technologies that is novel. Blockchain is a shared database, distributed among several devices, also known as nodes and uses cryptography to ensure immutability and accountability. Immutability is defined as once a piece of information is stored in the blockchain, it's impossible or very difficult to change that piece of information. Accountability is defined as visibility across the whole network, so people can see what transactions have happened, and where the information is stored.
What is the GovChain project?
GovChain is a publication that aims to paint an accurate picture of the state of implementation and regulatory treatment of blockchain technology by the public sector around the world.
GovChain team mapped out the regulatory and policy environment across over 20 jurisdictions to assess their degree of friendliness towards blockchain technology. They spoke directly to policymakers and entrepreneurs who have attempted to implement blockchain within their jurisdiction. They sought to find out what the key drivers were that allowed them to make this change, be at funding, political leadership, policy environment, cultural factors or something else to then draw up recommendations of best practices that other countries can learn from.
In addition to Lavan and Lucie, Helen Disney is the other co-founder of this project. It was born out of a conversation at a conference where the three co-founders realised the lack of information that was available regarding public sector implementation of blockchain. Victor Chatenay was brought into the team to conduct interviews and analysis across all of the jurisdictions.
Public and private sector symbiotic relationship to leverage blockchain The benefits of a technology like blockchain could be more impactful in the public sector space. But what you do also need is the private sector to come in and innovate within the public sector. The public sector may have the intention to be innovative and use new technologies, but they don't always have the tools necessary and know how or there’s too much bureaucracy in place.
Private sector is a lot faster and a lot leaner. They have the capacity to rapidly explore and experiment with new technology solutions and bring those learnings to bear to the public sector. This creates opportunities for a symbiotic relationship between the two.
It’s important for both the public and private sector to have good communications for:
Private companies to understand what the regulatory environment is to ensure they have inbuilt solutions to remain compliant
In this fascinating episode we are joined by Andy Martin, Blockchain Business Design at IBM. For the last three years Andy has been working on how to create business case for blockchain networks. In this podcast he shares with us his deep wealth of experience in how to design effective blockchain business design. This is a must listen to anyone interested in establishing blockchain networks.
What is blockchain? In defining what is blockchain, Andy focuses on private permissioned blockchain whose initial opportunity is in optimising shared business to business processes. Up to now the approached businesses took was in having a central intermediary to act as a central database to smooth out that shared process. The challenge is that both the quantity and the value of data has been growing very rapidly, leading to reluctance in businesses to share that data to a central intermediary.
Blockchain gives us a super elegant approach to sharing this process across the members of an ecosystem in such a way that no one person is in charge of the data. All the members can have a say in how that data is governed and they each have a copy of the ledger. Smart contracts are running on top of it and that is where the shared processes have been codified – who needs to do what to move the status of an asset as it moves across that shared process as trades of ownership of that asset are made. When a trade of ownership transaction is proposed to update the ledger, a consensus mechanism is used, so that all the members of the network can come into agreement as to what is the status of this asset as it as it moves through this process.
Blockchain has created a new asset which is trusted data at the level of the market. Privacy controls are put into place so that only the permissioned individuals are allowed to see the data. This new asset is effectively the foundation stone to truly innovate, to create new types of business and new types of marketplaces. This paradigm shift provides players within an ecosystem an interest to collaborate with their competitors in building that trusted data marketplace to then compete above it whilst combining your firm’s private data and capabilities and combine it with that trusted data.
Building business cases for blockchain networks There are three big areas where building a business case for a blockchain network is different than any other technology:
Incentive model Network effect Market level thinking
For any blockchain network you also will need an effective governing body that plays the role of defining the marketplace rules. It needs to be fair and democratic to ensure that everybody gets a fair chance and cut of things and a desire to increase the volume of transactions within that market.
Incentive model Three different types of business cases have to be built to create an incentive model. Each of these business cases have to interrelate and create reinforcing behaviour:
A solid financial incentive for whatever entity who is going to be bring this network to market. A strong business case for each of the members of the network to join it. If members benefit greatly from the network you charge them a fee to join it. Some members may be so valuable to the network that they either have great gravitational pull that they can bring other members to the network or whose data is so valuable that you may choose to give them free access to the network. The final case is for those who provides useful data to the network but don’t benefit greatly from being in the network. An incentive model is required for them to join the network.
Network effect The whole point of the incentive model is to ensure that as many of the trading partners of a market join a blockchain network. The incentives are here to identify and recruit the partners who can bring the most transactions and volumes to the network in order to seize a market.
John Carolin is B3i's new CEO. In this new podcast we had a very honest and open discussion about John's journey to B3i and his assessment of what the company got right, its business model and how they can better engage with brokers. We also discussed the very exciting announcement of the Cat XoL product deployed to customers’ production environments.
John Carolin, B3i’s new CEO John is a chartered accountant and chartered financial analyst by training. He started off working at PWC in the insurance industry. However, John always had a desire to be a maker of things which is why he founded a number of businesses in South Africa including a small venture capital firm, a retail property asset management company and a B2B platform for traditional media and online broadcasters.
John moved to Zurich with his young family to join Antony Elliott at Zurich whom he had worked with 15 years ago. Antony, at that time, was Zurich’s B3i representative and knew of John’s journey and invited him to join B3i to help Zurich further support its investment in B3i and offer him as a resource to the venture. For John working at B3i helped him reconcile his professional training, his industry experience, his business life stage experience and his deep passion for technology and building stuff.
What is blockchain? John thinks of blockchain as a form of DLT mechanism that initially with Bitcoin gave us a way to trust digital data and digital outcomes.
It provided a ledger list of transactions that couldn’t be altered without a huge amount of coordinated effort from a number of parties. This was transformational as traditional databases could have both the data and their audit log altered by a party. Blockchain provided the first mechanism to trust that the data hadn’t be altered.
Blockchain technology matured beyond being just a ledger with the likes of Ethereum providing tamper proof business processes encoded in algorithms. With smart contracts we had mechanisms where we could share automated processes in an immutable manner.
What has B3i gotten right and what can they improve on? For John it is a long list of things that B3i got right and many things they could have done better.
He has looked at the many initiatives over the course of almost three decades within the insurance industry at automating aspects of the value chain, either through commercial entities or non-profit, standard setting bodies, and looked at what they have done well and what they haven't done well or where they haven't delivered on the promise that they brought.
One of the things B3i got right is to address market level inefficiencies. Their ethos of "by the market, for the market" has been very important for them and one of the early things they got right.
Structuring B3i itself is another. They had considered setting themselves up as a foundation that develops open source software. However, the decision to setting up as a for profit company helps create some sort of North Star that helps to clarify your decision making, keeps you honest, and execution focused when you have cooperative competitors that aren’t necessarily aligned.
Moving away from Hyperledger Fabric was a business decision they got right. They felt that Corda answered questions around scalability, data, privacy and security better than Hyperledger Fabric. From a productivity perspective, it also had developer tools that enabled B3i to move quicker.
In comparison to most start-ups in the consumer space that apply lean methodology, the minimum viable product is very different to one when you’re building a platform. When you build enterprise grade solutions your first customers are really important and you can’t afford to make big mistakes with them. As John says “we only get one bite at this cherry”.
However, they do apply Agile ways of working by having bi-weekly sprints where they work with their customers, who are more like core contributors,
In this exciting episode we had the great pleasure of interviewing Dan Fritz and Marco Cuomo to hear about the exciting blockchain work they are doing at the pharmaceutical giant, Novartis. In this podcast you will hear about the wealth of experience they have developed by building POCs using Hyperledger, Ethereum and Corda.
Dan Fritz role is domain architect for supply chain. His department look at technologies that support supply chain business capabilities. They also look at emerging technologies and how they could be used to leverage and address the business needs.
Marco Cuomo is the Applied Technology Innovation Manager and his team is responsible for bringing in new technology into Novartis. He has been looking at blockchain for the last 2 - 3 years and in addition to supply chain has been looking at good use cases for using the technology.
Novartis is a global pharmaceutical company with about 100,000 employees in over 100 countries. It has a portfolio of prescription medicines, a generic division, and is increasingly focused on biotech including cellular and gene therapies.
What is blockchain? Marco Cuomo recognises that defining “what is blockchain?” is a difficult question to answer. In Novartis they have developed a “blockchain elevator pitch” to describe what is blockchain internally to their business and to their internal customers. Blockchain is a shared means centrally controlled, distributed ledger. Every partner in that blockchain network has a copy of that ledger and it enables immutable recording of transactions. These transactions track assets without the need for intermediaries.
Dan adds that blockchain is a socio technical construct which is designed to be a win-win for all participants engaged within it. This requires a different mindset where all participants are growing the pie together instead of just slicing it up.
Beginning of Novartis journey into blockchain in 2016 The immutability aspect of blockchain is what attracted Dan and Marco to blockchain. Immutability is a key attribute that is desired in the pharmaceutical industry. This is an industry that is highly regulated, it operates under GxP, or good manufacturing, good distribution, good clinical practices, where the traceability of all of the processes and the accountability of all of the processes have to be proven and documented. A shared immutable distributed ledger seemed like the perfect tool in comparison to creating binders of paper that go into an archive for 10 years.
From a supply chain perspective, it was the promise that blockchain could provide more efficient transactions, reducing the friction between data silos and organisational silos through a shared ledger.
Additionally blockchain could provide the patient control of their own data instead of it sitting with a range of intermediaries. There is the opportunity for creating patient data marketplaces.
The LEGO Mindstorm Truck
In 2016, Marco purchased a set of LEGO Mindstorm Truck to create a supply chain scenario where a serialised product is delivered from a packaging line onto a truck which transports it across the supply chain from a pharmaceutical manufacturer, to a distributor, to a pharmacy and ultimately to the patient.
At every step of the way the serial number is tracked against the serial number of the previous block to ensure that the medicine hasn’t been swapped or that it is a potential counterfeit. IoT was added to this blockchain with a set of temperature monitors to simulate a temperature excursion where the medicine is outside its standard transportation conditions. Every participant on the supply chain is informed if there is a potential quality issue.
Why blockchain? If a company controls their ecosystem, all of of its suppliers and distributors then maybe a central database approach will work. However, in the case of the pharmaceutical industry, there are hundreds, if not thousands,
On the 12th of June 2019, Legal & General launched its Pension Risk Transfer blockchain reinsurance platform called “Estua-re”. Thomas Olunloyo, CEO at the Legal & General Reinsurance Company, based out of Bermuda, joined us in this podcast to share “Estua-re’s background and why blockchain was the best solution to answer his pension reinsurance challenge.
His company is the global reinsurance hub of the Legal & General Group. It writes pension risk transfer for reinsurance in multiple countries around the world. But focus primarily on the UK, the Netherlands, Ireland and Canada.
What is blockchain? Thomas thinks of blockchain in terms of the context in which they’re applying it with estua-re. Blockchain is a network with a number of participants that are here to sell risk and some who are here to take on risk. It allows these participants to have a single version of the truth built on consensus that exists at all times. For a business, like the Legal & General Reinsurance Company, that trades with contracts that can last up to 50 years if not more, being able to exchange data in an immutable way, built on consensus that is self-perpetuating, is an incredibly powerful thing. Smart contracts are programmable scripts that run on the blockchain that allows for the data to be used for some purpose or another.
Legal & General Reinsurance Company The company does pension risk transfer for reinsurance around the world. What is pension risk transfer? L&G provides insurance to pension schemes either directly or indirectly. Provide a guarantee for the payment of pensions to all members of that scheme. So being a reinsurer, L&G stands behind insurers who provide these guarantees. However, being a reinsurer means L&G take a part of those guarantees to pay those pensions.
What was the problem, Estua-re was here to resolve? Contracts in the pension risk transfer can be up to 50 years old if not more. Every months of those 50 years data is exchanged between L&G reinsurance company and its counterpart. Most of the time that exchange is bilateral but it can also be with a larger number of counterparties. Both parties, or more, are entirely separately exchanging data every month to try and determine how much to pay the individuals within an underline population.
For the duration of those 50 years all the parties are maintaining separate data sets, trying to calculate the same payments from those data sets and exchanging data by emails and data rooms. This is very inefficient. To add to it, any errors which are made are compounded overt time. For example, it can very difficult, if not impossible, to try pinpointing where something has changed and understand what happened 10 years ago, when managing massive data sets comprising tens of thousands of lives.
Why blockchain? Thomas’ journey into solving this problem didn’t start off with blockchain. He had looked at a number of solutions and off the shelf software platforms. But none of them were really able to address the problem they had. Centralised databases with APIs worked well for bilateral business but not as well with multiple parties. Risk is shared among multiple parties. The more parties you have the less efficient it becomes to use centralised databases with APIs. Two years ago Thomas discovered DLT and blockchain which was increasingly gaining momentum and pace in the financial services industry. It then became apparent that blockchain / DLT was the only technology that was able to store data in an immutable way, all the interactions between the multiple parties for a period of time that can be over 50 years.
What is Estua-re? Estua-re is world’s first pension risk transfer DLT platform. It allows to L&G to manage long term contracts on the blockchain. Estua-re’s mission is to transform the way pension risk transfer business is executed and managed by making into a more democratic system.
The efficiency of removing the segmentation,
Shermin Voshmgir is Director of Cryptoeconomics Research Lab @ Vienna University of Economics and Founder of BlockchainHub which she started nearly 5 years ago. She recently published a book called the “Token Economy”.
In this podcast Shermin is going to take us through what are tokens and the token economy.
When researching blockchain, Shermin quickly realised that blockchain information was spread out on Reddit, Twitter, Ted Talks and numerous other places but there didn’t seem to be this one central repository of information. Shermin launched BlockchainHub to provide a comprenhsive source of information on blockchain.
To find out more about Shermin you can check out her site Shermin.net.
What is blockchain? Blockchain is the driving force of the next generation internet, often referred to as Web 3.0. It’s not a front-end revolution it’s a change around the data structures in the back end of the internet. Blockchain allows us to have a universal state layer of who did what and who owned what in terms of values or tokens. This is a completely new way of storing and collectively validating data via ledgers which are collective managed by a public or a federate network.
Blockchain is not a financial technology it’s a governance technology.
The Book - Token Economy
Shermin recently published her book the “Token Economy”. For her, tokens are the killer application of blockchain and smart contracts.
With the launch of the internet in the late 80s we had the information revolution. However most people couldn’t access the internet because even if they had a computer they did not have the notion of command line to operate the internet to connect to another computer.
However, when Sir Tim Berners-Lee invented hypertext it allowed everyone with even limited computer knowledge to create a visually appealing website, which anyone could now use to navigate the internet with clicking on links.
Tokens are to the Web 3.0 what HTML was to the web. Smart contracts have made it really easy to create a token with a few lines of code. At the beginning of the web a lot of the initial web sets had a “hello world” message and a bunch of links. One of the earliest use case was the search engine. Tokens are at a very similar stage. Whilst it is now very easy to create tokens most people don’t know what to do with tokens.
What is a token? Tokens have been out for a quite a while. Prior to blockchain tokens have had many use cases from their usage at amusement parks, airmiles, gift certificate, a paper note for a fiat currency is a token, a metro / tube ticket is a token, a casino jetton is a token that can be exchanged for cash. Probably the earliest tokens in human history were shells or seeds that were used as a kind of standardised medium of exchange.
A QR code is a kind of computerised token. Cognitive psychology have used tokens. For example in the 50s there were experiments to use incentive mechanism as kind of positive reinforcement tool to change patient behaviour. Good behaviour at the hospital would be rewarded with tokens which could be exchanged for special access rights to the TV room or a special kind of food at the canteen.
Tokens have three components related to them:
They have to be issued They have to be managed They need some kind of copyright protection to enable they’re not copied
Why are blockchain tokens a game changer? Blockchain networks provide the infrastructure upon which tokens can be created and managed with a few lines code with a smart contract. What needs to be determined is how many tokens are to be issued? What is the purpose of your token? What is the function of the token?
Shermin argues that it is important not to use the regulators terminology of tokens as either being security tokens or utility tokens for example. The regulatory perspective is only one perspective what is more important is to think what do they represent?
In June 2019, the CRO (Chief Risk Officers) Forum, published the “Insurance and distributed ledger technology – a risk manager’s perspective” white paper as a practical tool for risk managers to accelerate the accomplishment of the productive phase of DLT.
For this podcast we are joined by Dr. Sebastian Rath, Principal Risk Officer at NN Group, and with Gian Luca de Marchi, CRO at Unipol Group. Sebastian and Gian Luca aren’t here on behalf of the CRO Forum but are pleased to discuss their views on DLT while sharing some of the CRO Forum DLT paper content.
What is blockchain? A distributed ledger can be considered as a database that is distributed across several independent computing devices where changes to data are protected and manged by cryptography and consensus. This in turn provides guarantees that the data cannot be tampered with and that all parties have identical copies that can be considered as a reliable single source of truth.
The functionality of a distributed ledger system can be enhanced by the use of smart contracts (i.e. computer programs deployed and executed on the ledger’s network) and oracles (i.e. data feeds that trigger specific conditions defined within smart contracts).
What is the CRO Forum? The CRO Forum was formed in 2004 to advance risk management practice in the insurance industry. CRO Forum member companies are large multi-national insurance companies whose members are headquartered across the world with a concentration in Europe.
The CRO Forum has three core aims:
Championing best practice in risk management to advance business, Aligning regulatory requirements with best practice in risk management, and Providing insights on emerging and long-term risks.
The CRO Forum aims to share its views on topics related to these aims through publications and papers. In this context, the DLT paper was created by a working group of hands-on risk and technology experts from multiple member companies, including NN Group and Unipol Group.
What is a Chief Risk Officer and what are their responsibilities? Basically a Chief Risk Officer, the CRO, is an executive responsible for identifying, measuring and addressing any material risks that could have an impact on company objectives. Adverse events should be mitigated, while opportunities should be enhanced. According to the Solvency II regulation, when insurance companies calculate their own solvency position through internal models approved by supervisors, CROs are also responsible for the design, implementation and management of these models.
The CRO Forum’s white paper on DLT Hype has surrounded Distributed Ledger Technology and especially blockchain over the last few years since the birth of the Bitcoin cryptocurrency.
Hype, and criticism too, have been fuelled by fervent visions as well as misconceptions. These technologies have not yet delivered on promises, but several experts believe that DLT has the potential to transform the financial services sector. CROs are well positioned to play a critical role and strengthen innovation initiatives; the CRO Forum paper is thus meant as a practical tool for risk managers to accelerate the accomplishment of the productive phase of DLT. Although traditional risk management frameworks remain valid, there are specific issues to consider when assessing the risk of a DLT-based application.
Sebastian believes that the paper captures today’s status-quo for the insurance market’s use of larger DLT applications. More importantly, in his view this paper was an opportunity to formulate key considerations, key questions and advocacy opportunities where the insurance industry of the future may wish to dedicate time and resource to shape future DLT solutions.
Eventually, the paper’s recommendations are designed such that they can inform DLT solutions, future standards for technology and IT aspects, or strengthen strategy and governance for DLT partners.
Antony Welfare is the Managing Director of Luxoft, which is part of DXC Technology and has accumulated a wealth of experience on blockchain across industries. He recently published the book Commercializing Blockchain whose content we will be discussing in this podcast. Antony is interested in real blockchain applications and is all about commercializing blockchain - using blockchain in a commercial business or a government to add value efficiency, trust, and a lot more which is discussed in this podcast.
What is blockchain? Blockchain itself is just a technology. It's just a set of rules and principles that you can put into code. It is an enabler for trust and transparency in any network or business or community, in government, where data and information that's transferred can be more trusted and transparent. Blockchain circumvents all the modern issues we presently have around the reconciliation of data, auditing it and verifying it. Blockchain is fundamentally about trust and transparency.
How does blockchain compare to two companies who have a decade worth of trust in working together and have an API to sharing and exchanging information. Antony would really challenge if two companies, organisations or networks would really trust each other. Each party always reconcile the information they have as they don’t have the exact same copy of the data. At the end of the day the transparency and the trust isn’t there in a technical format. Blockchain is about making the trust and transparency there in a very clear black and white coded manner.
Commercializing Blockchain – The Book Back in 2017, Antony was working with Oracle Corporation and was doing some deep research on blockchain. During his research he realised he wanted to write about real blockchain applications and how the technology could impact individuals, businesses, and government communities. His initial thought was to write a blog to help him in creating material for the keynote speeches. It is at this moment that it dawned on him that there was an opportunity to write a book. Through his contacts from meetups and the feedback he was getting on his book idea he realised that not a single person in the world knows it all on blockchain. He invited 13 contributors to write different sections of the book from how contracts are formulated to global trade issues to consensus mechanism and what the future looks like.
The common and most interesting question he asked all of his contributors is what does blockchain look like in five years time. They all agreed that blockchain is going to be an enabler for us to build solutions to be more efficient to more trusted as a community and that no one will be talking about blockchain just like no one talks about TCP/IP for the web.
Killer app of blockchain? Email is one of the killer apps for the internet. We asked Antony what he thought would be the killer app for blockchain. Antony believes that the killer app is around identity. He believes that there will be an app that will sit on your device (mobile, laptop, etc..) that will hold the identity keys where you share what you want to share with whom you want to share it, what portion of the data and for how long. Essentially, self sovereign identity. Which means that similarly to how you use Google or Facebook but with the difference that you know what’s happened with your data, where is has gone, who has used it and crucially you determine that instead of Google or Facebook. Then tokenization of this data can also all you to get paid for how you wish your data to be accessed and used.
For Antony, identity and tokenisation are the two killer apps for blockchain.
Luxoft works with Sovrin’s self sovereign identity to launch their own personalised medicine track and trace which is around self sovereign ID for a person and personalised medicine. It allows the patient to only share the information they wish to share with the treatment centre.
Heather Dahl is the CEO of Sovrin, one of the leading self-sovereign identity solutions. In this podcast we discuss how identity has evolved from the offline world, to the limitations of it being online in the internet and finally to the opportunities it brings in a blockchain world.
What is blockchain? Heather Dahl looks at blockchain as one of the technologies tools that we have today. From her perspective we should ask ourselves - are you seeking a solution that provides a decentralised network, meaning that you're running a large number of diverse validators or nodes around the world that are run by different organisations that are censorship resistant, that helped build redundancy? Is that something you want that provides governance where no one organisation or company or government runs that network? If that's something you want, blockchain technology brings that decentralised, diverse set of nodes to run a blockchain solution.
From an identity standpoint is do you need interoperability with your identity? If you only need an identity for your sole company’s purposes then you don’t need a blockchain. However, if you’re building an identity, that needs to be interoperable with other systems then you need a blockchain based identity system like Sovrin. This allows issuers to write schemas and credential definitions and revocation on publicly available decentralised global network that everyone can access.
Heather likes to think of blockchain as an immutable ledger where her customers, users or clients are in control of their data and information.
What is Sovrin?
Heather Dahl is the CEO and Executive Director of the Sovrin Foundation. ‘Sovrin’ most commonly refers to the Sovrin Network, a public service utility enabling self-sovereign identity on the Internet. The Sovrin Network is decentralized, meaning individuals can collect, hold, and choose which identity credentials —such as a driver’s license or employment credential—without relying on individual siloed databases that manage the access to those credentials.
Sovrin is an open source project that offers the tools and libraries to create private and secure data management solutions that then run on Sovrin’s identity network.
Sovrin is now a global network for decentralised identity in six continents. In the past year they have launched the Sovrin Alliance to provide education and training programme for their community and those interested in decentralised identity. In partnership with Hard Yaka, Sovrin has launched a self sovereign identity incubator out of San Francisco. Sovrin also recently won the award for “Greatest Social Impact” by One World Identity.
You can find out more about Sovrin on their website and join the Sovrin Alliance.
The internet has failed in providing an identify solution The web is abound with news regarding breaches of privacy, personal data being sold, cybercrimes and much more. The common factor around all these issues is identity. Heather believes that we don’t have a data management problem, we have an identity problem as all pieces of data are connected to some form of identity. These issues stem from when the internet was created as a network of machines. The identity protocols weren’t designed for people they were designed to identify machines. Heather gives the example of how email addresses are structured, where you’re at a workplace (name@workplace.com) or at a university or at a technology provider (eg. name@gmail.com) which provides you with a free email so that they can take your information.
Identify was thus created in a very fractured manner that isn’t fully interoperable. As the internet grew websites and services who provided us with identities didn’t do in a manner with the users’ best interest but in a manner where they could profit, exploit and share. It is this internet lack of identity infrastructure that’s resulted in a fractured experience that’s insecure,
TradeLens is a digital platform that empowers businesses and authorities along the supply chain with a single, secure source of shipping data, enabling more efficient global trade. Join us and Daniel Wilson, director of business development at TradeLens / Maersk and Juan-Jose Ruiz, Head of Strategy & Business Development at TradeLens / IBM to find out more about the exiciting TradeLens platform.
Daniel and Juan are jointly responsible for building out the investment case, as well as overseeing and implementing TradeLens mid to long term strategy, and managing third party engagements.
What is blockchain? Today’s traditional ways of storing data, whether cloud native or locally are great if you're able to trust with absolute surety, that the people and the organisations and the systems managing those data will do so essentially, with impunity. You have no risk that the data stored there and the systems will have any way of being challenged or corrupted.
However, we all know that these systems aren't perfect, and they have limiting features on them. Even systems as secure as banks have billions of dollars stolen from them each year. Because something as simple as hacking in and changing numbers in accounts is something that is feasible, given today's technology.
So basically, what blockchain is, is a way of moving away from the centralization of control and authority. It’s moving away trust from a single body and towards a distributed way of managing that information, and a distributed way of managing trust. Essentially what this means it that everybody within a blockchain network has a stake in the management of the system. Everybody has a way of checking the actions and activities of everybody else.
In an environment like supply chains this is very important as the idea of trusts and systems does not exist today as lots of paper and manual process are still being used in managing trade. What blockchain can enable, amongst other technologies, is a way of distributing digitization across the network, without centralising that control in any one party or body.
What is TradeLens?
Daniel used an analogy of the airport and planes to describe what is TradeLens. For example when Daniel books a flight to Europe from Newark airport in NY with United Airlines, he might find out that his plane is actually operated by Swiss Air on a different type of airplane leaving from a different terminal. However he can still choose his seat and check in using his United mobile app.
Basically, air travel for passengers is great because you have these all in one solutions in front of you on your phone. Containerized shipping isn't like that. A typical container will have an end to end journey that involves as many as 30 organisations such as the port loading the container on the ship, the shipping line who has the ship, the banks providing financing, government's providing certification and clearance and much more.
In those 30 organisations you’re dealing with at least 100 individuals and more than 200 information exchanges in the process of that container journey.
And today, the best case scenario for most of those information exchanges, is an EDI communication protocol, which is 1970s technology, it's batch processing, it's not particularly resilient. Outside of EDI you’re dealing with emails, phone calls, WhatsApp and texting. But in the majority of cases those information exchanges are being done with a lot of paper and faxing.
TradeLens is trying to address this lack of connectivity in three steps:
Integrating within the systems of those 30 organisations to convert their data into the data standards that TradeLens has adopted Store the data into the TradeLens technology platform:
Shipment milestones for 121 unique event types on the container’s end to end journey Documentation for TradeLens to receive, store and share documents in a structured or unstructured data format
Are hybrid blockchains the silver bullet for enterprises wanting to operate in the blockchain world? Join us and Ben Jessel, Head of Growth at Kadena, as we discuss the merits of hybrid blockchains that take on the best of both permissioned and public blockchains.
What is blockchain? A blockchain is a mechanism to have an immutable record. That record can be a record of ownership record or a record of data that can be shared by everyone. It is distributed, which means there's no single owner. Anyone can write to that blockchain and it iss crypto graphically secured, which means that it is tamper proof.
There are two forms of blockchains. Public and private blockchains, which really is a determinant on how the users of a blockchain are permitted to collaborate on that blockchain itself.
About Kadena
Kadena is a blockchain organisation whose mission is to be the first blockchain there's actually ready for business.
Will Martino and Stuart Popejoy are the co-founders of Kadena. Will Martino played a pivotal role in the setup of the securities exchange commissionthat started to oversee aspects of blockchain and then he went to work at JP Morgan Labs. Within that role Will and Stuart interviewed a whole range of stakeholders in 2014 and came to the conclusion that blockchain technology wasn’t ready for prime time utilisation by JP Morgan or any tier one financial institution in terms of speed, security, and scalability.
Will and Stuart used the results of their investigation to build a reference blockchain which ultimately laid the foundations for Quorumand for the launch of the JP Morgan Coina few years later. Will and Stuart left JP Morgan with the open source reference permissioned based blockchain to start Kadena. Now they’re getting ready to launch the public version of this blockchain on the 30thof October thus giving them these two platforms, a public blockchain and a private blockchain, which speak the same language around their smart contract language.
Differences between public and private blockchain What fundamentally differentiates a public and a private blockchain is around who has access to the blockchain and the actions they are allowed to perform. A public blockchain, like Bitcoin, is available to everyone and a new user is able participate in the consensus purely by downloading a wallet and submitting a transaction. As the users are anonymous there are very low levels of trust. The way public blockchains enable transactions to complete without any of that trust, is through mathematics. Its consensus capability is a an incentive model, that de-incentivizes unruly actors by making it very expensive to subvert the blockchain.
In the case of Bitcoin you have proof of work which requires the need to solve a computationally intense mathematical problem, that would cost a lot of money to complete.
Now, as each block is added in compounds the difficulty. So while it may be a little difficult to subvert the most recent block, to subvert one that is 10 blocks behind, you not only have to subvert that block, you have to rewrite history for all the corresponding blocks that come afterwards, which means that they are linked together using this mathematical equation, which is very time and resource intensive. And that becomes incrementally harder over time.
Proof of stake, has a slightly different incentive model, which is about staking money that you could lose if you're found to be subverting the network. So there's an incentive model, which inherently stops the subversion of the network. And that's the trade off.
The challenge with that, in particular, for tier one financial services clients, is they have some concerns that number one, this is computationally very intense, and therefore expensive. And then secondly, because it is a fully anonymous network, they cannot guarantee that those participating in the network are doing so for nefarious purposes,
Defining and understanding what is blockchain is a difficult task in itself. Michel Rauchs published a white paper entitled “Distributed Ledger Technology Systems – A Conceptual Framework” whilst he was at the Cambridge Centre for Alternative Finance. to help clarify all the concepts in DLT systems and to provide a framework in understanding those systems.
About Michel Rauchs Michel got interested in Bitcoin, cryptocurrencies, blockchain technologies about 5 years ago and then decided to write a master thesis about the evolution of the Bitcoin business ecosystem. For his thesis he monitored the evolution of this ecosystem by taking a data set of 500 different companies, projects and organisations over a 5 year period.
Joined the Cambridge Centre for Alternative Finance to work full time as a researcher of the blockchain and cryptocurrency ecosystem. He has now recently left the Cambridge Centre to set himself up as an independent consultant at Paradigma.
What is blockchain? Michel concedes that answering this question could take a whole day. But for him a blockchain, or a DLT system as he prefers to call it, is essentially just a shared record keeping system that is collectively maintained and updated by multiple participants that may not necessarily trust each other. Participants are able to reach an agreement over shared set of data and its validity without the need for a central coordinator or central administrator.
With regards to differentiating the differences between DLT and blockchain it is very difficult as the terminology is very unclear, messy and fuzzy. At the moment they’re both used as umbrella terms for a wide array of different concepts and technologies.
Publishing the white paper “Distributed Ledger Technology Systems – A Conceptual Framework” Michel had two objectives in publishing the white paper: “Distributed Ledger Technology Systems – A Conceptual Framework”:
Clarify all the concepts that have been conflated together Provide a framework to divide the system into different parts, components and processes. To compare different systems together by analysing how different design configurations and decisions essentially impact the characteristics and properties of the systems
Public vs private blockchains and distributed systems. The difference between DLT systems and other distributed systems, are that in traditional distributed systems you have distributed storage, processing power across multiple connected devices but connected by one entity to achieve fault tolerance. So, if one of these components or devices goes down, that the system as a whole still continues to function.
In DLT systems, it's really about what is called Byzantine fault tolerance. So not only being able to cope with hardware failures but also with tolerating with the presence of potentially malicious actors that want to actively try to undermine or disrupt the network.
In public blockchains you have dynamic membership systems where anyone can join a network and leave the network at any point of time. It essentially means that we do not know at any point in time, how many actors on the system, and actually who they are.
Now, in private blockchains, it's a bit different, because we have restricted access to a limited number of participants. A fixed membership system. It's closed and restricted to certain type of participants. And as such the number of adversities you can have is a lot more limited.
Public blockchains are really complex socio-economic systems. Because anyone can join, anyone can leave, you don't actually know how many people there are. So, the only way to essentially regulate that system, is via self-regulation through a combination of economic incentives and Game Theory.
Whereas in private blockchains, you have a more traditional business environment as all participants are known and vetted. In comparison to public blockchains,
Dr. Marcus Schmalbach is the CEO and co-founder of Ryskex, a provider of a blockchain-based ecosystem for alternative risk transfers and innovative insurance solutions. In this podcast we discuss Risk Transfer 2.0 from a perspective of how to use blockchain and AI solutions for new and emerging risks.
What is blockchain? Candidly, Marcus, Googled what is blockchain to get the following definition: “a decentralised distributed and public digital ledger that is use to record transactions across many computers”. However from his personal point of view, blockchain is an upcoming and interesting technology for the insurance market that will have a great impact on that industry.
What is Ryskex and what is its vision?
Ryskex stands for risk exchange. It offers a hedging platform focusing on emergent and non-insurable risk in a b2b ecosystem.
They bring together risk managers of traditional insurance companies or captive owning companies and institutional investors who have a risk appetite. Ryskex uses both blockchain, a private version of Ethereum, and AI technology in running its platform.
What is Risk Transfer 2.0? Risk Transfer 2.0 is fundamentally two points:
Covering risks in innovative ways such as the use of parametric based solutions Covering new upcoming risks like globalisation and ones engendered by digitisations such as cyber risks
Cyber insurance for example is very difficult to price and to understand the real risks associated to cyber. As it’s a relatively new risk there isn’t sufficient data on the kind of exposures that could happen that weren’t conceived of. New solutions have to be designed based on this limited set of data. However Cyber risk is only one example of such new risks, we have reputational risk and especially climate change risk that can have a large impact on the corporate risk landscape. All of these new emerging risks cannot be tackled using traditional approaches and thus require new solutions.
What role does data play? The question thus comes to mind is that does the data exist or are insurance companies simply not capturing the right kind of data? Marcus agrees that the data is existing but isn’t necessarily being captured by insurance companies.
Parametric insurance has a trigger that initiates a claim process. Having the right data to act as the trigger is critical. Ryskex works with insurance companies to help determine what is the right trigger for a parametric insurance. In the case of cyber insurance a trigger can be agreed between the policy owner and the risk taker. For example a double trigger model can be used when there is a data breach (1st trigger), which when reported by the press will ultimately lead to a fall in their share price (2nd trigger).
Ryskex is working with some syndicates in the London market to design these kinds of solutions over the next few months and offer them in a parametric solution.
New risks require new infrastructures Marcus recognises that there is a lot of scepticism in the insurance industry with regards to both AI and blockchain technology. However, in addition to the recognised benefits that blockchain can bring, Marcus believes that blockchain helps to make claim adjustments and parametric payments a lot more cost effective. The AI component will have a large impact on the underwriting or the risk and its pricing.
PRICE (political sanctions, reputation damage, innovation failure, cyber-attacks and equity) model At the moment there are risk which are hard to cover or who are insurable on the market.
Reputational risk in an era of social media is increasingly difficult to manage when CEOs or politicians can turn to Twitter to express their views whether personal or not. This is an example of an emerging risk that is in great demand but in low supply on the market.
Ryskex was in the 2ndcohort at Lloyd’s Lab over the last 4 months working on covering cyber in a parametric way (parametr...
Dustin Helland is blockchain product strategy and implementation manager at State Farm. In this exciting episode he talks to us about the auto claims subrogation implementation on blockchain by State Farm and USAA. What is interesting about this implementation is that it was done on a Quorum blockchain, which is a first on Insureblocks.
What is blockchain? Blockchain is a distributed ledger, which enables members of a business network to execute transactions in a peer to peer fashion.
Distributed ledger technology (DLT) essentially means that each of the network participants has a copy of the shared information. And by leveraging some complicated mathematical algorithms, the blockchain technology ensures that each of the participants can trust that the copy they have, or have access to, is the same as all the others.
What this means is that when each of the participants can trust the information that they have, it allows them to perform business transactions in a peer to peer fashion. Rather than depending upon a third party or intermediary for validating that the information is actually correct.
Who is State Farm? State Farm was founded in 1922 by retired farmer and insurance salesman George Jacob "G.J." Mecherle. State Farm now insures more cars and homes than any other insurer in the United States while also providing a few other products such as life insurance, ifnanical services and a litany of others. As a mutual company, State Farms is focused on their policyholders and is currently ranked number 36 on the Fortune 500 list of largest companies.
State Farm’s blockchain journey State Farm’s blockchain journey started in late 2016 when Bitcoin started to get on the attention radar of financial institutions and other large enterprises.
State Farm established a group in their labs department to explore and priorities blockchain opportunities. The team initially focused on working across the multiple business lines such as the claims department, underwriting and financial services. The objective was to educate them on the capabilities of the technology and identify and evaluate possible blockchain use cases that State Farm thought could be of value. In the spirit of learning by doing, they aligned a few of the identified business opportunities with some development teams to create early prototypes.
Since then their work has evolved towards a focus on product delivery and realisation of business value. The current flagship project is the net subrogation product that they have built in collaboration with USAA (United Services Automobile Association).
Large consortium approach or co-founder one for blockchain? State Farm rapidly realised that blockchain is a team sport. For many of the blockchain use cases, to realise the potential of that use case requires a certain level of market adoption. The value is typically in the network.
There are a couple of emerging patterns for driving blockchain solutions from concept through development and industry adoption. State Farm has invested and participated in each to really understand them. One of those models is the co-founder based approach that typically involves a small number of firms or companies that focus on developing a single product or use case. They build it out, prove it out and invite others to join in.
The other model is the consortium approach such as RiskStream Collaborative (previously known as the RiskBlock Alliance) where you start off with a larger number of network participants, utilising this neutral third party to facilitate the collaboration, drive out product ideation, assist with product development, and then eventual implementation and support.
The benefits of this type of approach is that it is mainly viewed by most as a more neutral environment for competitors to start working together. The neutral third party can facilitate conversations and the initial cost can be spread across multiple parties.
In this podcast we are joined by Kevin Leuthardt who wrote an interesting article on this subject earlier this year where he analyses the use of governance from a business network layer, protocol layer and data layer for scaling blockchain consortia.
Kevin Leuthardt is the cofounder of KSquared which works with start-ups across industries and technologies. He is a tax lawyer and is involved in the European Blockchain Association within the Governance Working Group.
What is blockchain? Kevin sees blockchain as a foundational technology. From a technical standpoint it’s a shared synchronised data ledger which is encrypted and comes with the potential of disintermediation, automation and providing a single source of truth. Automation comes through the use of smart contracts.
What Kevin finds the most exciting about blockchain is that it brings about the so called competition paradox where competitors can work together to unlock new opportunities.
The article - Successful scaling of blockchain consortia through governance On the 16thof January, Kevin wrote an article entitled “Successful scaling of blockchain consortia through governance”.
Whilst working on a project around withholding tax refund on a DLT project, Kevin realised the importance governance had in the successful deployment of a blockchain consortium or an enterprise blockchain project.
What is governance? Governance is a term which encompasses organisational, legal and economic reflections or considerations. Governance within a business network like enterprise blockchain is a set of rules, values and a set of incentives by which participants agree to operate within an ecosystem. If is a rulebook which is here to manage key situations or events:
Such as what to do in certain key situations such as the need to tweak a protocol. How to avoid a hard fork? Who owns the IP?
The ultimate goal of governance, within the competition paradox, is to enable and facilitate transparency and continuity of the network.
How to assess the governance of a blockchain consortia? If you think about what’s actually a blockchain consortia, it’s essentially a set of companies which agree to collaborate in order to advance the state of blockchain. Within an industry it’s about establishing industry standards, use cases or build real commercial applications as is the case with B3i.
In order to analyse the governance of a blockchain consortia it requires to run an assessment of the anatomy of the distributed ledger application. Michel Rauchs, at the Cambridge Centre for Alternative Finance at Cambridge University, has published a conceptual framework on distributed ledger technology systems. It splits the anatomy of blockchain applications into three layers:
Protocol layer - everything about the blockchain stack Network layer – details of the business network such as who can access the network, who can submit transactions and who validates the transactions Data layer – what happens on chain and what happens off chain, where does the application take data from, what Oracles to sue and also aspects of cybersecurity
Rauchs et al.’s conceptual framework for distributed ledger technology systems Minimum viable ecosystem (MVE) A minimum viable ecosystem (MVE) is the smallest configuration of participants which needs to be brought together to create a unique commercial value to validate a certain assumption. This isn’t about achieving big scale. It’s about having the minimum number of participants to really test out the coopetition paradox and the proof of concept of a blockchain education. In general in an MVE you don’t have strict legal structures more of a memorandum of understanding in terms of who brings what to the table, agreed costs and the vendor involved for running the MVE.
A good example of this is how B3i started off in the early days as a loose coalition of reinsurers before it became a registered company in Switz...
Trent McConaghy grew up on a farm in rural Canada. He did AI research for 20 years including running 2 startups and a PhD. For the last 5 years he has been focused on blockchain and in particular on Ocean Protocol which he has co-founded.. Ocean Protocol is a protocol whose mission is to unlock data for the broad benefit of society. Data is becoming increasingly important and influential throughout the world, ensuring that the opportunities to access data are equalised is the aim of Ocean Protocol. What is blockchain? Blockchain at its heart is a technology, just as the internal combustion engine or a computer. The internal combustion engine combined with oil unlocked mobile transport in a big way. Similarly blockchain unloads a whole new set of possibilities that we haven’t seen before. At the very heart, it is simply a database. However its a database with very specific characteristics:
Decentralised: no single entity owns or controls it Immutable Concept of ownership if you have the private key to it such as tokens for money like with Bitcoin Unlocks incentives – blockchain can be used to shape incentives for human behaviour
What is the data economy? Trent looks at the token economy as the open version of the money economy. With the money economy we have tokens, currencies, etc. Traditionally these were distributed solely by national governments in opaque ways through the Fed and Central Banks. Whilst this has been beneficial in many ways there were still challenges. Bitcoin opened up the money economy by being permission less, friction free and fully open.
Today there is a data economy, but like the money economy it is very opaque where credit card companies are selling your data, Facebook buying data from 150 organisations to add it to its own data in order to sell you more adds. There already is a data economy where it’s a flow of value and participants in the economy are buying and selling data in a closed and opaque manner. Just as Bitcoin opened up the money economy, ocean is designed to open up the data economy.
AI, the last mile of data Just like the internal combustion isn’t useful on its own nor is oil useful for its sake, both of them are useful towards machines that are then used for mobility. AI, is the last mile to unlock the value of data. Modern AI really loves data. The more data it receives the more accurate its models become which in turn can create business value. For example AI models used to predict cancer usually use data gathered from 100 individuals. These models can predict cancer from 6 months in or even from stage three. If those AI models were based on orders of magnitude of more data such as over millions of individuals then you could theoretically predict the existence of cancer 6 days into it from very early weak signals. Feeding large amounts of data into AI can help to unlock value and build new applications.
Components of the data economy Three levels to both the open money economy and to the token economy:
Base infrastructure (i.e. a store of value) Unit of exchange Platform to launch and to exchange things
The last mile on top of the platform are the applications.
In the token economy the de factor standard, the unit of exchange, that has emerged is Bitcoin. The platform is Ethereum. On top of the platform you have a set of decentralised applications, DAPPS, running on Ethereum, which represent the kind of last mile in terms of applications. In terms of financial side the last mile are Decentralised finance or DeFi, some use cases of DeFi are for payments, lending, stablecoins, tokenization and decentralised exchange.
The components of the data economy are very similar in structure to the ones of the open money economy and the token economy. At the bottom level you have a store of value in terms of data, you have a unit of exchange related to data and you have an application platform related to data.
Najib Rehman, Data Strategy Lead, at FarmaTrust and Raja Sharif, CEO and Founder of FarmaTrust join us in this exciting podcast on how they use AI and blockchain technology in the pharmaceutical and healthcare industry to help resolve some of its problems.
What is blockchain? Blockchain is essentially a database that is distributed for all relevant parties to have access and visibility. Where it differs from traditional databases is that it doesn’t have a sole controller. With blockchain if all the parties have an agreement, a consensus around what the distributed dataset looks liken, then it’s very difficult to game the system. Blockchain makes it easier to identify the bad actors.
Fraud & challenges in the pharmaceutical and healthcare industry
The World Health Organisation estimates that up to 700,000 people die every year due to complications caused by counterfeit Tuberculosis and Malaria vaccines. PWC estimates that counterfeit pharmaceutical is a $200bn annual business. This is quite a significant percentage of the $1.2 trillion pharmaceuticals global trade.
In the UK alone, the NHS is dealing with large amounts of waste within various hospital institutions such as how inventory is managed, how it’s being leveraged and used within each hospital by healthcare professionals or not being used. Due to the very nature of healthcare, hospitals can't afford not to have something on the shelf to treat a patient, as the consequences could be catastrophic for the patient. So, there is a large amount of excess stock that’s often floating and often sadly not used to ensure that patient safety and patient lives are the priority.
The World Health Organisation estimates that more than 50% of drugs sold online in the West is fake. In Europe the Falsified Medicines Directive and in the US the Drugs Supply Chain Security Act are both trying to address this challenge by stipulating that pharmaceutical companies need to have individual serialisation and digitisation of the packs of medicine. So, all packs in developed markets now have to have an individual identity that therefore makes the use of distributed ledger technology quite suitable for this challenge
Combination of AI and machine learning can help identify patterns to help healthcare professionals ensure that patients are treated but without the waste that we’re seeing today.
Data standards in healthcare GS1 is a global data standard that is used across industries including in healthcare. It is a standard that is used for products for tracking and identification. These standards aren’t always adhered to. Companies and entities will create their own identifiers for a product which then conflicts. How to address this problem is an important question that needs to be addressed by companies, governments and agencies. Blockchain and its associated technologies can help to address this problem.
FarmaTrust and its vision FarmaTrust is essentially a blockchain and AI solution for the pharmaceutical and healthcare industry. FarmaTurst works in three verticals:
Pharmaceutical tracking and data services- tracking a product or a medical device from the point of manufacture to the point of consumption. Clients of FarmaTrust for this vertical are the US FDA (Food & Drug Administration) and McKesson here in Europe. Cell and gene therapy (personalised medicine) – providing technical solutions behind the production of treatments, such as carti type treatments for late stage cancer of blood cancers, stem cell therapies and pharmaceutical personalised medicine. Clinical trials – providing clarity and transparency around global clinical trails using blockchain solutions
Why blockchain? The most interesting quality of blockchain is the immutability and incorruptibility of the data. Once you can ensure you have good data and ensure data integrity that has lots of knock on effects in terms of data analytics and artificial intelligence.
Managers in enterprises or start-up founders all have to go through a framework in order to unlock the necessary investment for their blockchain projects. Understanding that process and what it entails is key. Areiel Wolanow is managing director of Finserv Experts, expert advisor to the All-Party Parliamentary Group on Blockchain amongst many other blockchain advisory and non-exec positions. In this podcast he takes us through the commonalities between successful and failed blockchain projects before building a framework for requesting investment for a blockchain project.
What is blockchain? Blockchain is an enabling technology. It allows multiple separate legal parties to share a single version of data and keep that data in synch between themselves. Thus, removing the need to reconcile different versions of data between themselves.
Journey to blockchain In early 2014, Areiel was running IBM’s financial services practice for East Africa based out of Nairobi. 90% of the Ethiopian commodity exchange is with coffee. The challenge that they faced was that the Fair Trade Association was threatening to remove accreditation across the country, because of the level of corruption. Virtually all coffee farmers in Ethiopia were calling themselves Fair Trade with only a tiny minority having actually gone through the process.
The Ethiopian commodity exchange had asked IBM if they could do an IOT based provenance solution. The idea was to give where farmers, who had gone through the Fair Trade process, the ability to purchase Fair Trade RFID tags to put in their coffee bags. Whilst this solution would help solve the problem from the farm side, the problem remerged when the coffee reached the roaster and ultimately the market floor. The Fair Trade coffee would get mixed with other coffees thus making the ability to trace provenance very difficult and easily gamed.
It became clear that considering these challenges that blockchain could be an excellent solution for nailing down the provenance, tracking the coffee throughout the various transactions all the way to the consumer scanning a QR code on their coffee bag and seeing their coffees journey.
Blockchain – addressing the “world’s oldest business requirement” The above coffee example, or Everledger with diamonds, demonstrate how provenance is a powerful use case for blockchain.
Blockchain is an innovation that addresses what Areiel refers to as the “World’s oldest business requirement”. This is a requirement that goes back to 4,000 BC when humans were designing the very first contracts.
A bulla (or clay envelope) and its contents on display at the Louvre. Uruk period (4000 BC–3100 BC).
At that time Sumerians would record future commitments (eg. use of an Ox for bushels of grains) on a “bulla” a hollow ball-like clay that contained tokens that identified the quantity and types of goods being recorded. This ball would provide an independent verifiable tokenised representation of a contract. A bulla was at that time as transformative as the internet is today.
However, as the bulla becoming increasingly adopted it became difficult for individuals to remember how many tokens where inside each balls. This set an upper limit on scale of the bulla system. The next invention was creating indentations on the outside of the bulla to represent the number of tokens on the inside. These indentations eventually took the form of symbols to represent not just the number of tokens but the different type of tokens.
Finally, it was realised that the symbols had supplanted the tokens themselves. As long as both parties where present when the symbols were being drawn and that they were accurate, there wasn’t any more a need for tokens.
Ultimately the move came from this clay ball to the use of cuneiform script, the oldest form of writing, which developed out of the need to model future commitments. Cuneiform writing become an independently verifiable record of that...
Jamie Burke is the founder & CEO of Outlier Ventures. He also is a pioneer of the “Convergence Thesis”, where blockchain is foundational to Web 3.0 a more decentralised and automated future.
In this podcast we discuss how we are starting to see the emergence of a “convergence ecosystem” that involves blockchain, AI, IOT, big data and robotics that will help to build new markets that are open-source, distributed, decentralised, automated and tokenised.
About Jamie Burke & Outlier Ventures Jamie has a background in digital innovation and change management within large corporations. Prior to founding Outlier Ventures, Europe’s first blockchain venture platform he was an angel investor.
Founded in 2014, Outlier Ventures is a venture platform focused on building the infrastructure for the next phase of the Internet. Their investment philosophy is based around the idea of the Convergence Ecosystem. They view blockchains and other decentralised tools like tokens as a new data layer enabling other technologies like AI and IoT to combine and converge.
Outlier Ventures are the authors of - The Convergence Ecosystem
Source: Outlier Ventures What is blockchain? Blockchain is a catchall word which broadly represents distributed ledger technology (DLT). A blockchain is a very specific form of DLT. Jamie prefers defining what is DLT instead of blockchain as he finds the broader application of DLT in all of it different configurations more interesting. DLT can be broken down into three components:
The ledger which is about ownership and the transfer of ownership in an auditable way, where the state of the ledger is governed by the network instead of a central party Digital scarcity: today a jpeg, a movie, a sound file can be replicated a number of times. The notion that something can be both digital and scarce is a new one and one that can be enabled by blockchain Smart contract gives you the ability to program rules into the ledger to carry our rudimentary “if then statements”. Whilst at the moment they are pretty dumb they have the potential for increased intelligence
What Jamie expects is that both at the ledger and at the smart contract layer, is an increase level of intelligence, which is why they’ve invested in a start-up called Fetch.ai.
What is the convergence ecosystem? A little over 3 years ago, Outlier Ventures had spoken to over 1,500 blockchain start-ups, most of which would fail. Many of the challenges these start-ups faced was the lack of blockchain infrastructure (Eg. on Ethereum or on Bitcoin) thus making their use cases not quite possible.
It increasingly became apparent that DLT shouldn’t be looked at on its own, but how it can be used to look at IoT (Internet of Things) or AI (Artificial Intelligence) problems, preliminary predicated around data.
It was at this moment that the Outlier Ventures team decided to look at DLT’s ability to not only solve IoT problems, especially industrial IoT, and AI problems but actually all of these things combined and accelerated one another. For example the minute you solve for one problem such as securing an IoT and supply chain of IoT devices you can have provenance of devices and data all the way up to incentivizing the ability to unlock data marketplaces to train AI algorithms. Looking at these problems from a convergence perspective is the only way to make sense of it all:
Source: Outlier Ventures
Insureblocks shares a similar view to Jamie’s regarding the convergence ecosystem. We look at it from a technology standpoint in terms of the new stack:
Source: Insureblocks
There’s also an industrial standpoint, the Web 3.0 for the ecosystem of ecosystem:
Source: Insureblocks
A new web paradigm – Web 3.0 The current web paradigm is predicated around the platform model, one built around mediated marketplaces, and the cloud. This has brought numerous conveniences but also huge concentration of data,
Antony Elliott, is Chairman at B3i and Group Head of Business Transformation at Zurich Insurance. In this podcast we discussed innovation in the insurance industry, blockchain as part of the new stack, but also what he feels were the lessons learnt at B3i and what his aspirations are for it.
At Zurich Insurance, Antony is focused on making the organization more effective, efficient and customer centric. As he suggests, his role at B3i has a similar focus except at an industry-level. Thus, his dual roles allow him the ability to drive transformation at a group and industry-level; an opportunity few have!
What is blockchain? According to Antony, blockchain is a tamper proof protocol that allows information to be shared across a distributed platform. From an insurance perspective, blockchain permits better allocation of capital to risks by allowing mutually distrusting parties to be part of the same network and extract benefits from referring to a single source of truth.
B3i from Antony’s perspective B3i began as an industry roundtable to discuss blockchain and was eventually incorporated as a company in 2018 which is owned by seventeen insurance companies. The wider B3i community consists of 40 insurance entities including primary insurers, brokers and reinsurers. It's mantra is for the market by the market. The aim at B3i is to build protocols, standards and infrastructure to remove friction in risk transfer in order to better allocate capital to risks.
Antony’s journey Passionate about transforming the insurance industry inside and outside of Zurich insurance. Antony was introduced to the insurance industry during his early days on the graduate scheme at PwC back in 1999. His initial experience with insurance was in PwC’s assurance practices which involved audits and consultancy work.
He believed then (and does till date) that insurance is a social good. However, he continues to believe that there are ways to make insurance better for customers. Antony’s LinkedIn handle summarizes his vision as “passionate about transforming the insurance industry inside and outside of Zurich insurance.”
Innovation in insurance Antony points out that the insurance industry has made substantial progress with regards to innovation over the past 5 years. The focus on innovation is gradually shifting from the product side to becoming centered around the customer. Antony makes an interesting remark that “line of business” (a phrase widely used in insurance companies) bears no relevance to the customer!
As of June 2019, Zurich has created the role of Chief Customer Officer - Conny Kalcher was recently appointed to this position. This role may be viewed as that of a customer advocate within the organization. Another area that the insurance industry is improving is with a focus on innovation and engagement with startups. In general insurance is pretty good at developing proof of concepts but have a harder time at scaling innovation. Zurich is attempting to do it differently and Antony proceeds to highlight some examples of incumbent engagement with technology recently. In particular, he mentions Zurich’s acquisition of Bright Box in December 2017. Bright Box focused on telematics for OEMs which augmented Zurich’s effort in the telematics-based motor insurance category. In March 2019, Zurich partnered with start-up riskmethods within the supply chain space. In addition to these partnerships, Zurich conducted its Global Innovation World Championship in 2018.
Blockchain as part of a new stack
Antony shares Insureblocks’ view that emerging technologies such as blockchain are part of a new stack. He takes the example of a connected home insurance service where a blockchain based ecosystem together with IoT devices (in homes) and AI (to analyze data) will be required.
Blockchain will provide a single source of truth to various participants in a connected home insurance service – this ecosystem would i...
On the 15th of May of this year, law firm Clyde & Co launched an off-the-shelf connected parametric insurance contract for use by insurers. In this episode, Walid catches up with Lee Bacon, partner at Clyde & Co and co-founder of Clyde Code.
Lee makes a repeat appearance to discuss connected contracts and Clyde Code, which is a consultancy unit focused on blockchain and smart contracts within Clyde & Co. Lee highlights that insurance is a core focus of Clyde & Co and together with other partners at the firm, he began exploring blockchain in late 2015.
What is blockchain? From a non-technical perspective, blockchain is a form of distributed ledger technology (DLT) which depending on its guises can be either a public permission-based system or for enterprises as a private kind of ring-fence system. It’s an enabling technology which enables parties to have access to the same data at the same time with an element of trust that the data is of the type and format that all parties can take comfort that they have the same information at the same time.
What is a connected contract? “A smart contract is neither smart nor is it a contract, but it can be both.”
Lee highlights that the phrase “connected contracts” has been borrowed from Clause.io. A connected contract consists of a smart contract linked to a legal contract. A smart contract requires a trigger to execute a set of actions. In the case of connected contracts, the smart contract executes depending on trigger values defined in the legal contract.
Can smart contracts become law? Lee points out that legal contracts and law are not the same - legal contracts are subject to the law. Just as legal contracts are subject to law, smart contracts are subject to the same law. He believes that smart contracts are capable of being legally binding.
Partnership with clause.io Lee explains that connected contracts fall under the umbrella of smart contracts. Specifically, connected contracts offered by Clyde & Co are built on the clause.io platform since these contracts appear as a human readable contract instead of code.
Clause.io permits user input in words and transcribes these words into code for a machine to execute. Further, clause.io allows smart contracts to be connected to legal contracts.
Use case The use-case explored was parametric insurance for a solar plant. This plant was under contractual obligation to supply a certain amount of energy per quarter – failure to do so would invite financial penalty. Thus, this solar plant purchased (parametric) insurance cover to insure against adverse weather.
The claims trigger was more than 10 days of “adverse” weather conditions (per quarter) to generate electricity i.e. more than 10 such days per quarter would trigger a payment. A precise definition of “adverse” was provided in the supporting legal contract. This example illustrates how a connected contract (smart contract + legal contract) operates.
Further information regarding this use-case may be found here.
A note regarding parametric insurance in the UK Lee points out that there is a fine line between parametric insurance and derivative contracts – the differentiator is that in the UK, the former requires an insurable interest in the asset/event of interest. Under English laws, a contract of parametric insurance does not require the insured or insurer to demonstrate the actual loss. Instead, a “valued loss” (i.e. predetermined sum assured) can be decided upon at the contract outset and this mutually agreed value is paid out as a claim.
In other geographies, parametric insurance is not recognized as an insurance contract. It should be noted that in the UK, the insurer must only establish that a loss has occurred for the claim to be paid out under a parametric insurance contract. You can read more on the subject here.
The importance of connected contracts for Clyde & Co According to Lee,
Shaun Crawford is the Global Vice Chair of Industry at EY and the chairman of Insurwave. It has been nearly a year since Insurwave has launched and since then it has won 8 industry awards. In this episode we discuss some of their exciting learnings from last year’s Insureblock’s podcast and their plans for the future.
What is blockchain? In last year’s episode, Shaun gave us a technical definition of blockchain, this time he defines blockchain in a business optic. In the next few years we are going to see a 10x growth in volume of data produced due to 5G and IoT (internet of things) devices. To help manage all of this data from various sources, blockchain is the best technology to accomplish that. Blockchain can:
Confirm the relevance, accuracy, accountability and authenticity of the data Ensure the data provenance of the data Provide reliability and security to the data
On the 25thof March, Shaun wrote a blog entitled, “Is 5G the missing piece in the corporate jigsaw” in which he discusses the enormous opportunity that 5G will bring in unlocking the potential for IoT
What is Insurwave?
Insurwave is effectively a pipe, that takes data from a shipping company, accessing that ton of data, finding relevance of that data, feeding it through to a broker, which then feeds into a reinsurer and a retro insurer in marine insurance. Basically, it brings capital closer to risk.
Insurers today are miles aware from where the actual risk is taken. Insurwave provides the relevant data to enable the insurer, the broker, and the reinsurer to come up with a better and effective product. This ultimately results in a much more effective business process.
Awards and more awards!
Since last summer Insurwave has won eight awards including the The Insurance Day Maritime Insurance Award. Shaun recognises that there are a lot of blockchain ideas, proof of concepts and promises for the future out in the market, in which a number of them will success. What Insurwave has achieved is that it has been live for 12 months now with Maersk. They have proven the worth of their core functionality and have built a lot more on top of it.
Evolution of the Insurwave team When Insurwave first launched it had a small team – Maersk, one insurer, one reinsurer and one broker. Shaun stresses that their number one client has always been Maersk. Insurwave launched with basic functionality in July 2018 with Maersk but is now rolling out the full functionality for the whole hull and machinery by June 2019 for the next panel.
Insurance broker Miller’s has joined the Insurwave panel with a new reinsurer Gard and their retro panel. They are building out new nodes to accommodate for other shippers and brokers which they will be announcing in the near future.
Corda and technology platforms Insurwave has used Corda open source to build its back-office platform and has built a lot of functionality in front end system technology as well. Shaun describes his experience of using Corda as being very good but for him the key is not so much about technology. The toughest challenge is about defining the right business process. The toughest challenges isn’t about digitising existing processes but in creating new business models and then developing the technology to support them.
Insurwave has recently run a POC (proof of concept) with EY and a large insurer to prove interoperability with Ethereum and Corda. Shaun expects there to be more interoperability in the future.
Insuwave’s partner is Guardtime. Guardtime have the KSI software which they will be using a lot more of the KSI core for complex blockchain solutions for data provenance. This will be very important as Insurwave moves to their next phase with cargo which will involve the use of thousands of sources of data from IOT devices. This will see the use of Corda with KSI and some front-end technologies to deliver on all of their objectives.
Patrick Schmid has a Phd in Economics and is the Vice President of RiskStream Collaborative (previously known as the RiskBlock Alliance). In this fascinating episode he provides an expert opinion and process for calculating ROI for blockchain applications. This is a must listen episode for anyone looking to develop blockchain solutions and need a functioning model to be able to calculate expected ROI.
What is blockchain? Patrick proposed two definitions:
Formal definition Blockchain is a distributed ledger that maintains a constantly growing list of chronologically added records in the form of blocks. Within each block the data (e.g. transactional data or smart contracts) is confirmed and verified through this decentralised consensus process. This process removes the need for an intermediary to be involved in verifying and confirming transactions. Therefore, it establishes trust without the usage of a centralised authority. This is why, blockchain is often referenced at the trust machine. It is the decentralisation of trust where the data was once stored in one location and the trust was provided by one party. With blockchain the data is broadcast to all parties within network and the entire community is providing the consensus through the protocol itself.
Informal definition Blockchain basically meshes the network with database/distributed database/ledger through encryption to provide advancements in ecommerce or transactions, or computing via smart contracts.
What is the Institute & how did its blockchain initiative start? The Institute is a 501c3 not-for-profit that was set up over a hundred years ago out of the Wharton School at the University of Pennsylvania. The Institute provides knowledge-based solutions with the goal to make the risk management, in the insurance industry, more efficient for industry participants and consumers.
The Institute came across blockchain through their existing research when Patrick was leading their enterprise research whose goal was to provide some market insights and trends. Some of the early trends coming out of this research was that the insurance industry was going to continue to undergo employment changes. For example, careers in analytics were going to continue growing whilst traditional careers were expected to either remain stagnant or shrink.
Patrick had developed an early personal interest in bitcoin, cryptocurrency and blockchain. In 2015 Patrick discovered smart contracts and R3’s emerging banking consortium. It became apparent that there was a need to develop a thought on blockchain for the insurance space. After some extensive research and discussions with numerous players in the space, Patrick made some recommendations to the senior management team to consider starting a blockchain insurance consortium in 2016. He felt that a not for profit would be perfectly suited to provide the network for the insurance industry. The Institute’s Board, which represents 40 – 50 CEOs that represent 60-70% of domestic insurance premium volume, reviewed the recommendations and supported them. Now RiskStream is not only doing this in the P&C industry but also expanding to Canada by working with LIMRAto start working on the life and annuities as well.
What is RiskStream Collaborative? RiskStream’s perspective is that DLT (distributed ledger technology) is network driven, whilst the technology is here to answer pain points that the insurance industry faces, they feel that a non-partisan arbiter is needed to bring the industry together to design, test, implement and ultimately adopt the technology.
The RiskStream Collaborative was brought forth through the Institute and is designed to be that connector. RiskStream is a 501c6 not-for-profit.
Its members lead every area of what they do. They have over 40 members from carriers, distributors, reinsurers and brokers. For example, members work with RiskStream staff to design use cases on behalf of the industry....
On the 12th of May 2019, Insureblocks went on a 2 week road trip across the United States of America. This trip took us from the International Finance Corporation in Washington D.C. to the North American Contingency Associaiton in Myrtle Beach, South Carolina. From there we headed to New York City to run a blockchain cross industry workshop at R3's offices before heading to Connecticut to run a blockchain presentation to the Connecticut Captive Insurance Association.
Throughout this trip we interviewed a number of individuals from insurance professionals to regulators and to professionals from the pharmaceutical industry:
Nicholas Hanes, Senior Vice President, Underwriting and MGA Operations at Spotted Inc. and Vice President of NACA. Philip Mershon, Senior Account Manager - Entertainment at OneBeacon Insurance Group Dempsey Lulley, Risk Insurance Administrator at WeWork Philippe Heilberg, co-Founder & COO/CFO at Arbol Inc. Flora Nanda, Senior Manager, Blockchain at Pfizer Michael Fulton, Associate Vice President, Technology Innovation at Nationwide Tomer Saar, Partner, managing director at DBI Construction Consultants and Construction Consultant Stephen DiCenso, Consulting Actuary at Milliman, Inc. and President of CCIA. Christopher Gallo, Insurance Accredited Financial Examiner, CFE at State of Connecticut Insurance Department Janeanne Lubin-Szafranski, Of Counsel at Neubert, Pepe & Monteith, P.C. Christopher Day, North America-Business Development and Sales at RapidQube Digital Solutions Dawn Ware, CEO, Ware Consulting LLC and Independent Director
Blockchain is one of many new emerging technologies alongside AI, machine learning, robotics and much more. Most insurance companies unfortunately look at these technologies in silos and thus get a limited return on their investment. BlockClaim is an exciting insurtech that had the foresight to design an offering that combines both AI, machine learning and blockchain. In this exciting podcast we had the pleasure of interviewing Niels Thoné, CEO of BlockClaim, who passionately shared his insights on the convergence of AI, machine learning and blockchain.
What is blockchain? On a high level blockchain is all about storing and processing sensitive information, like financial transactions, on a lot of different computers rather than with a single central authority. What this means is that the need for trust in a central authority is removed because if it fails the network doesn’t fail. For BlockClaim, a private blockchain is a great way to connect various actors with different systems, software or legacy IT in a super light touch way. It allows BlockClaim to gather information from all these different systems in real time without interfering any kind of workflows.
Blockchain creates a unified data format that allows you to feed that into any AI or machine learning and increase its efficiency through the use of smart contracts for automation of workflows or processes of claims for example.
The new stack
Here at Insureblocks we are great believers that the future resides in looking at emerging technologies such as blockchain, AI, machine learning, IoT, big data, and robotics as the “new stack”. Because it is only by combining them that we can really get the most ROI out of them. We asked Niels his thoughts on how the insurance industry was embracing these new technologies.
Insurers have a tendency of looking at these new technologies in a “trendy way”. Five, six years ago it was RPA, then it became AI and machine leaning and last year it was blockchain. A lot of insurers have a tendency of just following the latest technology trends which complicates things.
However Niels is quick to point out that sometimes you meet a C Level director that gets it and sees the value of combining these new technologies to help them achieve their vision. He gave the example of a CEO of a bank insurer who stated her vision of settling claims in one day and wanted to find out what set of technologies would help her achieve that vision.
Innovation department at insurance companies are also a great way for start-ups to have that first conversation. However these innovation departments are more like gatekeepers who do put you in touch with different sections of the business but they don’t have any budget or any kind of decisive authority.
Data – the new natural resource In episode 40, IBM’s 2019 Insurance Predictions, we interviewed Sandip Patel, global managing director for insurance across IBM. In podcast he stated that there is a fundamental shift in how we think of data. Where data is becoming the next natural resource, particularly in Insurance from a few perspective:
Volume of data: The rate and pace at which data sets are evolving is growing exponentially. Type of data: the nature of data is changing. 60 – 70% of the data sets such as from wearables, sensors, and drones, often referred as unstructured data sets Temporal factor of data
Data basically enables BlockClaim to make informed decisions in an automated way Blockcliam is both an aggregator of data and an enricher of it. Data basically enables BlockClaim to make informed decisions in an automated way. Claims for example can be very subjective. Recognising that claimants may lie, a claims handler has to try and reconstitute an objective reality of what happened. What BlockClaim aims to do is to automate that. They leverage external and internal data such as “dark data” to enrich the whole claim process. Dark data is any data such as PDFs,
For this week’s podcast we continue into our theme at looking at new technologies that constitute the “New Stack”. Dessa is a company that specialises in offering artificial intelligence solutions to enterprises. We had the pleasure of having Paul Brikis, insurance lead at Dessa shares his thoughts on AI & Blockchain.
What is blockchain? To define what is blockchain, or even just to conceptualist it, Paul played a little game with Walid.
Paul: Let’s pretend that we’re going to assign my phone a store value and possession determines ownership. Let’s imagine there are no other phones in the room and I’m holding the phone. If I ask you, Walid, who owns the phone, what would you say.
Walid: I would say you own it.
Paul: Exactly there's none other ones in the room. You know it's very easy to see that ownership is mine. So, let's pretend I pass the phone over to you and let's ask the same question who owns the phone.
Walid: Well technically I would say it's still you as you just passed it over.
Paul:Sure, but it's in your hands like you know you feel confident that you're holding that phone. So, we can see that the transfer of physical goods is very easy to transfer ownership. But let's play the same game, but this time let's change the rules where I'm going to take a photo of my phone and say that photo is redeemable for the phone in the picture and now let's assume that I email you that photo. Do you still believe you own that phone?
Walid:I may own the phone, but you may have sent the phone to somebody else.
Paul:Exactly, digitally things are easily reproducible. When we are transacting digitally it's hard to create trust of ownership. This has been called by economists as the double spend problem. In that in physical goods there's no way to know it's been spent twice, but in a digital world that’s really hard. The way to combat this is to establish all forms of intermediaries, so we trust that when we own these things that people say we own. You need a third party to validate that. Where blockchain is this revolutionary idea where suddenly we can transact with parties we don't necessarily need to trust, but have confidence that we're getting what the other party says we're supposed to be getting.
What is Dessa? Dessa’s mission is to help large enterprises scale AI. They strongly believe that AI is a transformative technology that companies are going to need a lot more of in the future. The company is made of two parts:
A truly world-class AI team A team of former MBB (McKinsey, BCG, Bain) consultants who specialise in helping large enterprises identify business problems and opportunities that AI can address
Dessa works in a highly regulated industries such as Telco’s, banks, investment firms, credit cards and insurance.
What is artificial intelligence (AI)? For Paul, the reason why blockchain got on the map was thanks to Bitcoin. AI got onto the map thanks to a contest in 2012 called ImageNet. ImageNet is like the Olympics of computer science challenges. In this particular challenge, computers were tasked to classify five million images.
The team from the University of Toronto combined very powerful computers with a technique called deep learning and they won the competition. This event is seen as a sort of the advent of when AI became topical. All three of those team members were recruited by Google and that when they became an AI first company.
Dessa has recruited Alex Krizhevsky, who developed the technology from that team, called AlexNet.
AI is a broad umbrella that is composed of machine learning and deep learning.
Machine learning
Machine learning is technology that essentially is improving itself and it can be used for things like predictions based on a set of data. It works in a very linear manner.
Deep learning
What’s interesting about deep learning is that in comparison to machine learning,
Susan Joseph has been working in the blockchain area for the past 4 – 5 years. As a lawyer she has consulted with the insurance industry and most recently was the North American representative for B3i, the blockchain for insurance consortium.
In this podcast we discuss two of Susan’s passion: “Innovation and diversity in the insurance industry”.
What is blockchain? Blockchain is a foundational technology that provides a highly flexible set of tools allowing businesses, governments and others to re-examine their commercial relationships. It brings opportunities for greatly enhanced efficiency and development of new products. Inherent in the technology is the ability for diverse parties to cooperate in a way where trust is brought about through cryptography or promoting diversity through the development of the technology in the belief that the widest spectrum of perspectives will foster the most valuable innovations.
On a more technical side it is an additional communication layer on the internet / web 3.0. It's based on advanced cryptography, computing and game theory. Susan likes to refer to it as a distributed value technology and for her it presents the next step in the digitization of data - both communications and assets, while the data is created transferred and stored. It has wide-ranging implications for commerce, society and behaviour.
Is the insurance industry good at embracing innovation and diversity? In Susan’s point of view, no the insurance industry isn’t particularly good at embracing innovation and diversity but that isn’t too different to a lot of industries though. Innovation, in the insurance industry, is highly regulated and particularly in the United States where you have 50 state regulations in addition to some federal ones.
Systemically it’s hard to set up innovation in this space and yet you see a demand for digital projects and easier access to products and different kinds of products. Innovation has to happen, or the industry just isn't offering what the market wants.
With regard to diversity that's a problem with every industry - services, technology and insurance. When you look at cutting-edge technology, Susan believes it's even worse. The amount of diversity in a cutting-edge area that just isn’t there. Susan think it is really interesting in that in this technology, such as blockchain, which is intended to democratise, that we need to have this diversity of thought and diversity of voices.
it's not, there's not a full-throated diversity effort let's just put it that way and I think it's really interesting in this technology which is intended to democratize, the more diverse thought and diverse voices in there that needs to happen. Because that's a population that we want to serve.
Diversity is diversity in terms of gender, types of voices, cultural and a lot more. It is an inclusion play. Plenty of studies have shown boars with three or more women really start to affect the culture and change and increased profitability. A set of diverse voices and thoughts will improve the innovation side of any company. It’s really hard to innovate in an echo chamber.
In a study by McKinsey in 2017– “Companies with more culturally and ethnically diverse executive teams were 33% more likely to see better-than-average profits.“
AM Best – Scoring and assessing innovation AM Best is a global rating agency and information provider with a unique focus on the insurance industry. On the 14th of March 2019, AM Best published a report requesting comments from market participants in the insurance industry and other interested parties on the draft of a new criteria procedure, “Scoring and Assessing Innovation.”
AM Best defines innovation as a multistage process whereby an organization transforms ideas into new or significantly improved products, processes, services or business models that have a measurable positive impact over time and enable the organization to ...
Trade associations play a leading role in educating the business community on the opportunities of blockchain. In this podcast we had the pleasure of interviewing Patrick South, Vice President of Development at the Digital Chamber of Commerce in Washington D.C. The Chamber of Digital Commerce is the world’s leading trade association representing the digital asset and blockchain industry.
What is blockchain? Blockchain is a combinatorial innovation. Think of it like a Lego bucket in which people are pulling existing Lego pieces and piecing them together in new innovative ways. Blockchain is leveraging existing proven technologies such as linked lists, asymmetric key parenting and hash functions in new and innovative ways.
Blockchain is a distributed ledger is a distributed ledger that records and maintains data in a manner that allows multiple stakeholders to securely share access to the same information in digital aspects.
In today's environment we have all these disparate databases that require constant reconciliation and messaging. A lot of existing technology is simply applying digital overlays to analog processes. What blockchain offers is the true business transformation. Instead of having to reconcile siloed databases, blockchain creates a single source of truth that enables all parties to operate from of that mutualised data store.
What is the Digital Chamber of Commerce? The Digital Chamber of Commerce is a 501(c)(6) trade association whose mission is to promote the acceptance and use of digital assets and blockchain based technologies. Through education, advocacy and working closely with policymakers, regulatory agencies and industry, their goal is to develop an environment that fosters innovation, jobs and investment.
They are made up of over 200 members:
60% are startups varying from blockchain platforms to cryptocurrency exchanges to ones operating in the security token space 40% are composed of large financial institutions, consultancies, service providers, law firms, accounting and advisory firms
The Chamber has five working groups to promote the acceptance and use of digital assets and blockchain based technologies:
Token alliance:which is co-chaired by the former SEC commissioner Paul Atkins and former CFTC chairman James Newsome. Last year this working group wrote a white a paper on what constitutes a non-security or utility token entitled – “Introducing: Understanding Digital Tokens: Market Overviews and Proposed Guidelines for Policymakers and Practitioners” Smart contracts alliance: which focuses on the existing legal framework and how smart contracts can be used to enforce that. This working group has a white paper entitled: “Legislator’s Toolkit for Blockchain Technology” and “Smart Contracts: Is the Law Ready?” Digital asset accounting consortium: as there are no accounting standings in the digital asset space. Developing accounting and reporting standards for digital assets and blockchain-based technologies. Blockchain intellectual property council: Balances the protection of proprietary information with the openness necessary for innovation. State working group: Engages with state and local governments on the regulation and implementation of blockchain technology.
US Congress engagement with blockchain The Digital Chamber of Commerce regularly engages with the Congressional Blockchain Caucus which is co-chaired by Congressman David Schweikert, Congressman Bill Foster, Congressman Tom Emmer and Congressman Darren Soto. It represents a good mix of Democrats and Republicans.
This caucus is composed of men and women who dedicate their time and energy to learning more about blockchain. In addition numerous congressmen and congresswomen attend blockchain events both run by the Digital Chamber of Commerce and by other leading industry players.
Smart contracts alliance In their white paper “Smart Contracts: Is the Law Ready?
For this week podcast we continue our theme on how to build effective governance solutions in a blockchain ecosystem. This time we had the pleasure of having Mance Harmon, CEO of Hedera join us to share his insights on how to build effective governance.
What is blockchain? At a very high level, blockchain is an evolution of database technology. In traditional database technology you can have a multi master database solution, which is essentially like having multiple copies of a same master database. It’s a replicated database with identical information in every instance. As users connect to these master databases to make updates to them you sometimes have what is called a write conflict. Meaning that the collection of all these databases need to come to an agreement on which one of those master databases was modified first. The assumption has always been that one organisation would manage all of those master databases. Whilst that may be fine in some scenario it doesn’t quite work in one where for example you’d ask Amazon to take one of its masters from its multi master database solution and give it to Google to run and administer.
What blockchain initially provided was for the first time the ability to take this multi master database solution and give away the masters to different legal entities, different organizations and do so securely. The 1st generation of blockchains, Bitcoin being an example of them, uses a very linear process. Each node in the network has a local copy of this chain and as new blocks get published the community decides which blocks to put on top of the chain and what order and everyone does that in this sort of linear fashion. For Mance this isn’t very efficient.
Difference between Hashgraph and Blockchain?
Hashgraph like blockchain is a form of distributed ledger technology (DLT). However unlike blockchain it doesn’t have a chain of blocks. Hashgraph is a graph that represents the flow of transactions, changes to the database across the network as well as an algorithm for determining which of these transactions to apply in a given order.
A hashgraph is a patented algorithm that promises the benefits of the blockchain, distribution, decentralisation and security through the use of hashing, without the drawback of low transaction speed.
While Bitcoin allows for approximately 5 transactions per second and Ethereum allows for approximately 15 transactions per second, a hashgraph can process thousands of transactions per second.
Hashgraph can achieve such speed and security because it adds a tiny amount of information on top of any transaction between databases. That tiny amount of information, or metadata, essentially keeps. A record of the last received transaction and the last one created. By taking those metadata one can build a picture of the flow of information within a network.
What is governance? Governance refers to the process that a governing body goes through to determine what the product roadmap will be? What features are going to be added to the product? When those features will go to market? What rates are paid to the nodes in the network for their participation? What the fees are for the use of the network?
Governance can be thought of by using different model points as reference points. On one end you’ve got a dictatorship model where one person is calling the shots whilst on the other you have a full democracy.
Governance council type of model A council type model is an alternative approach. Just like you wouldn’t have every person that holds a US dollar to be voting on monetary policy. However, a council of experts on monetary policy to be governing the money supply can work.
A governance council type of model is one where you have a large population that votes and a subset of the population that acts as experts of the council to making complex decisions. That is the model used by Bitcoin for example where you have 11 or 12 core ...
This is a very special podcast for us as it is our first debate format on Insureblocks. We were extremely privileged to have two titans/Jedi Masters from the blockchain community join us for this podcast. On one side we have Richard Brown, Chief Technology Officer from R3, builders of Corda, advocating for enterprises to use private blockchain systems. Whilst on the other side we’ve got John Wolpert, Team Lead at Web 3 Studio at Consensys, builders of Ethereum based blockchains, advocating for enterprises to use public blockchain systems.
Have a listen to this fascinating podcast and if you’d like for Insureblocks to organise more debates on our show, do let us know.
About Richard and R3 Richard is the Chief Technology Officer at R3 an enterprise software firm that are the founders of Corda. Corda is an open source blockchain platform designed for the enterprise world. R3 initially began as a consortium of large financial firms trying to figure out what opportunity does blockchain represent for their firms and the implication blockchain may bring to their businesses. As part of this learning exercise and exploration they reviewed a number of blockchain platforms before deciding to build their own blockchain platform called Corda. Corda is available in an open source format and it is being used by a large number of firms to solve some interesting business processes.
About John and Consensys John is the leader of a team at Consensys called Web 3 Studio. Consensys is a company that is dedicated to building a platform to enable people to build on the Ethereum blockchain. John’s Web 3 team focuses, as he puts it, “on novel unexpected and exciting use cases that can help developers really get behind blockchain and Web 3.0”
Previously John used to be the Global Head of Products at IBM’s blockchain and one of the cofounders of Hyperledger. However, John, doesn’t define himself as a Hyperledger guy or an Ethereum guy but more as a “stateful internet” guy. He is a big fan for pushing the managing of states in a decentralized manner.
What is Blockchain? - John According to John, blockchain is just one part of an evolution of the internet towards a stateful internet. In other words an upgrade to the present internet that is essentially led by companies soloing servers sitting around controlling state, memory and business logic. “There won’t be one chain to rule them all.” But now, I believe that in order for the Stateful Internet to avoid descending into a fight at the gates of Mordor, we do in fact need a trustless, permissionless, decentralized root chain playing umpire. This can be done today in a decentralized manner similar to how we experience passing messages right now with packets of information going back and forth between different routers. However, managing state is a lot harder than managing passing messages. As messages go through a router, a router doesn’t have to remember what state it was before, what state it is now and coordinate that state with billions of other routers. Ethereum offers the ability to manage state between routers in a decentralized manner.
What is Blockchain? - Richard For Richard, blockchain is a technology that enables us to do something we couldn’t have done before. It enables multiple different computers, controlled by different organisations that don’t necessary fully trust each other, to be in sync and to be in consensus about some facts their owners care about. Whether that’s a crypto, an insurance policy or anything else. To be able to know that what you see on your computer your counterpart sees the same thing. This works without any one party having undue influence or power over the other and without everybody having to cede control to some central entity or some cloud operator.
Background to this debate On the 3r of January 2019, Consensys published an article entitled “Busting the myths of private blockchains”.
For the uninitiated, governance may seem like a side note. But in this exciting podcast, Thomas Cox, Chief Governance Officer at StrongBlock, is here to talk to us about “Governance 101 in a blockchain ecosystem”. Prior to StrongBlock, Thomas worked at Block.one which raised $4 billion in an ICO and launched the crypto currency EOS. He helped them set up their governance infrastructure. It was the first blockchain technology that allowed for governance to be done on chain in a variety of different ways.
What is blockchain? A blockchain is just a ledger that has very serious promises around safety and security. When something is recorded on that ledger you can’t deny that it was there, you can’t change it and if you try to you will leave fingerprints of your attempt. This now creates a shared source of trust with players within your ecosystem. So instead of having insurance carriers and brokers disputing each versions of their respective truth you now have a shared system that all parties can be working from with a single shared version of the truth. This means as enterprises we can stop struggling over whose data to believe and now our struggle shifts into how do we make the data we all work from better.
What is governance? Governance is essentially composed of three core statements:
It’s making collective decisions Carrying those decisions out Tweaking the process for making the decisions
Thomas Cox, recommends anyone interested in governance to read James M. Buchanan, The Calculus of Consent: Logical Foundations of Constitutional Democracy.
What is a consortium? A collective or a consortium is any group that gives up some of their individual power to the collective, to the entity that they're joining. Such that they can if they lose the vote, they're still bound by the majority decision and they can't opt out.
For example, in a consortium you have to figure out the following:
Who is in and who is out? What are the criteria’s for joining? How to record proof that someone has joined and if there’s a free to joining how do you record proof of payment? What are the rules members of the consortium have to abide by? How is that proved? How to normalise the data definitions by establishing common data standards? How to harmonise the data flows and processes? So that for example rekeying of information isn’t necessary anymore.
If you’re going to play in the blockchain space, you’re most likely going to be doing it within a consortium and you’ll find that all of the work that you do to set up a consortium is about 90% the same work you have to do to set up a blockchain between your organisations.
You can download his presentation on: Politics and Governance of Consortium Blockchains as delivered 23-Jan-2019 Seoul
If the above represent 90% of setting up a blockchain system then why not do the extra 10% of effort to create a shared ledger where you can have that shared truth between all the parties?
Consortias aren’t something new. When people have very risky endeavours, they build consortia’s to find wants tackle the endeavour together. All blockchain is doing is helping us automate and smooth something that we've been doing as human beings for thousands of years. We have a new tool to solve an old problem
Thomas cannot imagine a future in which a consortium forms and they don't set up a blockchain to formalize the operation of that consortium. Thomas cannot imagine going to all that work of really setting it up a consortium properly and having it work well and not taking the extra ten percent of effort to implement it in an automated distributed ledger that just dramatically reduces the friction of day-to-day business operations.
The three phases of governance? Pre-constitution phase In the pre-constitution phase decisions are made to determine how is the consortium going to be structured. For example it could be in a unicameral,
For this week’s episode, we spoke to Kshitij Nangia, Director – COO Strategy at Aon, and Michiel Berende, Inclusive Insurance Lead at Etherisc. Our guests provide us with an introduction to the notion of inclusive insurance along with insights as to how blockchain can help increase insurance penetration in emerging markets such as Sri Lanka.
Etherisc has teamed up with Aon and Oxfam in Sri Lanka to offer small hold farmers weather-based crop insurance.
About our guests Michiel started out as an underwriter at Interpolis, a Dutch insurance company. He moved on to work closely with the DHAN foundation to explore micro-finance and microinsurance solutions within India. As with most blockchain enthusiasts, he discovered Bitcoin in 2013 and was intrigued by how Bitcoin could facilitate small transaction values at a relatively low cost.
Kshitij has a background in strategy consulting. Prior to joining Aon in 2014, he worked in India and Chile as a strategy consultant in financial services. He is currently part of the COO strategy team at Aon.
About Etherisc and Aon Etherisc is an InsurTech firm that focusses on blockchain applications within the insurance industry. The firm aims to offer “Insurance as a service” by becoming the Linux for insurance. The first phase of this goal went live recently through the launch of the General Insurance Framework (GIF) – an open-source codebase for Ethereum based insurance applications (dApps), which may be accessed via GitHub here.
Aon is a diversified professional services firm which provides risk, retirement and health consulting. Aon is one of the “Top 3” insurance brokers.
What is blockchain and how does it work? According to Kshitij, blockchain is digital ledger shared across parties. It has in-built audit trail that provides an immutable record which induces trust between parties. He believes the real power of blockchain can be harnessed when combined with AI and smart contracts.
Michiel adds on that blockchain permits P2P transfer of digital assets without any intermediary. The decentralized network is held together by nodes who process transactions in return for some incentive.
Inclusive insurance According to Michiel, inclusive insurance (or microinsurance) refers to any insurance product offered to low income clients. Roughly 1.6 billion people do not have access to microinsurance products. He provides some alarming statistics – insurance coverage ratios for some regions are rather low - Latin America stands at 8.5%, Africa at 5.4% and Asia – 6.9%.
Michiel estimates that there are 500 million small hold farmers globally without access to any insurance and index-based agriculture insurance, which is a good fit for blockchain, may be a solution to increase insurance penetration.
Project origins and background Oxfam has been working on-ground in Sri Lanka with local insurer SANASA Insurance Co providing farmers with crop insurance. In March 2018, Michiel attended a conference where he spoke about agricultural insurance using blockchain and the impact that blockchain can have on the insurance value chain. It was at this conference where Oxfam and Etherisc expressed an interest to jointly explore blockchain for crop insurance.
Later in 2018, Michiel met Hugo Wegbrans, Chief Broking Officer – EMEA at Aon. Following this discussion, Aon expressed an interest in pursuing the concept of a low-cost agricultural insurance product which uses blockchain to distribute insurance risk.
Michiel highlights that the project will begin by covering 3000 farmers. Out of a total of 800,000 small hold farmers in Sri Lanka, roughly 65,000 have access to agricultural insurance. The ultimate goal of this project is to provide every small hold farmer in Sri Lanka with weather-based parametric crop insurance.
Why blockchain? The argument in favour of using blockchain for providing crop insurance in Sri Lanka is as follows:
This is a bonus podcast as Insureblocks was invited to attend the All Party Parliamentary Group on Blockchain at the House of Parliament on Monday the 18th of March. It was a fascinating session hosted by MP Damien Moore with opening remarks from MP and Minister for the Digital and Creative Industries Margot James and blockchain advocate MEP Emma McClarkin.
Presentations were made by IOTA on Global Trade, by Oracle on the food supply chain, Everledger on the diamond supply chain and finally Lloyd’s of London, on behalf of the London Market Target Operating Model (LMTOM) program - Insurance, Claims and transaction settlement.
We interviewed a number of the delegates by asking them what they were hoping to achieve at this event and in their opinion how the UK government could support blockchain.
We would like to thank the following participants for participating to this “Pulse” episode, in order of appearance:
Daniel McCoy Andrade, head of business development at Photocert
Emma McClarkin, Member of the European Parliament, East Midlands
Jens Munch Lund-Nielsen, Head of Global Trade & Supply Chains at IOTA Foundation
Vikram Kimyani, Cloud solution architect at Oracle
Najib Rehman, Data Strategy Lead at FarmaTrust
Areiel Wolanow– Managing Director of Finserv Experts
Manreet Nijjar, Co- founder & CEO, Truu
That’s it, this concludes this episode. What kind of support do you think the UK government could give to blockchain? Feel free to add your comments on Insureblocks, Twitter or Linkedin.
Note: We would like to thank both Areiel Wolanow and the Big Innovation Centre for the kind invitation.
In this exciting podcast, our 50th, we had the great pleasure of having Magda Ramada Sarasola, EMEA Insurtech Innovation Leader, at Willis Towers Watson return to Insureblocks. In this fireside chat we discussed the emergence of a new stack – the convergence of blockchain, AI, IoT, big data, machine learning and robotics.
This podcast sits at the epicentre of a pivot we’re doing at Insureblocks for 2019. In addition to reporting stories on blockchain within the insurance industry, Insureblocks is going to embrace three new themes:
Cover new industries: finance, supply chain logistics, food and agriculture, automobile and transportation, and healthcare. The aim is to investigate their blockchain learnings and facilitate the sharing of best practice across industries Investigate how blockchain sits with this new technology stack that includes AI, IoT, machine learning, big data, and robotics. We believe that while they’re noteworthy the potential these technologies have individually is limited but once combined as a stack there is the “multiplier” effect to their potential Deep dive into the legal and regulatory blockchain environment and of course best practices for establishing effective governance within blockchain networks
What is Blockchain? In the initial days blockchain was often referred to as a shared excel database. Of course, now we know that blockchain is a lot more than that. Today blockchain can be looked as this ledger that participants who don’t know each other and don’t necessarily trust each other can transact without the need for an overseeing central actor. Transactions of value can be:
Exchanged without being corrupted or changed Validating their authenticity and confirm that whoever is sending the value actually owns it
Consequently for Magda, blockchain is a sociological innovation. It enables peer-to-peer markets to work without centralised authorities. This has impact not just onto the peer-to-peer world but also onto the enterprise and business world whose ecosystems are highly dysfunctional. It gives enterprises peer-to-peer enablement which makes blockchain so interesting.
It’s a new governance paradigm that changes the way we organise markets and transactions of value in the broadest sense of the word (i.e. digital and physical assets).
Data the lifeblood of insurance August last year, Insureblocks interviewed Bill Pieroni, CEO of ACORD– (Ep. 21 ACORD: data standards for blockchain in insurance) where he stated “Data is the lifeblood of the insurance industry, which fundamentally works by examining data to quantify risk”. Over the last few years the nature, type and amount of data that is becoming available to the insurance industry has radically changed. Sandip Patel, Global Managing Director for insurance from IBM, stated that on Insureblocks that “Data is the new natural resource” and he mentioned three important points:
Volume of data is changing – 2.5 quintillion (a thousand raised to the power of six {1018}) bytes of data is produced on a daily basis (as reported by Forbes in May 2018) Type of data from both structured and unstructured Temporal factor of data
Source: Domo - Data Never Sleeps 6.0
Magda recognises the “mind-blowing” amount of data that is being produced on a regular basis that it is very difficult to define what the actuarial value of that data is. Insurance industry was quite late to embracing big data. One of the reasons was that they didn’t have enough transactional data at a high frequency like ecommerce does for example. That has changed, over the last few years, as the insurance industry recognises that there is a lot of data that it doesn’t own that is being generated by other players that has been proven to actually add value in assessing the riskiness of an individual or of a certain asset / situation.
However due to the large amount of data that is produced it is important to have a clear data strategy t...
The word blockchain can create a whole range of emotions ranging from excitement to fear. In this podcast we had the pleasure to have Mark Simpson, Head of Consultancy at Armour Risk, take us through the Psychology of Blockchain.
What is blockchain? Mark prefer to lift it to describe what Distributed Ledger Technology is (of which blockchain is a type of DLT)
Simply - Digital and decentralised books of record
A bit more complex - DLT is a database held and updated independently by each participant (or node) in a network – the distributed bit.
Updates to the ledger are independently constructed and recorded by each node.
The nodes then vote on these updates (different methods) to ensure that the majority agrees with the conclusion reached. This voting and agreement on one copy of the ledger is called consensus, and is conducted automatically by a consensus algorithm.
Once consensus has been reached, the distributed ledger updates itself and the latest, agreed-upon version of the ledger is saved on each node separately. The immutable bit.
The DLT attributes are
Distributed Transparent & change evident Consensus driven Immutable record Tamper proof Cryptographically secure
In three words - Digitally Lifting Trust Fear and DLT as a catalyst for change In many ways DLT is like other forms of technology in that it is a catalyst for change, but as it challenges from more than a tech point of view it brings other challenges.
DLT challenges paradigms; values, identity and this can be tough.
According to Mark our view of the world and decision making is in fact distributed and doesn’t just occur in our head. As a coach one of the methods Mark has trained in was multiple intelligences (or mbraining for short).
Mbraining developed by Grant Soosalu & Marvin Oka used findings in Neuroscience that show we have three functioning brains in our head, heart and gut respectively. Using these findings as the basis for further behavioural modelling research, they unpacked some of the unconscious processes we use with our head, heart and gut.
It is a body of knowledge that has really helped from a change perspective and is being used in a framework Mark has developed called Resilient Changing.
Mark wrote an article on the topic of change a couple of years ago: https://www.linkedin.com/pulse/meeting-challenges-change-part-1-mark-simpson/
In summary we have
The head brain – highest expression - creativity
Cognitive Perception- cognition, perception, pattern recognition, etc. Thinking – reasoning, abstraction, analysis, synthesis, meta-cognition etc. Making Meaning – semantic processing, language, narrative, metaphor, etc.s
The heart brain – highest expression is compassion
Emoting– emotional processing (e.g. anger, grief, hatred, joy, happiness etc.) Values – processing what’s important to you and your priorities (and its relationship to the emotional strength of your aspirations, dreams, desires, etc.) Relational affect – your felt connection with others (e.g. feelings of love, hate, indifference, compassion, uncaring, like, dislike, etc.)
The gut brain – highest expression - Courage
Core Identity – a deep and visceral sense of core self, and determining at the deepest levels what is ‘self’ versus ‘not-self’ Self-preservation – protection of self, safety, boundaries, hungers and aversions Mobilisation – motility, impulse for action, gutsy courage and the will to act
Fear and blockchain
What is fear - An unpleasant emotion caused by the real or perceived threat of danger, pain, or harm?
What could this mean from a blockchain perspective?
Head brain All this new terminology – I don’t understand it, or I don’t want to admit I don’t understand it – examples – DLT = Blockchain = Bitcoin = environmental damage, money laundering,
There is a lot of evidence that many people in organisation do not understand blockchain an...
Welcome to another episode in ours News Flash series, where we share the latest developments in the blockchain space, straight off the press. Today we are joined again by David Edwards, CEO of ChainThat, who previously featured in Ep.8 – Building a Blockchain PoC/Pilot, and we welcome Rebecca Oliver, business development director at ChainThat, to Insureblocks for the first time. About ChainThat David Edwards formed ChaintThat in 2015 with the sole focus to see how blockchain distributed ledger technology can impact commercial speciality insurance and reinsurance. Since there early start ChainThat cover the entire value chain from the placement process to technical and financial accounting, settlement, claims administration and facilities, tax and regulatory reporting. ChainThat has received investment from Xceedance and has now grown to about 30 staff.
Launching the world’s first technology-driven insurance and reinsurance risk and capital exchange ChainThat’s new initiative is to launch in Bermuda the most efficient reinsurance risk and capital exchange in the world called the Bermuda Risk Exchange.
Why Bermuda? Bermuda, is home to the ILS and a lot of captives, it has a very proactive government that wants to drive innovation in Fintech and Insurtech. The regulars are one of the leaders with their digital asset regulations and the tokenization of assets. Bermuda has a great community spirit that is keen to innovate and bring a blockchain based solution of the ground.
Scope of the Bermuda Exchange - Source: ChainThat
From a marketplace platform to a risk exchange ChainThat is offering a marketplace platform that will morph into a risk exchange. Initially the platform will be supporting existing back-office processes such as the placement of risk to supporting the technical and financial account and then moving into the settlement process and claim’s agreement process. The aim is to remove frictional costs to drive down costs to make insurance more efficient that it is today. The platform is built on Corda and uses the ACORD data model for all transactions.
Impact of current inefficiencies - Source: ChainThat
David hopes to offer this risk exchange to other insurance marketplaces by finding one regulatory area that has high trading volumes and lots of participants such as Singapore, Dubai, Zurich and New York.
Why blockchain? The challenge centralised systems have to running a marketplace for insurance companies is that the centralised entity has to store the data and manage the system on behalf of the marketplace participants. However, the insurance business model is a peer-to-peer one, just like they used to in the Lloyd’s coffee shop. That’s what blockchain technology enables, it gives participants back the control of their data and their process. It provides the guarantee that you’re looking at the same version at the exact same point of time.
Education & Customer Centricity At the beginning David concedes that there was a lot of misinformation about blockchain and distributed ledger technologies. So they had to spend a considerable of time educating all the main parties (brokers, reinsures and regulators) and engage with them on a one-to-one basis. This meant that ChainThat had a customer centric approach to defining the exchange and ensured that the participants within the exchange helped to shape and finalise the final outcome.
Brokers and disintermediation? David believes that individuals who believe that brokers will be disintermediated by blockchain lack the understanding of what the broker really does. For David the brokers are the market makers, they provide the risk management services to the customers and they provide back office services. It’s the back-office services that blockchain is looking to streamline. Not just for the brokers but for all insurance entities. By improving efficiencies in back-office services then brokers can deploy their resources ...
For most firms getting a good understanding of what is blockchain and its possible use is a challenging exercise. Once that has been established a further decision has to be made regarding whether or not to build their blockchain solution on a public or private blockchain system.
Within the first two weeks of January 2019, both the public and private blockchain proponents expressed their views on the merits of their systems. For this podcast we had the pleasure of having Richard Brown, Chief Technology Officer at R3, the builders of Corda, a private blockchain system, express his views.
Who is R3? R3 is an enterprise software company that produces an open-source blockchain called Corda. Corda was first launched in 2016, initially for financial services sectors, mainly banks. However, it was the insurance industry that helped broaden Corda’s view and utility as a blockchain for other industries. Now in 2019, Corda has launched the 4thversion of Corda which has already been adopted by finance, insurance, healthcare, government, and the oil and gas industry.
What is blockchain? What is interesting to know is that in the early days of R3 they didn’t begin with the ambition or the intention of building a blockchain platform. R3 began as a collaborative exercise between a large number of large firms to try and figure out what is blockchain and what the opportunities and implications it might have.
The conclusion they came out with regarding “What is blockchain?” is that blockchain is a technology or an approach to building systems that allows multiple parties who want to transact, but who don’t fully trust each other to do so in a way that allows each and every one of them to know what they see on their computer is exactly the same as what their counterparts sees on theirs. This massively drives down duplication costs, errors, inconsistencies and the need for reconciliation which allows firms to focus on solving business problems and transacting with their counterparts. Essentially, once you know what you see is accurate, that you know the information you’re working on is correct, you can make decisions more quickly and with more confidence.
Busting the myth of private blockchains - Consensys
On the 3rdof January an author at Consensys, an Ethereum based blockchain technology company, published a blog post entitled “Busting the Myth of Private Blockchains”, whose main point was to explain why enterprises shouldn’t use private blockchains in business: Business networks need resilience, interoperability, permissioning, and privacy to succeed. These requirements, however, are out of scope for proprietary distributed ledgers, let alone traditional database technologies. The Ethereum blockchain’s granular privacy layers and public-first approach make it a powerful enterprise solution for organizations that need the flexibility of an in-house platform and that want the global reach to participate in economies of scale.
The Rebutal – Busting the myth of public blockchains for business On the 14th of January, Richard wrote a blog post “Busting the myth of public blockchains for business”. In this blog post he debunks three of the main arguments the Ethereum community makes on why business should build on Ethereum:
Ethereum has the largest community of developers. For any firm new to blockchain deciding which platform to use can be complicated. A common argument used by the Ethereum blockchain community was to go to the platform with the most developers. Ethereum has the most advanced tools and the best technology. This argument essentially builds on the first since Ethereum has the largest community of developers. Anchoring your private transactions onto a public chain is more secure. Public chains are more immutable than ‘insecure’ private networks and so you should ‘anchor’ your private transactions to prevent malicious parties rolling back your transactions behind your back.”
Often not considered as “sexy” in the blockchain world, but building effective governance is probably one of the most important tasks in building a resilient blockchain ecosystem. For this podcast we were very privileged to have James Carlyle, Head of Network and Operations at R3.
What is blockchain? Blockchain is a distributed ledger system that makes a fundamental promise which is “what I see, is what you see”. The idea being that although people share a common view, they actually have their own copies of data and that matter for numerous reasons such as the one of control. . It means with a copy of their own data and the promise that what they see is what the other side sees, that they don't need to rely on intermediaries.
What is governance? I always say if you haven't figured out who is in control, it's because you haven't been looking hard enough; there is someone there Governance is about control first and foremost. What had initially attracted James to Ethereum was the idea of an unstoppable world computer where no one was in control. The initial bitcoin and Ethereum community were people who believed in small government or not government and perhaps they thought that these systems came without control. However James view is “I always say if you haven't figured out who is in control, it's because you haven't been looking hard enough; there is someone there”.
R3’s initial governance for running a consortium In R3’s early days it was solely focused on running a consortium and the consortium was there to explore how blockchain technology could be used in finance. Right from the start R3 set out to encourage participation and collaboration, which is absolutely fundamental for blockchain, and thus governance became important from the very start.
In its early days R3 had a steering committee that decided what it should focus on. A steering committee had representation from every one of the 42 initial bank members of R3. One of the first things the steering committee decided to do was for example to set up an architecture working group and the architecture working group had its own governance.
The architecture working group’s governance was comprised of leading and chief architects from banks thinking about the right technology choice for distributed ledger's in banking. But governance has always mattered with these collaborative and heterogenous groups.
The Corda Network When Corda was first designed its founder imagined a platform in which people could use Corda to manage agreements with each other for any business between any businesses and at any time… ie. the corda network. This can be thought of as an internet of Corda nodes. Corda nodes that are connected together and across which business transactions can take place.
In the initial days of Corda most groups of banks and other companies wanted to deploy their blockchain software together in the form of many consortiums who weren’t necessarily connected. Corda’s original vision of a corda network couldn’t be achieved in this manner. The reason is because each network per application has its own boundary of trust and that means that what happens in that network is trusted within the network itself, but it isn't trusted by anyone else. Each network has a “trust route” where all of the digital signatures and so on can be traced back and it's not possible easily at least to bring the advantages of blockchain across the boundary of one network to another.
That's because the provenance for example which is supported by things like the digital signatures and the hash chains and everything else, that provenance doesn't move across boundaries very easily.
If we take the analogy of two villages who want to trade with each other. In the real world what they need is a common trust boundary and that trust boundary is provided by things like language, a set of laws and currency. For example, they can trade together,
For this episode we were fortuitous to reconnect with Dante Disparte Founder and CEO of Risk Cooperative to look back on how blockchain has evolved in the insurance industry in 2018 and what we can expect for 2019.
What is blockchain? For the insurance industry, Dante describes blockchain as a bordereau or a ledger that exists simultaneously in an exact form across multiple distributed computer systems. From the outset this creates a level of resilience, a level of tamper proofing that you don’t get from existing technologies today.
Retrospective of blockchain in the insurance industry in 2018 “Still the beginning” “Still the beginning” is how Dante would characterise blockchain in the insurance industry. In spite of Bitcoin recently celebrating its 10thanniversary, it’s really only been in 2018 that we started seeing large scale enterprise tinkering with blockchain technology.
In January 2018, Dante penned an article “One Thing Is Clear From Davos, Blockchain Is Out Of Beta” in Forbes, where he stated that at least 50% of the Fortune 500 were embarking in deep experimentation with blockchain. 2018 was the year of orientation, and Dante believes that 2019 will be the year of experimentation at scale. 2020 would see the much broader adoption of the technology across asset classes and across industries.
Consortiums and competitive advantage The most mature and evolved model in the insurance industry are the consortia at B3i and the RiskBlock Alliance. This model allows a risk averse industry, such as insurance, to understand the technology and follow their peers in getting basic POCs and use cases.
Dante’s personal view of the world is that the consortia approach amounts to co-opetition which is tantamount to having Amazon partner with Walmart and JC Penny’s (For the UK: Tesco partner with Sainsbury, Asda and Lidl) in building ecommerce platforms. For Dante there is a genuine opportunity for insurers, brokers and others in this industry to leverage emerging technologies like blockchain and others to get a competitive advantage. Firms that really embrace those technologies, instead of limiting it to back end efficiency plays, will really take a lead over their competitors.
In episode 23 “Blockchain from an Allianz perspective and lessons learnt” Bob Crozier, Head of Global Blockchain Centre of Competence at Allianz. Pointed out that “B3i is not about getting a competitive advantage. It is for the industry and by the industry and its goal is to use blockchain to address industry pain points, help members reduce their cost base and make customers’ lives easier.”
Whilst Dante agrees that there is value in such consortia his issue is that the strategic challenges the insurance industry faces require competitive dynamics than the consortia model doesn’t allow for. The average expense ratio is between $0.30 and $0.50 on every dollar of risk capital.
If a firm tries to become more efficient to risk allocation and risk pricing but yet everybody in the insurance industry is following the same model in leveraging technology in exactly the same way, that firm’s potential net gain has been washed away.
Opportunities for Innovation – Insurwave Style Insurwave is a great example of opportunities for innovation that is triggered by the buy side of the market, especially when you are a Maersk with enough buying power and clout to force the insurance industry to innovate.
You can hear more about Insureblocks from a Maersk perspective, EY perspective and insurance perspective.
Need for Digital Transformation “Where the internet was a disruptive technology in every sense of the word, blockchain is an augmenting technology” Blockchain isn’t meant to disrupt or displace the core function of the insurance industry, after all what is an insurance industry but a promise to pay. Blockchain is a technology that is here to amplify the trust.
Maersk has a fortuitous balance sheet which in some wa...
In this week’s episode we explore how can we automate the claims process with blockchain. Our guest for this topic is Bobbie Shrivastav, Co-founder and Chief Product Officer at Benekiva. Bobbie has 15 years experience in the technology field. In 2015, in addition to becoming a parent Bobbie started working on Benekiva after realising all the inefficiencies in the insurance industry.
What is Blockchain? Blockchain is magic? That magic pill that we have all been waiting for? Bobbie describes blockchain as a ledger of transactional records that is permanent and immutable, i.e. it can’t be changed. In addition it is distributed across a permission based or permissionless based blockchain and is append only.
What is Benekiva? Benekiva is a technology platform that is here to bridge the gap between carriers, policy holders and beneficiaries via claims automation, asset retention and data management. Benekiva claims to be the only stand alone claims platform for life and annuity that focuses on the customer.
Challenges of the existing claims process? In 2016, Bobbie heard a stat that 68% of life insurance goes unclaimed in the United States. According to NerdWallet and USA Today, there is $7.4 billion of unclaimed life insurance in the US alone.
This staggering number is due to the fact that what is wrong with the existing claims process is that it is still in paper and file mode. For the most part the work flow is passing paper and files. It is a process full of friction that generates many barriers for beneficiaries to successfully receive a payout.
Bobbie highlighted the four main problems:
Inefficient process Legacy systems As most life insurance policies are filed in paper format it doesn’t enable for a digital kind of communication with the policy holder for updating their details such as their beneficiaries. Unclaimed laws prevent insurance companies to keep the money so they have to engage in costly investigative exercises to find the beneficiaries of the life insurance policy.
How have carriers tackled this problem to date? Up to now most carriers’ strategy for addressing those issues has been through back end admin system upgrades. Whilst there is no issues with updating an insurance company’s core systems, it isn’t an update that has a fundamental impact on claims processes. As it also takes on average 2 – 5 years to do those updates, claims improvements haven’t happened. Additionally as some carriers look at claims as an expense centre, they don’t always invest sufficiently into it to update them.
Benekiva can integrate with insurance companies current systems and also into the updated admin systems once the update is complete. In the meantime Benekiva can start pulling data from legacy systems and provide immediate customer experience improvement. Even if the data is stored in a paper format, Benekiva is able to digitise its content.
Blockchain Benekiva started looking at using blockchain in two use cases within a private blockchain:
Immutable ledger – provide an audit trail of the claim process from the moment the policy is generated to when the payout is made “Time travel capability” – enables querying at any point in time instantly
Bobbie recognises that this could have been done without blockchain. However, Benekiva understands the importance of being at the cutting edge of technology and to start experimenting with blockchain in order for the future to explore building a consortium.
From a customer experience side blockchain can help guarantee integrity and once the consortium model is enabled it will be able to service the beneficiary very efficiently with the potential to significantly reducing this stat of 68% unclaimed life insurance.
Benekiva’s blockchain has been developed by Fluree.
What does the future look like? Making the claim process as seamless as possible is Benekiva’s focus for the next few years.
Last week we had the pleasure of talking to Dr. Markus Kaulartz, lawyer at CMS Germany, discuss with us the very hot topic of Blockchain & GDPR. We will try to answer the question of how does GDPR, drafted in a world in which centralised and identifiable actors control personal data, sit within a decentralised world like blockchain? Markus is the co-author of "The tension between GDPR and the rise of blockchain technologies".
Markus works in the IT law department of CMS Germany with a focus on innovative topics such as blockchain, AI, cyber security and all the data protection issues. Previously to becoming a lawyer, Markus used to work as a software developer.
What is Blockchain? From a pure legal point of view there are two aspects:
Blockchain is a database which is distributed and synchronised, whose data cannot be deleted. This definition however is controversial within some quarters as blockchain isn't considered as a database but it is used to simplify defining it for a non-IT audience. Blockchain enables us to move digital assets. This is very important because a receiver of a digital token for example will always know that the sender of the token doesn't own it anymore. In other words the tokens transfer of ownership emulates the transfer of ownership of real life offline assets. If we look at the transfer of ownership of paper share certificates they presently use a bank as a central intermediary to help identify who is the present owner of a share. In a blockchain world we can theoretically eliminate the need of the bank.
What is GDPR? General Data Protection Regulation (GDPR) is a regulation in EU law on data protection and privacy for all individuals within the European Union and the European Economic Area. It was enacted in May 2016 but only applied from May 2018. It replaced the former EU Data Protection Directive with a big difference that it applied directly to the member states of the EU without the need for it to be transformed into national laws. The other big difference of GDPR with the former EU Data Protection Directive is the amount of the fines. Under GDPR the fines are up to 4% of the global turnover of a company.
What is key is that GDPR also applies to companies outside of the EU that works with the EU. For example if you're an Indian or American company who offers services to EU citizen you will have to comply with GDPR regulation.
Personal Data & Application of GDPR
GDPR only applies where personal data is being processed. Personal data is defined as any information relating, directly or indirectly, to a natural living person, whether the data identifies the person or makes him or her identifiable.
Article 4 of GDPR defines Personal Data - "as any information relating to an identified or identifiable natural person (‘data subject’); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person."
The key implication is that a person, not a company, can be identified or identifiable. Being identifiable means you don't necessarily need to have their name, or address of the person, it suffices to have their unique ID and even their IP address. In a blockchain world the public key is considered as personal data as it is related to an identifiable person. Having any of these identifiable data points means that GDRP applies.
If GDPR applies an assessment needs to be carried out to identify which obligations are applicable:
Inform data subjects with what to do with the data Maintain records of processing activities Implement technical and organisational measures Review in which country the data is stored (i.e. EU or non EU)
Last week we had the pleasure to talk to Hugh Karp, founder of Nexus Mutual, about their insights on how blockchain and smart contracts can be used for building effective insurance mutual. This is Hugh’s second appearance on Insureblocks as he was a guest blogger last September where he penned a post on “Public Blockchains in Insurance: Do incumbents need to worry?”
What is Blockchain? Hugh believes it is more interesting to focus on what the technology enables instead on focusing on the technical description of it. Blockchain gives a shared view on some sort of information, so that everyone can agree on the information and that it can only be changed by playing by the rules.
Examples of such information are account balances and the rules could be a combination of smart contract logic and consensus process to add new information to the blockchain. In Bitcoin that consensus process is mining for example.
Once we have shared information that all parties can agree on, and self enforcing rules, we can coordinate human activity in ways we couldn’t do before. What is key is that this can now be done more efficiently than ever before and without a central regulator.
Why Mutualisation? Mutuals are the original insurance structure. They arose because communities recognised that they had a shared common risk and that they would be more resilient if they spread this risk out within the group. These communities would pool resources together and decide as a group when a claim will be paid. If no claims were made then all the members benefited.
This is a stark difference to traditional insurance companies whose interests aren’t aligned to those of its customers. Shareholders driven by profit by not paying out claims. Mutuals are member led and have a shared goal thus reducing the risks for conflicts of interest.
So what about regulators? Aren’t they meant to reduce those conflicts of interest? Hugh believes that in well developed countries that is the case but it comes at an administrative costs. In developing countries though many people don’t always have a reliable legal and regulatory system on which they can rely on.
What is Nexus Mutual? Nexus Mutual uses the power of Ethereum so people can share risk together without the need for an insurance company... ie bring back the true form of mutuals where individuals contribute to an insurance like entity and group together to protect themselves. Nexus Mutual uses blockchain to reengineer the business model.
The role blockchain and smart contracts play in building a mutual? How does it help to scale trust and capital? Mutuals have traditionally struggled to compete with shareholder insurance companies. Expanding outside of their original community group is challenging for a mutual. Hugh exemplifies this problem with an example of where one village may not trust the elders from another village to pay out their claims. Thus blockchain can be helped to scale out trust because instead of having to trust that other group of people you simply have to trust that the code works as it is intended.
The other, less well-known issue, that mutuals face is the scaling of capital. Due to how they are structured, mutuals can only raise money from their membership base, and have limited access to capital markets. As insurance is capital intensive it does put limit a mutuals growth.
Hugh believes that due to their decentralised characteristics mutuals can only be built on a public blockchain (e.g. Ethereum) instead of a private one (e.g. Hyperledger and Corda). This ensures that the funds are collectively held on a smart contract instead of in a central location. Member driven and member owned.
Tokenisation As Nexus Mutual is using smart contracts on the Ethereum public blockchain they can tokenise membership rights of the mutual which allows an increased level of flexibility on how they can raise capital. In other words the rights of the members (e.g.
For this week’s episode, we are joined by Olivier Rikken, Director of blockchain and smart contracts at Axveco– a consultancy firm based out of the Netherlands focusing on sustainable innovation. Olivier last spoke to us in April regarding smart contracts – this episode focuses on the legal aspects of blockchain and smart contracts.
Since April last year, Olivier has been involved in a wide range of blockchain related projects which include being part of the ISO World Standards working group on smart contracts. In addition to his role as a start-up coach for blockchain-enabled start-ups within and outside the Netherlands, Olivier is part of the governance group for the Dutch Blockchain Coalition and is a guest lecturer at three universities in the Netherlands.
Blockchain in two minutes According to Olivier, blockchain is a decentralised database – a shared administration system where everyone who wishes to join may do so and participate (reading, writing and validating content.) There is no need for a trusted 3rdparty to monitor the database.
Publication of the “Legal Aspects of Blockchain” Olivier has recently co-authored a book titled ‘Legal Aspects of Blockchain’ – this book was a product of a collaboration between the Dutch government and the UNOPS (United Nations Office for Project Services.)
Olivier was involved in a working group that published a report on the legality of smart contracts in December 2017. This report drew the attention of the UN and Olivier was subsequently approached with a proposition to co-author a book on smart contracts together with experts from institutions such as MAS (Monetary Authority of Singapore), MIT amongst others.
A powerful opening “The fourth Industrial Revolution is underway and organizations in the public domain on both national and international front are being confronted with numerous new technologies” – Minister for Foreign Trade and Development Cooperation, Netherlands. Olivier explains that in the past few years, we have witnessed several technological developments that could potentially disrupt industries as we know them today. An industrial revolution is characterized by a change in the way things are organized and work is carried out.
For example, decentralisation (through blockchain and DLT) can allow us to design new ecosystems and processes – advances in blockchain combined with developments in big data analytics, artificial intelligence and IoT indicate that we may be on the brink of major changes.
Looking at blockchain from a regulatory angle Olivier believes that prior to forming regulations on a new technology, it is extremely important for law-makers, politicians and lawyers to understand the technology and its implications. Using the example of GDPR and blockchain – he highlights that there is a lot of concern regarding GDPR compliance issues with blockchain. However, as he points out, there isn’t a single version of blockchain (public v/s private, permissioned v/s permission-less etc.)
Formulating regulations concerning blockchains is particularly challenging– though regulations tend to be as general as possible – it is extremely important for regulators to address different types of blockchain to promote enterprise adoption and increase confidence. Thus, Olivier feels regulations (today) cannot be general since there are very specific questions that need answering.
Olivier raises some questions (that are still being discussed) from a regulatory perspective such as who is accountable for blockchain, how is privacy guaranteed and where/how can traditional jurisdictions apply (if at all)?
How will legal jurisdictions apply? During the discussion, Olivier points out that there is still a lack of consensus regarding which legal jurisdiction applies in cases where transactions take place between parties in different legal jurisdictions.
Olivier provides the example of Swarm City,
For this week’s episode, we spoke to Steve Pomfret, CEO at Cygnetise. Steve describes himself as a “process guy” with over 18 years of experience in bringing about operational change (efficiency and de-risking) at reputed banks and brokerage firms.
After learning about blockchain, Steve spotted an opportunity to apply his skills and learnings together with blockchain to streamline processes within the financial ecosystem. Presently, Cygnetise has one blockchain application used for management and distribution of authorized signatory lists such as delegated authorities, bank mandates etc.
What is blockchain? According to Steve, blockchain has 4 pillars –
Decentralised database
A centralized database allows users with requisite permissions to add, remove, edit and view data (think of a spreadsheet on your computer!) A decentralised database is not owned by a single party. Hence, each party, with requisite permissions, can add and view data. There is a record (time-stamped audit trail to document modifications.)
Distributed Ledger
The key feature of blockchain for commercial applications – under traditional centralized systems of record, for a transaction between two parties to take place, there would have to be a debit and credit effect recorded. However, with a single shared database (as in the case of blockchain), data doesn’t need to move around.
Immutability
Numerous blockchain applications in insurance today exploit the immutability of blockchain (such as FlureeDB, which uses DLT-enabled databases.) Blockchain has an in-built audit trail that is timestamped.
Smart Contracts
Smart contracts are pieces of code that allow execution of certain actions conditional on certain pre-specified conditions being met. With appropriate (legal) documentation, smart contracts may also serve as (trigger based self-executing) legal contracts – this is the notion of Ricardian contracts.
Lack of universal terminology as a barrier Steve makes an excellent point - since blockchain is a nascent technology, there are no universally accepted definitions for key concepts. To begin with, blockchain purists and business practitioners disagree on whether industry deployments of “blockchain” are “blockchain” or “DLT” projects.
As Steve points out, so long as the terminology used is clarified by the concern parties, the terminology itself doesn’t hold much significance.
Barriers to adoption of blockchain across industries “Part of the adoption (of a new technology) is to break it down into something that is useful at a process level and then you can build and evolve as opposed to revolutionize.”
Blockchain as a nascent technology Steve recalls the first time he read about blockchain in a newspaper – the article spoke about how blockchain would “revolutionize” trade, clearing and settlement process within the banking ecosystem. His initial reaction was that of surprise – as he rightly points out, how could you realistically expect hundreds of ecosystem participants spread across the world to each adopt a new technology almost overnight? In his opinion, such claims are equivalent to stating that it would be possible to build Facebook overnight.
The message is clear – change doesn’t take place overnight; more so at financial institutions since they are subject to strict internal and external scrutiny – new technology needs to pass through checks before reaching commercial deployment.
Integration with legacy technology According to Steve, the more complex a blockchain based solution is, the harder it becomes to integrate the solution with the existing technology stack through API’s. Furthermore, he highlighted that another approach would involve identifying manual processes within an organization or an ecosystem that can be replaced by technology (perhaps, blockchain.)
How to build a business case for blockchain deployment?
For this week’s episode, we spoke to Sandip Patel, Global Managing Director for insurance across IBM. Sandip refers to himself as a lifetime practitioner in the insurance industry having worked for PWC and Aetna and IBM within the insurance industry. In this special episode Sandip shares with us what are IBM's 2019 insurance predictions.
What is blockchain in under 2 minutes? Sandip reminds us that practitioners in the insurance industry are painfully aware of the friction and the manual cycles that are involved in different insurance processes. Blockchain is an operating system for establishing trust in the insurance trust. A shared replicated and permissioned ledger technology which allows any participant in the business network and the business process, that they are engaged in across different parties, to see these systems of records. It’s a single system of records, ledger of transactions, with consensus, prominence, immutability and finality. Blockchain carries the following three characteristics:
A level of transparency where transactions can be inspected by the relevant parties who have been granted explicit permission to view them. A distributed ledger where there is a single immutable prominence regarding where the data came from and where they were actioned. This provides a level trust through every transaction flow through the blockchain. A level of audit trail that exists where previous transactions can be confirmed as having happened providing a level of trust in the entirety of the transaction.
IBM’s 2019 Predictions Sandip detailed out IBM’s 2019 insurance predictions around three key points:
Data New Digital Ecosystems Customer and ecosystem interactions to create a differentiated brand
Data Digital transformation in insurance: Data is the new natural resource There is a fundamental shift in how we think of data. Where data is becoming the new natural resource, particularly in insurance from a few perspective:
Volume of data: The nature of data is changing. The rate and pace at which data sets are evolving is growing exponentially. Data sets are going to keep growing to petabytes level and more with which the insurance industry is going to have to deal with. Type of data: The nature of data both structured and unstructured is fundamentally changing. 60 – 70% of the data sets such as from wearables, sensors, and drones, often referred to as unstructured data sets since most computers haven’t yet been exposed to such type of data sets. Temporal factor of data (relevance). There are data sets which are being created which loose relevance within a few nanoseconds of being created.
The shift requires insurers to fundamentally rethink how to think about data. Traditionally insurers have thrived and excelled in capturing, storing and owning large volumes of data about their customers, products, risk factors, historical events...etc. In the future there are going to be very relevant data sets such as sensor data which informs certain risk factors at the point of time they are created where the paradigm of data is going to be how quickly are you able to capture the data set at the point of creation and enable some decision making based on certain risk factors.
Competitive advantage in the insurance industry today is defined by an insurer’s ability to leverage all this data – structured, unstructured, owned, bought, rented, accessed on demand – and drive insights at scale to proactively find new customer segments, gain early insights into customer needs, and quickly innovate products that blend traditional risk products with insightful risk advice and preventive services.
New digital ecosystems The second paradigm shift that is happening in the insurance industry is around the new ecosystems that are being created. These ecosystems require the players within them to operate in a fundamentally different manner with their customers and partners to ide...
This week’s episode is slightly different from the norm – it was recorded off the fly and in the moment as a fireside style discussion. Walid had the opportunity to speak to Timothy Dwyer and Michael Fulton from Nationwide. During this podcast, we get an overview of Nationwide, discussed their perspective and lessons learnt on blockchain and its recent Proof of Insurance POC.
First a little about our guests:
Timothy Dwyer, Vice President & Assistant Treasurer to Nationwide, returns to our podcast to provide some further insight into blockchain from Nationwide’s perspective. Tim’s role at Nationwide covers banking, credit and debt finance.
Michael Futon, Associate VP Technology Innovation, makes his debut appearance. Michael is the representative for Nationwide at the RiskBlock Alliance.
What is blockchain? Michael answers this question from an innovator’s perspective –
Blockchain allows participants to do things differently – its key properties are its decentralised nature and immutability.
How important is immutability? Michael points out that it is difficult to find perfect use cases for blockchain. Walid posed an interesting question – wouldn’t tamper evidence in a system/solution be enough? Michael and Tim both agreed that in many use cases, it would be more practical to have a system that permits (but records) changes as mistakes are bound to happen!
Although many use cases do not warrant the need for immutability, some specific cases such as asset transfer do require immutability (to prevent fraud and other forms of charge-back scams.) In some cases, reversibility may in fact be a desirable property – as referenced to during the discussion, in 2016, we saw the hack of the (first) DAO (‘DAO’ is an acronym for a ‘Decentralised Autonomous Organization’, recall that recently Hugh Karp from Nexus Mutual made an appearance on Insureblocks with a guest post– the Nexus Mutual is an example of a DAO.)
Following the subsequent collapse of the DAO due to this hack, there was a hard fork on the Ethereum network – this split the network into ETH (Ethereum) and ETC (Ethereum Classic) – the hard fork represented a split in consensus - some parties wanted the DAO attack victims to be returned their money, but others did not. The DAO attack is an excellent example of the case where parties agree to “reverse” transactions on an otherwise immutable network.
As our speakers point out, immutability and irreversibility need not be mutually exclusive – take the example of storing your books of accounts on the blockchain. The standard practice in the accounting profession is to never delete an incorrect transaction but to make a rectifying entry – the same idea may be applied to a blockchain – errors made may be corrected in subsequent blocks with a reference to the block containing incorrect/inaccurate information.
An introduction to Nationwide
Nationwide is a leading P&C and Life insurance company based out of the USA, it prides itself on writing a highly diversified line of business.
Blockchain at Nationwide Timothy points out that the interest in blockchain stemmed from the lunch-time discussions surrounding cryptocurrencies in 2015. These discussions matured and lead to the formation of a monthly blockchain forum (which still runs today.)
Michael and Timothy insist that Nationwide is still in the exploration/educational part of their journey with blockchain and they are actively observing how networks are developing.
DLT beyond blockchain The CEO of Hedera – the company behind the much-hyped hash-graph technology has delivered talks at Nationwide – the company is demonstrating willingness to explore DLT solutions beyond blockchain.
Nationwide has observed that hash-graphs are able to handle a larger volume of transaction flow than blockchain currently and a potential POC using hash-graphs is in the pipeline! It is important to note that it is still early days for Distrib...
In this week’s episode we get an insight into how blockchain can enable ‘mutualisation’ and learn about social insurance from VouchForMe. Our guest is Matt Peterman, Founder, VouchForMe and InsurePal. Matt’s experience spans private equity and fraud detection in the insurance industry. It was roughly 3 years ago that Matt realized that ‘mutualisation’ in insurance was gone – this realization led to Matt co-founding InsurePal.
Breaking down the jargon What is blockchain? “Blockchain is a mechanism where we can send information and money at the same time through non-centralized institutions.”
Matt provides the example of Ethereum by highlighting that instead of sending money through Swift, people can now send money through a network for 25,000 miners (who form the Ethereum network) in a P2P (peer-to-peer) manner.
What is Ethereum? “Ethereum is a software of the future (economy.)”
Matt makes a profound statement that Ethereum is ‘a software’ and not ‘the software’ i.e. it is still early days in the blockchain/crypto world and only time will tell which software (public blockchain) prevails and reaches mass adoption.
In this light, a recent article published on CoinDesk sheds some light onto why public blockchains are yet not suitable for enterprise needs. There are indications that the technology needs time to mature to become enterprise grade.
Permissioned blockchain v/s Ethereum (public blockchain) Matt highlights that the Ethereum network is secured by over 25,000 nodes whereas a permissioned blockchain network implemented by a consortium might have as few as 4 or 5 nodes securing the network.
A node may be thought of as a point where information is confirmed, stored and validated.
The notion of ‘mutualisation’ From an underwriter’s perspective From his experience in fraud detection, Matt recalls that there is a lot of opportunistic fraud and premium leakage in the insurance industry today. The Association of British Insurers concluded that there is one insurance scam roughly each minute!
At the point of underwriting, there are numerous scams such as prospective policyholders claiming they have a garage for their car, when, in-fact they do not. Insurance companies today are trying to fight fraud by using big data or by trying to link customer provided data with other data-points including social media (Facebook, Google etc.) A mindset problem Matt points out that people think of insurance as a necessary evil. In some cases, insurance companies are thought of as government-sponsored entities which can be ‘used’ to obtain money from time to time!
As Matt suggests, most people forget that these malicious activities increase the cost of claims which in-turn increases the premium charged to the end customers. In the UK alone (for FY 2016), insurance fraud cost the industry $1.3 billion and the industry spent $200 million trying to combat fraud. The origins of insurance can be traced back to Edward Lloyd’s coffeehouse where parties agreed to share risk (which reduces fraud) and it is this notion that VouchForMe is trying to bring back using blockchain.
‘VouchForMe’ The notion of 3rdparty underwriting Traditional underwriting involves pricing using data made available by the customer and augmented data (with permission) from Facebook, Google etc. At ‘VouchForMe’, prospective policyholders are asked if they have many friends or family who would guarantee or vouch for them. ‘Vouching’ for a prospective policyholder means pre-authorizing a credit card to pay out a maximum of pre-agreed sum in the event of a claim by the prospective policyholder.
There are two advantages that this scheme has:
Reduction in adverse selection – Prospective policyholders are much more likely to be good drivers or good home-owners since they have a counter-party willing to vouch for them. This means that ‘VouchForMe’ has overall a better than average risk pool.
For this week’s episode, we spoke to Arun Narayanan, Head of Data and Analytics at Ed. This episode provides an excellent insight into the specialty insurance market at Lloyd’s and how blockchain based solutions can streamline processes, generate savings and promote product innovation.
Ed Broking is a global wholesale insurance broker which is headquartered in London with offices in China, Dubai, Germany, and the USA. Ed Broking provides clients with broking facilities for a wide-range of specialty business lines such as aerospace, marine cargo, construction and energy. What is blockchain? “Blockchain is a distributed ledger that sits on a peer-to-peer network where transactions are validated by every other member in the network.” After providing a technical definition of blockchain, Arun proceeds to explain the benefits and features of blockchain:
Blockchain can improve data sharing – Each transaction stored on the distributed ledger must be validated and these transactions are visible to all parties with requisite permissions. Thus, blockchain can enable data sharing between parties that may potentially have conflict of interests (for example, insurers and reinsurers.) Blockchains are secure – Cryptography (cryptographic hashes) ensure that transactions once stored on chain cannot be tampered with – this makes the information in the blockchain secure and verifiable. Blockchain can generate savings – There is a large amount of manual work done in the Lloyd’s market today (especially in the specialty business lines). Smart contractscan help automate some of these tasks to save time and money. At the same time, immutability and time-stamping in a blockchain provides a verifiable audit trail for regulatory or internal compliance processes, thereby generating even more savings.
Will blockchain disintermediate brokers? At the start of this calendar year, there was a lot of discussion around the possibility that blockchain will disintermediate brokers entirely. However, over the past few months, this idea has been replaced by a notion that blockchain will enable brokers to focus on their core competencies – translating complex risks their clients face and bringing appropriate risks to the correct sources of capital (underwriters).
It goes without saying that automation may eat into some of the existing revenues of broker, but it is important to remember that blockchain, which may cause this revenue loss, will also reduce costs and create significant new product opportunities.
Brokers leading the charge in blockchain – is this counterintuitive? Some examples of brokers playing an instrumental role in blockchain are:
Marsh: In collaboration with IBM, ACORD and ISN, Marsh has launched a commercial Proof of Insurance solution on the IBM Hyperledger protocol. Extending this idea of proof of insurance, in October this year, Marsh collaborated with Evident to launch a blockchain based insurance verification solution for gig-economy workers. Willis Towers Watson (WTW): In May this year, WTW was part of the pilot for Insurwave – a commercial marine insurance blockchain solution which has report cost savings between 30% to 40%. Insurwave has been covered in detail in Episodes 12, 18 and 19.
Arun steps in to help us understand why all is not lost for brokers and attempts to explain the growing interest in blockchain amongst brokers. “This (the emergence of blockchain) is a huge opportunity to improve the insurance value chain.” Arun believes that the combination of IoT, Blockchain and AI has the potential to enhance the insurance value chain and potentially re-define the roles of some of the incumbents. He believes that brokers will not be disintermediated since brokers are trusted advisors for clients. Since Ed Broking focuses on specialty lines of insurance, there is even less chance of disintermediation.
How is business transacted today by brokers like Ed?
For this week’s episode, we spoke to Ashish Gupta, CEO of docprime.com and CTO of Policybazaar. This is our first time focusing on the Indian insurance ecosystem and Ashish provides an excellent insight into the $95 billion insurance market along with Policybazaar’s latest blockchain implementation. Indeed, an episode you cannot miss!
Policybazaar is India’s leading insurance aggregator which provides a platform for retail customers to purchase health, life and motor insurance. Currently, Policybazaar has control over roughly 80-85% of the insurance aggregator market in India and the platform transacts roughly 30-40% of all personal line’s insurance cover sold in India.
What is blockchain? “Blockchain is a more secure and dispersed way of saving data.”
Ashish explains that in the Indian insurance market, data has been traditionally stored in servers – data is disjointed, there is a lack of transparency and a lack of trust during data exchange. Blockchain is resistant to change i.e. data is verified and parties can trust the data. Furthermore, data can be allowed to communicate to unlock value.
Policybazaar and Blockchain Recently, Policybazaar announced its partnership with Accrivis network– a data integration platform provider to implement blockchain solutions.
What problems can blockchain solve for Policybazaar? Ashish begins by providing a quick overview of how Policybazaar enables insurance purchases – by virtue of being an aggregator, Policybazaar interacts extensively with its customers and typically makes the transaction on behalf of the customer. Traditionally, API’s together with databases would enable this transaction to flow from customers to Policybazaar’s payment and insurance partners.
“Data doesn't need to necessarily reside in two places; one of the big problems is data sanctity across data storage mechanisms.”
Ashish explains further by stating that Policybazaar has validations in place to check the customer’s name, age, email, phone number and other details. Similarly, its partners might have the same or a similar set of validations at their end too! This potentially leads to issues during data exchange and transfer.
Blockchain is an attractive proposition for Policybazaar since a platform can be set up jointly with its partners – ownership is shared by Policybazaar and its partners - thus, everyone in the network shares, sees and trust the same version of the truth. This reduces operational cost and speeds up response time to customer queries.
Merits of blockchain “The duplication and maintenance of data becomes extremely expensive, painful and time-consuming. (Introduction of blockchain) makes these issues goes away.” Ashish answered the difficult question of why blockchain v/s a centralized database by highlighting the key utility of blockchain in the insurance industry – Immutability. Since cryptographic hashes change if data is modified, blockchain prevents modification of data (a problem that often arises from Policybazaar’s experience.)
The current blockchain implementation Presently, Policybazaar is exploring the application of blockchain for its payment mechanism and the reason for doing so is that Policybazaar is currently experimenting with offline payment mechanisms such as cash collection. Developing and deploying blockchain into the insurance ledger will be the next step.
Policybazaar has chosen IBM Hyperledger for its blockchain deployment – Ashish elaborates that there is a sense of trust in the stability and performance of this blockchain protocol. Furthermore, the permissioned nature of the protocol suits the business requirements of Policybazaar.
Policybazaar is currently not using smart contracts in its blockchain platform. However, once the platform is tested for stability and performance, smart contracts will be incorporated when the platform begins to address Policybazaar’s insurance partners.
For this week’s episode, we had the opportunity to speak to Antonio Di Marzo, Product Owner - Commercial Insurance at B3i, at the B3i headquarters in Zurich. Antonio provides an excellent insight into B3i’s upcoming project – commercial insurance on the blockchain which was announced in September this year at the ‘Rendez-Vous de Septembre’. If you haven’t listened to the earlier News Flash episode regarding this announcement, now is a good time to do so!
Prior to his current role at B3i, Antonio spent over ten years at Generali Global Corporate and Commercial. During his time at Generali, he was involved in building a global platform and he feels deploying this platform across various countries was the biggest challenge he faced. Antonio brings this experience of leading digital transformation and dealing with different cultures to B3i.
What is blockchain? “Blockchain is a catalyst (for industry); this technology is bringing people together, empowering people and enabling transformation.” Antonio believes there is no set definition for blockchain because the technology is evolving rapidly. He compares blockchain today to the internet in the 1990’s – there is lack of clarity regarding a definition but there is a clear indication that the technology has the potential to increase customer satisfaction, increase industry profitability and increase insurance penetration. “Blockchain has the potential to empower people to challenge the status quo. Insurance is an enabler for human beings.” Antonio recognizes that insurance provides peace of mind, encourages constructive risk-taking and provides a cushion for the bad times. Furthermore, he believes blockchain can help increase insurance penetration. This sentiment is shared by many others at B3i – Philipp Tölle, Co-Architect at B3i, was recently interviewed and he spoke along similar lines.
“Blockchain is bringing trust, integration and automation.”
Antonio stresses that prior to the advent of blockchain, participants in the insurance industry were working in silos.The breakthrough that blockchain has provided is a shift in the industry mindset towards working in ecosystems.
Foundations of B3i The Lloyd's – B3i connect “Lloyds is an example of success. However, it is not technology enabled, it is human being enabled.” Following a question about Lloyds offering a (physical) insurance ecosystem, Antonio clarified his earlier statement about blockchain enabling ecosystems in the insurance industry.
Although he acknowledges that Lloyds has spread to various countries and it serves as an excellent model since all competitors behave in a similar way, he asserts that B3i wishes to build several ecosystems that are interconnected and allow easy integration of new ecosystems.
“What if we copy the Lloyds mindset and spread (the model) using a technology that can support such activity?”
Enter B3i “(B3i was formed due to) the willingness to check if this technology (blockchain) was an enabler for the insurance industry.”
Antonio explains that that the founding members of B3i recognized that they all wanted to seriously explore what blockchain was capable of – hence, it was natural to join forces. Even though each founding member was capable of exploring blockchain individually, there was an understanding that an optimal outcome would only be achieved through cooperation – this notion is shared by Jags Rao, Blockchain Workstream Lead at Swiss Re, who was interviewed in the previous episode.
B3i began as a consortium and built its proof of concept (POC) on IBM Hyperledger Fabric. The POC involved over 100 nodes and thousands of insurance contracts. This POC convinced the initial members to look at blockchain seriously as evidence suggested that blockchain will be an enabler.
The analogy between B3i and a child Antonio explains that parents recognize the importance of coaching, education and support to enable their child to achieve their pot...
In this week’s episode we get an insight into blockchain from the perspective of Swiss Re and hear about the lessons learnt from their projects. Our guest is Jags Rao, Blockchain Workstream Lead, Finance Reinsurance at Swiss Re. Having started out his career over 22 years ago as a software engineer working on a COBOL system, Jags has seen tremendous changes in technology – today he is a strong proponent of distributed computing and he is betting big on blockchain!
What is blockchain? “(Blockchain is) a platform in which you can validate transactions, and this makes blockchain fascinating!” According to Jags, blockchain consists of several components - a network, a protocol, and a distributed ledger. From the business perspective, blockchain permits virtual recording of economic transactions i.e. an exchange involving something of value – which could be a will, a deed or even a title license. From the technology perspective, it is an open-ended database which records transactions in an immutable fashion.
How did the blockchain journey begin? Jags introduced blockchain to Swiss Re. However, his personal journey in exploring blockchain began by looking at Bitcoin. Jags realized that the technology underlying Bitcoin could be relevant to the enterprise world as it could solve some of the fundamental problems in the insurance industry. “The insurance industry has been financially healthy, but operationally less efficient. This is partly due to multiple layers of counterparties in the insurance value chain.” According to Jags, blockchain brings the promise of creating a common network to allow counterparties to track data driven interactions without needing to maintain their own systems. Blockchain will not help just one company but help the industry as a whole.
Blockchain in the insurance industry Is blockchain a challenge, an opportunity or a threat? “This (referring to the change driven by blockchain adoption) is a clear business model innovation opportunity for us (Swiss Re.)”
Jags acknowledges that innovation in the insurance industry today is being driven by the end customers of insurance – the change in customer demand makes it easy to bring about change in the industry.
Jags describes Swiss Re as a “risk knowledge company.” The key factors driving profit in insurance today are –
Risk management Global diversification Informational asymmetry
Informational asymmetry in the value chain generates profits for participants. However, blockchain provides a common network where participants come together – thus reducing informational asymmetries.
This raises an interesting question – in an environment where blockchain is eliminating informational asymmetry, how should an incumbent react to maintain its leadership position?
Jags views this impact of blockchain as an opportunity to innovate with business models and not as a threat to the existence of (re)insures.
The network effect “Collaboration is key; blockchain is an ecosystem solution.” Jags asserts that Swiss Re does not consider blockchain as an internal process improvement tool but rather as a mechanism to engage with the ecosystem where a critical mass of players can be achieved. Highlighting that over 60 cooperatives have been formed that are relevant to the insurance business, Jags stresses that there is a need for team spirit and the ecosystem way is the only way forward.
Jags was asked about blockchain solutions in other industries – such as TradeLens (IBM and Maersk) in the international trade industry and Food Trust (IBM and Walllmart) in the grocery value chain.
Jags responded by stating that such projects present a massive opportunity to open new risk pools for insurance companies. He highlights that the emergence of such digital ecosystems pioneered by trusted brands to solve real business problems makes it extremely important for companies such as Swiss Re to continue exploring blockchain.
In this week’s episode we will investigate how blockchain is being deployed in the healthcare and the health insurance industry. Our guest is Ahmed Abdulla, CEO & Founder of Digipharm. Prior to founding Digipharm, Ahmed was a Global Health Economist at Rosche and Research Associate at the University of Liverpool. In addition to his present role as CEO, Ahmed is a Blockchain expert in healthcare for the United Nations Economic Commission for Europe. Blockchain in two minutes According to Ahmed, blockchain is a collection of records – referred to as ‘blocks.’ Through cryptographic hashes, a block is linked to the previous block. This creates an open and distributed ledger, which is cryptographically secure, timestamped and immutable.
Digipharm and value-based healthcare Digipharm began as a project a year and a half ago with a goal of becoming an independent third-party platform to implement value based healthcare which is the notion of paying for healthcare on the basis of the performance of the treatment or drug.
Ahmed explains that there are two major factors that prevent patients from accessing the best healthcare facilities.
- Cost
Speaking from experience, Ahmed highlights that pharmaceutical companies spend millions in R&D activities for new drug development. Once a patent for a drug has been obtained, the pharmaceutical company must undergo the process of securing FDA or EMA approval. Hence, there is a short period of time between receipt of approval and expiry of the patent i.e. the company must recover its expenses and generate profit in a relatively short period of time.
As a result, the prices of new drugs are usually quite high – customers are unable to handle the ever-increasing cost of medical treatment and parties (such as the Government, insurance companies etc) struggle to meet these rising costs.
- Uncertain medical outcomes
Approval for new drugs or treatments are given based on evidence collected during clinical studies. Thus, there is uncertainty of the performance of such drugs and treatments – this creates the need for a mechanism where performance data is tracked, and outcomes data is used to pay for healthcare.
As described by Ahmed, there is a misalignment of incentives of various stakeholders within the health economy. Customers and other payers (Governments and insurance companies) wish to reduce the rising cost of medical treatment and counter the uncertainty of the outcomes of medical treatments, pharmaceutical companies are forced to charge high prices to recover their investments into R&D and regulators are unable to lower standards to maintain safety.
Implementation of value-based healthcare Does such a model exist? “Value-based Health Care is a mature concept. It is not something that Digipharm has developed. The issue lies within its implementation.” When asked if such a model can be implemented, he explained that the ‘outcomes’ of a treatment or drug which form the basis for determining payments under a value-based healthcare system can be quantified. In this regard, he gave some examples –
For cancer related treatments, it would be progression (worsening/spread of cancer) or survival. For diabetes and cholesterol drugs, it could be blood glucose levels and cholesterol levels respectively.
Thus, there are measurable outcomes that can be used to determine performance and hence, determine payments under a value-based healthcare system.
How does Digipharm help in the implementation of this model? Ahmed clarified that Digipharm does not replace the initial (face-to-face) negotiations between manufacturers (drug or treatment providers) and payers (such as insurance companies.)
Digipharm helps by providing a platform to automatically reconcile pricing agreements – patients start treatments at different times and reach the various stages of illness or recovery at different times – there is a need for a system that can track al...
For this week’s episode we had the pleasure to hear about the exciting blockchain work IBM does in the insurance industry and beyond. We very pleased to have Craig Bedell, Global Insurance Industry Executive, and Annap Derebail, Executive Architect Financial Services Sector from IBM, take us through IBM’s journey with Hyperledger Fabric and some interesting blockchain case studies.
Blockchain in 2 minutes Annap
Annap chose to explain what is blockchain from an insurance perspective. The insurance industry operates within a network that involves brokers, service providers, regulators, advisory services, other insurance carries and reinsurers. They transact business across this network by exchanging assets that typically historically have been recorded in ledgers or systems of record by each party involved in these transactions.
As they compete with each other they don’t necessarily trust each other. The effect of this lack of trust is that when ledger’s mismatch for whatever reason, either due to error or incomplete updates, businesses would spend considerable time and resources to resolving these disputes or reconciling records.
Blockchain fundamentally brings a shared replicable ledger that records who owns what within a business network so that there are no disputes and records don’t have to be reconciled.
Craig
For Craig, blockchain is a technical platform for conducting transactions on a shared permanent ledger that records every aspect of every transaction between all associated parties. Don Tapscott, author of the blockchain revolution, refers to blockchain as being the second coming of the internet, the first internet being the internet of information and this second internet, blockchain, being the internet of value.
Hyperledger
Hyperledger was founded back in 2015 when a number of companies that were working on blockchain realised that they could achieve more by working together rather than separately. They came together with the aim of pooling resources in order to create open-source blockchain technology for anyone to use. The members put the governance under the foundation or guardianship of the Linux Foundation. The organisation now has over 230 member organisations from a wide variety of industries.
Three key principles, why insurers should consider Hyperledger
According to IBM, there are three key principles, why insurance companies should consider Hyperledger:
Open source: the code is written in a reliable manner, has no vendor lock-in, resulting in high quality solutions Open governance: all technical decisions carried out within Hyperledger are made by a group of community elected developers. Open community: An open community concept which establishes enterprise friendly consistent handling of IP and this is done by adopting the Apache 2.0 license and the Creative Commons attribution 4.0 license for content.
Beyond these three key principles there are a set of design principles for enterprises: modularity, security, interoperability, availability of open APIs that enable ease of dealing with these sorts of Hyperledger blockchain frameworks.
IBM’s involvement in Hyperledger – Fabric
Hyperledger Fabric has a modular based platform for building distributed ledger solutions. This is being developed as open source. IBM has contributed about 40,000 lines of code to initially bootstrap the Fabric project. The code is owned and operated by the community. It supports a large number of privacy and confidentiality features that fit all manners of insurance business use case:
Channels which allow groups of participants to carry out separate transaction in private Private data which enables parties to transact data with each other without revealing its content Un-linkable transactions which brings confidentiality to transactions
IBM’s involvement in Hyperledger – Indy
Hyperledger Indy is a distributed ledger,
Welcome to another exciting episode of Insureblocks! Today we are joined by Stan Nazarenko and Karl Stanley who discuss how blockchain can enable seamless data transfer in the insurance industry.
Stan Nazarenko is the CEO of Piprate which is an InsurTech data sharing platform. Piprate aims to provide companies in the insurance and reinsurance space with a way to share data that creates trust, accountability and transparency.
Karl Stanley is an AVP at Technology Ventures for Renaissance Re. Renaissance Re is a global reinsurer specializing in writing P&C business which has been in existence for 25 years. Technology Ventures at Renaissance Re is a combination of a Corporate VC arm and an innovation department – the objective of this function is to keep an eye on emerging technology, provide advice to the VC arm on technology investment and develop internal technology strategy for both the short and long term.
Blockchain in two minutes Our guests were asked the customary Insureblocks question to share their perspective on what blockchain is and perhaps, what it means for the insurance industry.
According to Karl, from a non-technical perspective, blockchain is a shared and tamper-proof data store. From a technical perspective, it is a decentralised shared ledger which relies on distributed computing and asymmetric cryptography (public-private key pairing.) Distributed computing is important since the ledger is shared by all parties and replicated across all nodes in the network and cryptography maintains the security of the system. Explaining further how cryptography secures the system, Karl stated that since blocks are hashed, a change in data stored in a block results in a change in the hash which indicates that tampering of data has taken place!
Stan chose to provide a less technical and more business-oriented definition of blockchain. He stated that blockchain is a technology that allows a network of participants to agree on a single, shared and consistent state of the world. It also allows participants to update the state.
Some insight into Piprate Insurance professionals are always looking for the most attractive risk. Precise and trusted data is required to understand risk. Today’s data sharing involves a combination of excel spreadsheets, emails, file shares etc. These methods of data sharing are not secure, not compliance friendly and pose the grave threat of cyber risk.
Piprate permits seamless data sharing by using data wallets - a list of all data possessed by a member of the network. The goal is to help everyone along insurance value chain to get most comprehensive risk representation – thereby bringing risk closer to capital, permitting better pricing and facilitating precision underwriting.
Why did Piprate choose blockchain? Stan was posed the question on do they really need a blockchain based system for the effective exchange of data between the parties along the value chain. In his view the challenge of using APIs either to connect insurance players along the value chain or via centralized institutions is three fold:
Who will hold the data? Will data be held by the firms’ respective authors? Will it be via a centralized party? If these firms get hacked, acquired, or go out of business will the data become inaccessible? API relevant information is great for immediate access of data? However, they aren’t always great for the long tail accessibility of historical data (e.g. 10 – 30 years old) Insurance carriers may at any point of time wish to change the availability of historical information and/or change the structure of the API, the availability of the API, the availability of historical data that may have been available in the past. A blockchain based system, due to it’s immutability means that previously made information available information will always be available.
Given that blockchain is a nascent technology and is rapidly evolving,
In this week’s podcast we will be discussing digital IDs onto the blockchain. We had the pleasure of having 2 guests in this episode. Daniel Faria, CEO of Nodalblock and Timothy Dwyer, VP and Assistant Treasurer at Nationwide Insurance. Daniel has had a career in cyber security and entrepreneurship. Timothy has spent a majority of his career in treasury and navigated into blockchain about 3 years ago by looking at the disruption it could bring to banking.
Blockchain in two minutes To explain blockchain in a non-technical manner, think about a traditional accounting firm that has one hundred book keepers. What if each of one of those one hundred book keepers had at the same time had to maintain a ledger saying exactly the same thing. Out of those hundred if more than 51 would say that a certain record is wrong, then all of the other ones would have to fix the book to maintain the record exactly the same way.
About Nodalblock Nodalblock is a blockchain cyber security company.
The fastest FBI has stated that the fastest growing crime in the US is identity theft with one identity being stolen every 3 seconds! That’s 35,000 every day and more than 15 million every year.
Nodalblock include digital IDs with multi factor authentication with a certification API that can be used to prove the authenticity of any digital file. A legal binding digital signature and and then an encrypted file transfer tool made available for a client’s IT systems via a regular API.
Nodalblock essentially brings security to the blockchain.
About Nationwide Nationwide is a diversified insurance company offering life insurance, mutual funds, property and casualty.
Nationwide has had a keen interest in blockchain, ever since it launched a proof of concept for “Proof of Insurance” with the RiskBlock Alliance (featured in this episode – An Introduction to the RiskBlock Alliance) at the end of 2017.
Nationwide has been trying to determine if there was an opportunity for business disruption with blockchain technology on a stand-alone basis. They’re still trying to determine that and they still haven’t found a blockchain use case that will fundamentally change their business.
They’re still continuing to look for that and consider themselves to be in education mode regarding blockchian.
They have recognised the barriers to entry to blockchain, in the form of the network effect and in speed of transactions that can be pushed throught the network. Two points which they felt will be resolved in due course.
Digital ID As we all know we all leave comprehensive digital footprints wherever we transact on the internet. Whether it is on social media sites like Facebook or Twitter, financial transactions with Paypal and Apple Pay amongst others. We all must disclose personal and financial data to uses these services. This leads to our personal data being stored in various databases which we have little control over. How can digital IDs on the blockchain help to address this, especially in a world where our IDs get hacked with Equifax last year and Facebook last week?
To answer that question businesses have to really ask themselves the question of the value they place in running KYCs and in keeping that information secure. Do they have the necessary processes in place, especially when considering that the biggest security problem is humans; employees in firms that get hacked due to a phishing attack.
As public and private blockchains can interact between each other it gives large organisations such as insurance companies the strategic opportunity to open up part of their stored internal information (such as their customers digital IDs) to talk to a larger network (public blockchains) whilst maintaining the private sections secure, whilst leveraging the power of public blockchains.
Nodalblock had an example of a recent piece of work they did for a large European insurance company whose GDPR,
In this week’s episode we will look into how blockchain can reinvent the insurance value chain. Our guest is Risto Rossar, founder of Black Insurance. Risto has over 20 years experience in the insurance industry, having worked in insurance before launchingfive insurtech startups. Now he is focusing on Black, a blockchain-enabled, decentralised insurance marketplace.
Blockchain in two minutes Risto focuses on blockchain’s value proposition, which he believes lies in replacing central authority bodies. Potential candidates include central and traditional banks, government branches, courts and (of course) insurance companies.
Blockchain does have a broader range of uses. However, Risto supports that other technologies can achieve these just as well and it is important to ensure the positive aspects of blockchain outweighthe challenges it entails.
Discovering blockchain Risto had been exploring how technology can improve the insurance industry long beforeblockchain. In 2001 he created one of the first online insurance brokers, IIZI, which became the biggest insurance broker in the baltic states. Through this he realised insurance brokers are not particularly scalable, so Risto launched Insly to help them become digital. Inslyadapted IIZI’s successful technology, sellingit as a software solution to over 300 insurance companies and intermediaries in 40 different countries.
Launching his owninsurance brokering business and providing IT solutions to over 300 other brokers around the worldled Risto to blockchain and ultimately founding Black Insurance.
The insurance value chain Risto’s multifaceted experience covers the consumer and brokering perspectives, as well as providing software solutions to brokers worldwide. He is happy to share what he has learned through his journey about the state of the insurance value chain.
- The industry’s strengths and weaknesses
The main strength of the insurance industry is that it is dominated by big insurance companies, offering certainty and stability in the insurance market. This is reinforcedby a strong regulatory regime, aimed at protecting consumers.
These qualities, however,also contribute to theindustry’s weaknesses. The strict regulations create high barriers to entry, maintaining an oligopoly and working to the advantage of the biggest and bettercapitalised insurers. This not only leads to higher premiumsbutitis also a source of systemic risk, meaning that the problems of the biggerinsurance companies can quickly spread across the market.
Another problem facing the insurance industry is the lack of innovation, withbig insurance companies beingvery slow to innovate. This is exacerbated by the fact smaller startups, whether they are brokers, agents or MGAs, do not control the product. It is the large insurance companies that control the product, limiting the opportunities smaller companies have to innovate.
- What can blockchain bring
Risto believes that, from a technical perspective, today’s insurance industry does not need blockchain. Blockchain’s real strengthis its abilityto get rid of the trusted third party. Everything else can be done with existing technologies. It is important, therefore, for companies to consider if blockchain is the best way to implement futureprojects or if existing technologies are better suited.
From a broader perspective, blockchain is still adding value to theinsurance industry. Blockchain has been a catalyst for innovation, with the whole insurance value chain exploring different blockchain applications. While many of these projects could have been implemented without it, it is blockchain that spurred action and made them a reality.
AXA’s blockchain-based flight delay insurance, Fizzy, (which features in a previous episode) offers a good example. While it is a great product, Risto believes blockchain was not necessary. While the smart contract ensures customers do not need to trust AXA,
With the US battling Hurricane Florence and typhoons battering China and the Philippines, the insurance industry is preparing for potential record claims. Handling those claims and, more importantly, helping those affected rebuild their lives is a challenge facing people across the insurance industry.
For today’s “Bonus Episode” we will be exploring how blockchain can provide insurance to hurricane afflicted areas. With us we have Renat Khasanshyn, co-founder of Etherisc. Renat is responsible for products at Etherisc, helping people join the Etherisc ecosystem to build their own insurance offering.
Blockchain in two minutes A blockchain is a distributed ledger. By combining security and immutability through the use of cryptographic algorithms, the whole network can be absolutely certain they are accessing the same information. This enhanced trust and security creates numerous potential applications:
Implementing checks and balances regarding funds or tokens in an account. Issuing and tracking an insurance policy. Using a smart contract to pay out claims automatically.
Etherisc Etherisc, which also featured in a previous episode, (creating a decentralised insurance model with blockchain & smart contracts – Etherisc) is a decentralised insurance protocol promoting the collective creation of insurance products.
A protocol is a collection of rules. While these rules do serve as a guideline, what distinguishes a protocol from an industry paper is that the protocol creates a system of incentives and deterrents. Blockchain’s functionality enables it to promote collaboration by rewarding complying parties. For example, a member will be rewarded if it follows the protocol when valuing a claim.
Renat tells us Etherisc’s protocol consists of a theoretical and a practical aspect. On the theoretical level, the protocol outlines the responsibilities of each party in the Etherisc ecosystem, such as designating which party should be recording premiums.
On a more practical level, Etherisc provides common tools and infrastructure. This includes product templates or even an insurance license and is part of what makes the Etherisc ecosystem special. The protocol creates an added value that would not be possible if each member worked separately, even if they used the same technology and underlying code.
Etherisc’s vision Etherisc is not simply a decentralised insurance company. It is an ecosystem aiming to democratise the insurance industry and people can join the Etherisc ecosystem to build their own insurance offering. How members structure their company is completely up to them. It can be a peer-to-peer pool, a mutual fund or a for-profit company.
What matters to Etherisc is that people on the ecosystem are fairly compensated. Its protocol enables members to be compensated in accordance with the value they create regardless of their age, race, gender or personal connections. Imagine, for example, a 20 year old Etherisc member from China. They could be a developer, data scientist or software engineer. Etherisc’s protocol could allow them to earn 3% of an EU or US insurance company’s revenue, creating a both fair and valuable opportunity.
Hurricane Guard In April 2018 Etherisc launched HurricaneGuard, the first blockchain based insurance product to combat catastrophic weather events.
You can try out their demo concept.
- How it started
It all started when Renat visited San Juan, Puerto Rico to examine the devastation caused by Hurricane Maria. What disappointed him the most was the business practices of traditional insurance companies. Approximately 80% of commercial policies did not pay out, and those that did took months or even years. This left people in a very vulnerable situation, forcing many to gather what money they had left and leave their homes. While factors such as a shortage of claims assessors did play a part in this,
For this week’s episode will be shifting our focus from blockchain itself to one of blockchain’s most popular applications, cryptocurrencies. Specifically, we will be discussing the challenges and opportunities of brokering crypto assets.
To help us we have a panel of experts including Rachel Turk, Head of Directors and Officers insurance at Beazley, Rhys James, Head of Management Liability and Financial Institutions at Paragon Brokers and Ed Ventham, Client Executive at Paragon Brokers.
Blockchain in two minutes A blockchain is a distributed ledger that is maintained by a network of users. It is powered by its users, who keep it secure through cryptographic algorithms. This is a distinguishing feature of blockchain that ensures the ledger is safe and trustworthy.
Cryptocurrencies Cryptocurrencies are the tokens of value that exist on specific blockchains. The Bitcoin blockchain, for example, uses Bitcoin. The US Securities and Exchange Commission designated cryptocurrencies as a currency, saying they work as a “replacement for sovereign currencies”. This distinguishes them from a safe security and has great implications on how insurers perceive cryptocurrencies.
- Mined vs premined
A mined cryptocurrency, such as Bitcoin or Ether, is what people generally understand cryptocurrencies to be. Multiple users on the network solve the complex algorithms that keep it secure and are rewarded with the currency.
A premined currency involves creating a number of coins before the currency is launched to the public. The currency is then distributed over time onto the blockchain for its specific use case. Premined cryptocurrencies have a negative connotation in the crypto community as some argue gathering all the coins upfront allows companies to easily manipulate the market.
- ICOs: utility and security tokens
Initial Coin Offerings (ICOs) are used to raise capital and involve the distribution of utility or security tokens. Utility tokens represent future access to a company’s services and are not designed as investments. This created difficulties for companies and insurers alike. When insurers were discussing ICOs and SAFT agreements, what they were really trying to cover was the legal risk inherent in the agreement.
Rhys informs us that, in the last few months, there has been a shift towards security token offerings. A security token offering is essentially an equity or dividend offering, with security tokens having an inherent security designation by the SEC. From a risk point view that means clients are preparing private placement memorandums and adhering to SEC rules around security offerings. This changes the risk of the ICO race and moves the market forward, making a great difference to insurers who can now know they are dealing with well-established securities laws.
- The crypto industry
When examining the crypto industry it is important to distinguish between its different sectors. These include pure blockchain companies, cryptocurrency exchanges and cryptocurrency custodians. Each sector has different regulatory responsibilities and can benefit from different insurance products. While there are some more general services such as regulatory indemnities, cryptocurrencies have also led to the creation of specialist products. For example, custodians require crypto wallet insurance to protect the private key for their wallets’ public addresses.
Thankfully, Rhys is here to explain what that means. The public address (also known as public key) is similar to an individual’s sort code and account number while the private key is the credentials needed to access the account. With cryptocurrencies, the best way to secure the key is to take it offline. This leads to a high value password and a custodian usually holds several of these private keys.
- Regulating the crypto industry
Cryptocurrencies are borderless by design.
This week we bring you a very special episode, straight from the heart of London’s insurance industry. Our guest has provided leadership, inspiration, innovation and the embracing of all communities irrespective of gender, race or religious affiliation. We are proud to have with us Inga Beale, CEO of Lloyd’s of London. We will be discussing blockchain and the future of Lloyd’s. As Insureblocks is based on community, Inga will also be answering the questions you submitted over the past weeks.
Blockchain in two minutes A blockchain is a shared, immutable record of transactions. Blockchain’s traceability and cryptographic verification make it an exciting prospect for the insurance industry.
Transactions can become particularly complex and involve numerous parties. A claim, for example, usually involves the claimant, the policyholder and the customer. However, it can also involve a third-party loss adjuster, a lawyer, an underwriter, a company claims adjuster, brokers and so on. The beauty of blockchain is that it creates a single, shared, transparent record that every party in the transaction can rely on.
Lloyd’s of London Lloyd’s is an insurance market comprised of over 80 insurance syndicates. Lloyd’s is unique as these syndicates are competitors but also collaborate in sharing the bigger risks. In its 330 year history Lloyd’s has always been there to ensure risk never came in the way of human ingenuity and support human progress through the good and the bad, whether that was launching a satellite into space or the Titanic’s fateful voyage.
Lloyd’s in the changing landscape The insurance industry has found itself at a point of unprecedented change. On the technology front blockchain, IoT, AI and robotics are ready to drastically update the industry. Incumbents also face a huge number of new entrants including insuretechs and their innovative, customer-centric propositions, Amazon and possibly even Chinese firms like Zhong An and Ping An. As Inga mentioned at the Dubai World Insurance Congress, the insurance sector risks “sleepwalking” in this new world if it remains complacent.
Inga has therefore taken active steps to ensure Lloyd’s remains a leader through this changing environment. While Lloyd’s has been known to be very traditional in some ways, such as being very paper-based, Inga informs us Lloyd’s has turned a corner and is on its way to being a leader in the new world. Unlike startups, whether insuretechs or fintechs, which usually focus on a single solution, Lloyd’s is focusing on the whole industry. It is working together with new entrants to make sure it is getting the best of these new ideas and piece them together to complete the bigger picture.
Driving change within Lloyd’s Inga Beale and Shirine Khoury-Haq, Lloyd’s COO, have shown a keen interest in blockchain since 2015. This resulted to the London Market Target Operating Model (TOM) initiative launching in 2016, which now runs a major consultation to see how blockchain can improve the industry. Here is a copy of their whitepaper.
However, bringing change in an organisation as large and unique as Lloyd’s can be challenging. Change disrupts people’s lives, who can often feel threatened by it and worry about how it will affect their jobs. It is not easy, therefore, to convince all 34,000 people engaged in Lloyd’s that change is a good thing. Inga tells us the secret lies in getting other people excited and open to seeing the benefits blockchain and other innovative technologies can bring.
Blockchain investment in the insurance industry The multiple blockchain PoCs and pilots multiple blockchain PoCs and pilots in the insurance industry are valuable but timid steps compared to the $1.7billion annually invested by the financial industry in blockchain technology. Will the insurance industry have to wait until faced with a crisis before moving forward?
Inga informs us embracing change when the industry is doi...
Welcome to the second episode of our News Flash series, where we share the latest developments in the blockchain space. For today’s episode we are excited to present returning speaker Christopher McDaniel, president of the RiskBlock Alliance.
Chris will guide us through the release of Canopy 2.0, the new version of the RiskBlock Alliance’s blockchain framework, which will run on R3’s Corda Blockchain.
RiskBlock Alliance The RiskBlock Alliance, which featured in one of our previous episodes (An Introduction to The RiskBlock Alliance), is an industry-led consortium comprised of insurance carriers, brokers and reinsurers focused on delivering blockchain solutions to the insurance industry. What sets it apart from other insurance consortiums is the fact it’s a not-for-profit organisation sponsored by The Institutes, an educational organisation focusing on the property and casualty space that has been around for over a century.
Since its founding last September, the RiskBlock Alliance has expanded significantly. It developed a relationship with LIMRA in the life annuity and retirement space and expects to expand in areas including group benefits and workers’ compensation.
The RiskBlock Alliance is built around three aspects.
The consortium itself and its members, who are integral in ensuring the RiskBlock Alliance is for the industry and by the industry. Its blockchain framework, Canopy, a standardized set of blockchains that are reusable for many applications. Blockchain applications. The RiskBlock Alliance builds fifteen to twenty application on an annual basis on its Canopy framework.
Canopy Before Canopy each company had to create its own blockchain for its applications. If a company decided to build a blockchain application utilising policy information, they created a policy blockchain. Then, if a different company built another application requiring policy information, they had to build a similar blockchain from scratch.
The RiskBlock Alliance’s solution to this is Canopy, a framework that makes it easier for companies to experiment with blockchain and create their own solutions. It provides a set of reusable blockchains, such as a policy or a claims blockchain, along with numerous applications that work on these standardized blockchains.
Canopy 2.0 Canopy 2.0 will be released in early September, along with a blockchain application for proof of insurance and one for first notice of loss in claims. It aims to become the framework that connects all blockchain applications together.
- Universal framework
Canopy 2.0 will be the first universal version of Canopy. While the RiskBlock Alliance will continue building its own applications, Canopy 2.0 will be an open framework others can build upon. It will have the tools and components to allow others to cooperate with the RiskBlock Alliance and improve the framework by creating applications and expanding the framework itself. In that way Canopy 2.0 can grow beyond the areas it is currently focused on, making it the first true end-to-end blockchain insurance platform.
- Back office connectivity
At the moment a lot of blockchain solutions ignore the problem of connecting back office systems with the blockchain, leading to a gap between blockchain applications and back office data. Canopy 2.0 solves that with its ability to create APIs to connect back office systems with the blockchain.
This connectivity does not just make loading data onto the blockchain easier, it also allows members of the consortium to create more flexible use cases. Chris points out that blockchain is not meant to be used as a data warehouse and it is neither easy nor sensible to put every piece of data onto the blockchain. Through these APIs, members will be able to selectively combine data from the blockchain with data from their back office systems in their applications, thereby creating more flexible use cases for all blockchain appl...
Welcome to another episode of our News Flash series, where share the latest developments in the blockchain space, straight off the press. For today’s episode we are excited to present Ken Marke, CMO at B3i, the blockchain insurance industry initiative.
Ken is joining us to reveal some exciting news about B3i’s new product and plans for the future.
B3i B3i, which we have introduced in a previous episode, began life in October 2016 when five insurers and reinsurers came together to see how blockchain can benefit the insurance industry. This led to a consortium which ten other members joined to test the viability of blockchain in solving problems for the insurance industry. Its first project was a prototype for a catastrophe excess of loss programme, which has been very successful. The next step was to establish B3i as a legal entity, domiciled in Zurich.
Now, B3i is focused on expanding its product line and enabling partners to cooperate with them to offer more products and services on B3i’s platform, thereby creating a network ecosystem. Today B3i will reveal how it plans to achieve this goal and Ken is here to guide us through B3i’s announcements.
1. Commercial insurance development programme B3i is launching its commercial insurance development programme, for which it recruited Antonio di Marzo from Generali. You listen to Antonio’s interview below to find out more about B3i’s development programme.
https://www.youtube.com/watch?v=r1tTRoY5BYk
B3i’s development strategy also involves expanding its global network. It will launch an office in New York in a few weeks and is planning to open several new offices in key regions around the globe. Additionally, B3i has been forming alliances with industry groups around the world, including the Association of British Insurers in the UK and the Chamber of Digital Commerce in the US.
The purpose of B3i’s new alliances, and of its development programme in general, is to expand its network and its ability to educate the insurance industry. Ken points out it is very important for the insurance industry to better understand blockchain’s potential. While experimenting with blockchain is welcome, Ken believes the time has come to move beyond experimentation and start identifying real problems blockchain can solve in the insurance industry. As Ken says, “let’s get blockchain out of the lab and into the business”.
2. Cat XoL product Staying true to Ken’s word, B3i unveiled a demo of their Cat XoL prototype in September 2017, inviting companies to join its testing platform. We are excited to announce the Cat XoL product will become available on the market at the end of this year, taking live contracts on the platform through an early movers programme.
B3i chose Cat XoL as its first product as it is important to start simple when developing a prototype. A Property Cat XoL contract was the perfect choice as there is usually a smaller network in a reinsurance contract including a seed, a broker and a few reinsurers. Additionally, there are less transactions in a reinsurance contract, ensuring the new concept wouldn’t face too much pressure in the early stages of development. In that way, B3i could work on a simple project, making sure the prototype, its functionalities and peripheral needs are all in order before moving on to more complex products.
But isn’t trust already guaranteed in such a small network?
While engendering trust is one of blockchain’s strongest assets, it’s not the only one. The Cat XoL product helps ensure contract certainty and simplify communication, allowing parties to better deal with any unexpected challenges that might arise. Blockchain’s immutability ensures every party has the same version of truth, which removes friction from the value chain and the need for reconciliations in the network.
The results
Testing a blockchain product’s performance against existing processes to measure the exact improvement in ef...
In today’s episode we focus on insurance regulatory reporting with the American Association of Insurance Services (AAIS). With us we have Joan Zerkovich, Senior Vice President of Operations at AAIS. Prior to the AAIS, Joan worked in information technology, with over twenty years as a CIO specialising in building large infrastructure systems. Joan will talk to us about openIDL (open Insurance Data Link), the blockchain-based solution aiming to improve data sharing between insurance carriers, the AAIS and US state regulators.
Blockchain in two minutes Blockchain is a technology that provides increased trust and security in data sharing systems. It enables users to upload records, data or transactions to a system, which are stored in a chronological order and cannot be modified or deleted. The records are encrypted and stored in blocks, with copies of those blocks then stored in the same away across the network. The immutability of the records and the secure storage across numerous computers on the network provides a level of trust and security never before seen in data systems. Smart contracts are blockchain’s other distinguishing feature. A smart contract is essentially software that checks for specified transactions in the network and automatically executes queries without exposing any more underlying data than necessary. Combined with blockchain’s immutability, this ensures the trust of all parties on the system.
American Association of Insurance Services (AAIS) The AAIS is the only non-profit, member-owned advisory organisation in the US. As the US insurance industry is regulated on a state (instead of federal) level, the AAIS was formed to provide a common platform across all the state-regulated markets. Joan is here to guide us through the US regulatory framework and how the AAIS helps insurance carriers navigate it. To begin with, insurance carriers need to request state insurance departments permission to create and rate a new product. After a long approval process, the insurer needs to report to the department once they start writing business. This can be a very time-consuming and expensive process and it can delay a product getting to market by numerous years. The AAIS employs a countrywide programme to make this simpler across all fifty states. This includes creating common forms and contracts, whose language is set primarily on a national level but is adapted to conform to state-level regulations. Once the programme is approved by the regulator, any member of the AAIS can go through it to write business much quicker, significantly reducing the time and cost involved. Another feature of the US insurance regulation is that antitrust laws do not allow insurance companies to share pricing and rating data between them. However, the AAIS, as an advisory organisation, can collect policy and claims data from insurance carriers across all states. It then uses that data to to create new products, update loss cost and rating factors and share them back with insurance carriers. Finally, insurance carriers have to report to state regulators. This is done by providing the data to the AAIS, which aggregates and anonymises it before passing it on to regulators. Overall, the AAIS makes it easier for state-based regulators to serve their communities while also ensuring consistency across all states and improving operational efficiency.
Data collection before openIDL While data collection, reporting and filing of new products is now digital, data is nevertheless coming from multiple different systems across thousands of insurance carriers. AAIS has to normalise the data, do quality assurance checks and create a coherent data set that can be used for product development and industry reporting. Traditionally this is done by members submitting their data to the AAIS statistical data management application. This is a web-based tool where members upload the data required for the application to perform quality ...
Today with us we have Susan Holliday, Principal Insurance Specialist at the International Finance Corporation (IFC), all the way from Washington DC. Susan has over thirty years of experience in the insurance industry and specializes in insurance and insuretechs. We will be discussing how to unlock the future of blockchain and the opportunities for insurers in emerging markets.
Blockchain in two minutes While there are different blockchains with slightly different features, blockchain is centered around two key features:
It is a distributed ledger. This means it has numerous nodes and, if one part of the blockchain experiences an error, the rest of the blockchain remains operational. The transactions are processed in blocks. Each block is linked by a hash (a cryptographic function) and is immutable. This means it is completely transparent and users can trace every transaction.
The International Finance Corporation The IFC is the World Bank’s private sector arm. It is government-funded, with nearly all governments of the world being shareholders of the IFC. Its goal is to invest in emerging markets to alleviate poverty and increase shared prosperity. It achieves this by considering both the financial returns and the developmental potential of a prospective investment. The IFC helps companies grow and brings in private sector investment. Following a project’s completion, it exits its current investment and uses the profits to continue its work in other areas.
Insurance plays a fundamental role in achieving the IFC’s goal by helping companies and individuals become more resilient. People can then establish businesses more easily, take on risks and better cope with the financial difficulties of a natural catastrophe or a death in the family.
The IFC works within all classes of insurance. It has invested in commercial line companies, reinsurers and personal line companies including non-life, life and health. Insuretechs are also becoming an increasingly important part of the IFC’s portfolio.
Insurance penetration in emerging markets One of the challenges of emerging markets are the very low insurance penetration rates. While there are protection gaps everywhere, insurance penetration, which is measured by premiums versus GDP, is typically lower in emerging markets.
There are three main reasons emerging markets have low insurance penetration rates.
- Natural catastrophes
Some emerging markets are exposed to various natural catastrophes for which they are largely uninsured. This is an increasingly big problem and the IFC is actively looking to provide solutions to climate risks. However, this is not the root cause as countries with a higher insurance penetration can also have a high catastrophe exposure.
- The insurance trust deficit
In many emerging markets people are either unaware or distrustful of the insurance industry. Some of this distrust stems from historical examples of companies writing business with no intention to pay out valid claims or intermediaries who defrauded clients. Part of the blame, however, rests with the current state of the insurance industry. Products developed over fifty years ago are not well-suited to the needs and day-to-day problems of people in emerging markets.
The solution to this is customer-centricity. Companies need to pay more attention to the needs of clients to develop new and better-suited solutions.
- Profitability
Disposable income is, on average, lower in emerging markets. This means coverage and premiums would be small, which doesn’t sit well with insurers’ high operating costs. Even where claim ratios are low, high operating costs and too many middlemen lead to disheartening results for insurance companies.
The IFC is trying to change that by investing in fintech and insuretechs to create new products that can be delivered in a cheaper, more efficient way. By investing in new technologies such as blockchai...
This week we focus on a recently published report claiming that the UK is poised to become a global leader in blockchain. To help us discuss this we are joined by Sean Kiernan– one of the reports key authors and CEO at DAG Global.
Sean is a banker, with previous experience in both Switzerland and London, as CEO of Falcon Private Bank’s London office, who at the time were the first regulated crypto-bank. He has recently been involved in setting up DAG Global, a London-based company aiming to become the UK’s first regulated crypto-bank where he is its CEO.
Blockchain in two minutes The easiest way of describing blockchain is to imagine a spreadsheet, which everyone across the world can see, in both its current format but also every previous edition. This analogy reflects the decentralization of the ledger and also the immutability of the blockchain technology and can be extended further as formulas can be added to spreadsheets. The addition of formulas reflects automation offered by smart contracts, allowing ecosystems to be built and enabling the restructuring of processes for the benefit of all parties.
Is the UK placed to become a leader in blockchain? To build a successful blockchain ecosystem, both IT and Financial sectors are required. Unlike the US, where San Francisco and New York are independently recognised as the technology and finance hubs respectively, London is rare in that it has a huge IT sector alongside a financial services sector which are both globally recognised. Many of the big American IT houses have acknowledged this, with Google, Apple and Facebook increasing their UK staffing despite Brexit lying just around the corner. In addition to the right industry components, the UK’s regulatory framework is also beneficial to widespread blockchain development and adoption, but more on this will be mentioned later.
Whilst places like the Zug Valley in Switzerland are also competing for the title of ‘blockchain capital’, with an intent in the Swiss Banking sector redefining itself through marketing and cryptocurrency. However, the Swiss finance sector cannot compete with the depth of financial services offered in London, with a multitude of hedge funds, insurance, private equity and asset management firms alongside a healthy range of private banking firms also, leading to wider demands on the blockchain ecosystem and more potential for progress. The presence of blockchain consortium R3 in London represent the developmental opportunities in London, not only in finance but also within both healthcare and real-state industries also.
How has the UK Government engaged with blockchain? The involvement of the All Party Parliamentary Group on Blockchain (APPG Blockchain) and Deep Knowledge Analytics in authoring this report has outlined the discussions between governmental groups and different sectors of the UK economy as to how blockchain can be used to optimal effect. Additionally, the FCA has provided public statements of support for the emerging sector and a regulatory sandbox for product development. Businesses can test innovative products, services, operating models and delivery mechanisms within the regulations imposed by the FCA, ensuring that consumer benefits can be delivered whilst also managing the associated risks.
The successes of this scheme have led to a ‘global sandbox’ being proposed, with the FCA leading a collaboration of 11 other financial regulators, forming the Global Financial Innovation Network (GFIN) and demonstrating future promise for the move towards regulated global blockchain adoption with the FCA at the helm. By recognising and working with blockchain developers, the GFIN can help educate individuals on the safety of blockchain. This helps to bridge gaps between traditional financial services and blockchain based technologies such as cryptocurrencies, with potential for a token economy in the future.
How was the report initiated?
For today’s episode we are going to Munich with Bob Crozier, Head of Global Blockchain Centre of Competence at Allianz.
Bob shares his views on blockchain’s effect on the insurance industry and sheds some light on the Allianz approach to blockchain.
Blockchain in two minutes A blockchain is a shared ledger record of transactions. When everyone in a network agrees a piece of information is correct, it is added to the ledger and the blockchain’s technology links each successive transaction to the previous one. The end result is an unbroken history of transactions that all parties can trust is correct.
Blockchain’s impact on the insurance industry In August 2017 Bob wrote a blog post titled “how blockchain will impact insurance in 2017 and beyond”, where he examines how blockchain is changing how insurance companies operate on a fundamental level and the way insurers and customers relate in a shared economy.
This refers to the gradual change in which insurers realise that working together to solve common customer pain points requires rewriting the rules of business. Blockchain is the first time competitors have to work together to improve the industry and insurers have to learn to coexist in a world where the means of developing and delivering products or services, i.e. blockchain, require shared development and maintenance.
By working together Bob does not simply mean creating policies and exchanging risk, for which Lloyd’s of London already does a good job. Bob refers to solving more fundamental issues in the low value adding tasks that are a prerequisite for doing business. It is about solving common pain points and creating a customer-centric experience.
Bob’s post also introduces the concept of self-sovereign identity. Data privacy rules are increasingly granting more protection to consumers. Self-sovereign identity, therefore, refers to the way in which people can take control of their data and only give companies the data which is necessary for a product or service. This means that insurers will have to better calibrate the level of information required to provide a service, which will naturally lead to more customer-centric products and services. It is an opportunity for insurers to listen to customers and provide the services they want, in the right volume and in the right way.
If you are interested in Bob’s article, you can find it here.
Allianz and blockchain Allianz is keen on experimenting with blockchain and Bob walks us through two recent projects.
- Captive insurance blockchain
Captive insurance programmes, one of the most complicated aspects of commercial insurance, are established by multinational organisations which self-insure instead of purchasing insurance. This entails creating their own self-insurance program which pools together selected assets and insurance exposures from their global operations. They collect premiums from each operating company and pay out claims internationally as they arise. Due to the complexity of self-insuring, captive insurance companies use an insurer to effectively administer the program. Allianz is one of those insurers, having partnered with captive insurance companies to provide administration and compliance services utilising its international network.
Blockchain is integral in making this task simpler. The blockchain network automatically connects all the parties in the programme, including the captive management, the local subsidiaries and the fronting insurer. Any updates or changes to the data are shared in real time across the network, creating a much faster, transparent, secure and efficient means of distributing information, conducting business processing and recording transactions.
But why use blockchain? Since all parties are trusted in a captive insurance model, one could argue that a set of connected databases or APIs will do.
While all parties are trusted, which is often the case with private blockchains,...
For today’s episode we are going to Paris with Laurent Benichou, director of R&D at AXA. Laurent will introduce a famous blockchain case study called Fizzy, AXA’s blockchain flight delay insurance policy.
Blockchain in two minutes A blockchain is a fully distributed database. This means it has no single point of failure and no central managing authority.
Blockchain’s technical characteristics, such as its immutability and cryptographic verification, create numerous convenient features including fast and easy payments, smart contracts and the ability to indefinitely store information.
Fizzy Fizzy is a fully automated flight delay insurance policy that runs on the Ethereum blockchain and allows customers to get indemnified as soon as they arrive to their destination. The process is fully automated, with a smart contract deciding whether customers are eligible for indemnification. This means no action is required by eligible customers to claim their indemnity.
AXA fully supported Laurent’s idea. Deploying Fizzy, which began development in late 2015, was easy from an internal point of view. This is because AXA is aware of customer pain points regarding flight delay insurance:
Coverage exclusions reduce customer satisfaction as they can lead to cases where the policyholder is unaware whether they are covered or not. Customers do not know when they will be compensated. Customers have to provide proof of delay. This is a cumbersome process involving contacting the airline to provide proof and sending it over to the insurer.
AXA was excited to create a product that efficiently deals with these challenges. Fizzy is very transparent with no claim forms, proof of delay or other paperwork involved. These issues are all automatically dealt by Fizzy, which notifies the customer that the policy has been purchased successfully, that it is stored on the blockchain and that compensation has been completed. In that way, AXA tries to create trust between itself and its policyholders.
If you would like to find out more about the process behind launching Fizzy, Laurent has written a blog post which you can find here.
Fizzy’s value proposition Fizzy’s value proposition for AXA revolves around rebuilding trust in the insurance system.
- Customer-centricity Despite AXA being a party to the transaction, Fizzy will reinforce trust by ensuring total transparency in making policy payouts. As Laurent puts it, “it’s not the insurer, it’s the smart contract on the blockchain” that will decide whether the policyholder is eligible for indemnification. This means that unlike traditional flight delay policies, where not every eligible policyholder asks for their indemnity due to the cumbersome process, Fizzy guarantees that every eligible policyholder will be compensated. Laurent is confident that customers will be willing to pay more for that guarantee, a necessary condition as paying every eligible customer means the price will need to be adjusted to retain margins. Having said that, Laurent is keeping the same margin for Fizzy as for other products (and perhaps even a lower margin for the first years). Fizzy is more about increasing customer-centricity than directly improving AXA’s profit line. In that way, AXA can build trust between themselves and their customers.
We cannot but notice how both Laurent and Stefan from Etherisc (which we covered in a previous episode and provides its own flight delay blockchain product) stress the importance of customer-centricity and using blockchain to rebuild trust in the insurance industry.
If you want to find out more about blockchain’s potential to create trust, you should check out our episode (Blockchain vs. the Insurance Trust Deficit) on blockchain and the insurance trust deficit.
- Learning exercise
Another benefit of Fizzy is that it helped AXA better understand blockchain. Laurent tells us launching Fizzy helped the team develop a bette...
Today’s episode takes us to New York with Bill Pieroni, President and CEO of ACORD, the global data standard setting body for blockchain in the insurance and related financial services industry.
Bill shares his perspective about the importance of the uniform data standard provided by ACORD and the value of investing in blockchain and new technologies.
Blockchain in two minutes A blockchain is a digitized, decentralized ledger of transactions.
The first step is a transaction request, such as a claim, contract or endorsement. This request goes over a peer-to-peer network and, after its validity is verified through cryptographic algorithms, it is combined into a new data block which is added to an existing blockchain, thereby completing the transaction.
In insurance, the peer-to-peer network can be comprised of insurers, reinsurers, brokers, independent agents, regulators or anyone with a vested interest in the insurance industry.
ACORD ACORD is the global standard setting body in the insurance industry. It aims to bring together various stakeholders for whom collaborating would otherwise be difficult, either because they are competitors or because they lack the necessary infrastructure. For over forty years ACORD has been providing the infrastructure, facilitation and expertise to enable fast and accurate data interchange by creating electronic standards, standardised forms, taxonomies and tools. It boasts over 8,000 global members, with one third of all global premiums leveraging ACORD standards covering brokers, agents, carriers, reinsurers and solution providers.
With new technologies such as blockchain, IoT and usage-based insurance, data standards have become more important than ever. Investing in innovation runs a risk of becoming a one-off investment due to an inability to effectively leverage the technology. By setting a common data standard across the industry, ACORD helps lower the cost, risk and time associated with investing in innovation.
ACORD and blockchain A great aspect of blockchain is that it requires a level of cooperation which brings together the stakeholders in the insurance industry. Operational efficiency is blockchain’s most popular feature. However, Bill reminds us of blockchain’s potential to enable the development of superior value propositions. Talented individuals across the insurance industry can work together to focus on meaningful differentiation rather than just thinking how to compete on price based on a specific set of data.
Following a proprietary approach to data standards would be a mistake. It would create barriers in the industry by limiting a product’s uptake and the the availability of vendors to develop innovative solutions.
Having a common data standard is therefore critical. It reduces risk and makes it easier for existing legacy platforms to adapt to blockchain. A common data standard does not only create a tactical advantage, ie cost reduction, it creates a strategic advantage as well. ACORD standards leverage much of the work done in the insurance industry in the past decades and share that with ACORD’s global network.
ACORD is involved in most, if not all, blockchain initiatives globally, either by helping develop their data standards or by directly leveraging ACORD standards as part of the initiative. Here at Insureblocks we have seen quite a few of these initiatives. Insurwave, B3i and R3’s Corda blockchain all utilise ACORD standards. ACORD is also working with different digital network operators, including B3i and the RiskBlock Alliance, to create a smart contract standard on how data is processed, a key step in allowing interoperability between different networks. Finally, ACORD is working with Ethereum and IBM’s Hyperledger Fabric as it seeks to set a uniform data standard across blockchains.
Data in the insurance industry Data is the lifeblood of the insurance industry,
Welcome to another episode in ours News Flash series, where we share the latest developments in the blockchain space, straight off the press. Today we are joined again by Ranvir Saggu, who previously featured in Ep.8 – Building a Blockchain PoC/Pilot, and we welcome Bradley Brandon-Cross to Insureblocks for the first time.
Ranvir is CEO at Blocksure – a blockchain business specifically focussing on implementing blockchain in the insurance space, and is currently focussing on Blocksure OS, which is a platform set to revolutionise the insurance industry. He is a seasoned insurance executive with over 25 years in-depth experience across various composite insurers, with hands-on experience in delivering large transformational programmes at the highest level.
Bradley is Managing Director at Commercial & General– a small independent insurance broker which focuses on both commercial and consumer insurance lines. Bradley also has a wealth of experience in insurance, leading GE Capital’s primary insurance business in Europe and responsible for innovative products such as the first Shariah compliant insurance product authorised by the FSA.
Ranvir and his team at Blocksure have been developing Blocksure OS for 4 years, with 2 years in concept and 2 years spent on PoC and validation. Throughout the final year they were looking for pioneering brokers to partner with in designing an innovative concept product on their new platform. Bradley and his team at Commercial & General were instantly excited by the technology and the prospect of reducing costs and improving customer flow and beginning product development on their Blocksure OS platform.
The Product Together with Covéa Insurance, Blocksure and Commercial & General are releasing Insure Now. Insure Now is a tenant’s policy targeted at millennials, where blockchain facilitates policy administration and premium collection with the entire insurance methodology built around the technology. It is the first insurance product in Europe which utilises blockchain and the first product to be built on the Blocksure OS platform, which uses a microservice architecture with R3’s corda platform at its core. The product is smartphone based, with an app controlling the interactions of the customer, catering for their every need through a simple user interface on their phone, a revolution in the paperwork heavy insurance world.
The blockchain engine allows secure and validated contracts in each part of the database which can be viewed in real-time by all parties, behind a web-enabled front end. Previous platforms utilised for tenant’s insurance have been plagued by issues with database integrity and data transferral between brokers and insurers, and third-party administrators. However, blockchain should alleviate some of the back-office costs by removing these issues and a huge amount of the administrative mess, ensuring that companies can focus on the customer experience. Real-time updates and automated functionality allow changes to policies to be administered with minimal fuss and within seconds, reducing cost and time and providing obvious benefits to the customer. What challenges have been faced in blockchain adoption? At Commercial & General, one of the main hurdles to overcome was understanding blockchain and how it would work in practice. Ranvir and his team at Blocksure were excellent at explaining the basics of the concept and helped the team overcome these initial challenges. However, there are always some who do not fully understand the benefits, and it is important that these people recognize the innovative and experimental nature of the product and look at all the positive feedback garnered from users and testers.
Challenges have been further minimised by Ranvir’s team building the platform from an insurance-first perspective, enabling them to explain the benefits of the platform in ‘insurance-speak’. Not only does this allow insurance brokers to better comprehend t...
This week we look at the exciting journey from Bitcoin to enterprise Blockchain with Burak Yetiskin, a director at Deloitte in Switzerland.
Burak, a former cryptologist turned strategy consultant, has been working in consultancy for nine years now. His last three years have been spent working exclusively on DLT and blockchain technology within the financial services and insurance sectors at Deloitte.
Blockchain in two minutes Simply put, blockchain is the underlying technology of Bitcoin, where Bitcoin was the first application of distributed ledger technology (DLT) used for transactions, in the form of the first decentralized cryptocurrency.
Following from the first deployment of blockchain technology and the success of the first Bitcoin transactions, the technology is being scaled into something much greater than previously imagined. What was originally created to underlie an online currency is becoming a complete distributed solution, revolutionising global business and trade. This revolution is paired with a change in perception, as blockchain developed from ‘the technology behind bitcoin’ into a distributed ledger solution allowing the immutable agreement of facts, statements or contracts in the business world.
What is Blockchain? CNBC explains the break-though technology from CNBC.
How did the banks and governments react to Bitcoin initially? Due to Bitcoin’s lack of central authority, it was and partially still is perceived to represent a shadow finance world, where the participants are unbound by regulations such AML, CTF and KYC, meaning governments had reason to be fearful. China’s move to ban access to cryptocurrency exchanges in addition to ICOs until clear regulatory requirements are introduced exemplifies this scepticism, with hopes that the volatility of the market can be regulated and protection measurements can be put in place.
The small-scale adoption of cryptocurrency worldwide does not threaten established institutions and governments; however, they’re increasingly realising the potential of bitcoin and also the underlying technology. A recent speech from Chinese President Xi Jingping outlined the value of blockchain to modern technological advancement, with Chinese Central Television stating that “the value of blockchain is 10 times that of the internet” in a recent show. This represents a significant U-turn in their standpoint on the technology. They are not alone in embracing blockchain, with numerous Proof of Concepts and pilots built using blockchain or DLT inspired technologies (see Ep.8 – Building a Blockchain PoC/Pilot), with cases of usable money transfer and trade finance platforms emerging recently from huge institutions such as Santander and HSBC.
The Bitcoin ‘hype’ of Q3 2017 – what triggered it? The hype was fuelled by extreme market volatility, which brought media attention and subsequent market entrants fuelled by large short-term gains. This led to a surge in the market value from 18 billion in 2017 to almost 800 billion by the start of 2018, only to decrease again to around 200 billion by June 2018. The rise and fall was due to increased publicity influencing a rapid influx of money into the market, causing accelerated market growth without the underlying development of the firms which issued the traded coins – leading to an unsustainable hike in price.
However, a benefit of the increased publicity surrounding the Bitcoin bubble is the massive spike in public awareness and education regarding blockchain technologies, which could prove beneficial for the long-term adoption of blockchain technologies in general.
Blockchain’s love/hate relationship with Bitcoin For those in the blockchain industry, there is often a love/hate relationship between Blockchain and cryptocurrencies such as Bitcoin. The love stems from the continued awareness and publicity that Bitcoin provides to other blockchain based technologies,
Insurwave, the new marine insurance blockchain platform launched by EY, Guardtime, Microsoft, Willis Tower Watson, XL Catlin, MS Amlin and ACORD and piloted by Maersk has been a recurring theme here at Insureblocks.
In a previous episode, Insurwave - a Maersk pilot for marine blockchain insurance, we examined the client’s perspective. In a more recent episode, Insurwave: the complete story with EY, we discussed the process of creating Insurwave. To complete the circle, today we will look at Insurwave from an insurer’s perspective.
For today’s episode we were lucky enough to have two speakers, Madeline Bailey, Head of Strategic Initiatives at MS Amlin, and Hélène Stanway, Digital Leader at XL Catlin.
Blockchain in two minutes Blockchain is a distributed ledger that allows users to share data in real time in a secure and immutable way. This data can be related to assets, for example the location of a vessel, or it can be a smart contract, a piece of code set to execute when a set of specified parameters is fulfilled.
Blockchain has the potential to create trust between parties in the insurance industry and improve risk intelligence, lowering costs and benefiting parties across the insurance value chain.
Why Insurwave? In the past four years the marine insurance industry has experienced declining performance and increasing combined operating ratios. It has become necessary, therefore, to take a strategic look at the industry and consider how new technologies can improve efficiency. In building Insurwave, both MS Amlin and XL Catlin were willing to take a leadership position in the insurance industry and commit to a vision of how the industry is going to develop.
In an industry not known for embracing change, developing Insurwave came with challenges. Working alongside competitors and completely re-inventing the underwriting process is not something insurance companies have done before. However, every participant was keen to grasp an opportunity to cooperate with representatives across the value chain and consider what each needs out of an insurance transaction to re-imagine the underwriting process.
The low margins plaguing the insurance industry posed an additional challenge. Unlike usual, well defined projects, it is harder to quantify the costs and benefits of investing in innovation. For that reason it was important to have a clear set of goals with Insurwave. One of the main factors Insurwave has been successful is its focus on providing hull and war cover for its pilot with Maersk.
What insurwave does?
Insurwave’s effect Insurwave allows parties to seamlessly share data between them. By combining blockchain with IoT data, parties have access to real time information. At the moment Insurwave provides over thirty data points per vessel. The aim is to get to fifty. Insurers get more data, get data of different types and get it in real time.
Up until now, insurers traditionally looked backwards to quantify risk. This means the insurance industry has yet to come up with a definitive answer on how to use all this new data but Insurwave opens up a range of new possibilities.
- Real time decision making
Real time data updates have the potential to shift traditional business models in favour of real time decision making. Consider war zones, for example, which are geofenced in a smart contract on the blockchain. A vessel captain will be able to decide between navigating through a war zone, knowing it will lead to an added premium, or avoid it in favour of a longer journey which will also require more fuel but at a lower premium.
Additionally, connecting the IoT data points to risk and contract data opens up the possibility for different types of products and services for clients, creating a better tailored and more efficient service.
- Cost reduction
Another advantage of effortlessly sharing information is cost reduction. Traditionally,
In one of our previous episode, Insurwave - a Maersk pilot for marine blockchain insurance, we introduced Insurwave, a new marine blockchain insurance platform launched by EY, Guardtime, Microsoft, Willis Tower Watson, XL Catlin, MS Amlin and ACORD and piloted by Maersk.
This week we are joined by Shaun Crawford, Global Insurance Sector Leader at EY and one of the founders of Insurwave. We will be discussing the complete story of Insurwave, from Proof of Concept to launch.
Blockchain in two minutes A blockchain is a series of blocks of continuous records, where a previous block is effectively a cryptographic copy of the information from the preceding block. The blockchain is managed autonomously using a peer to peer network, meaning that the whole network will know if a peer makes a change to the blockchain. Therefore, everything has to be authenticated. This leads to a live, immutable audit trail.
Insurwave Insurwave is the first product of Insurwave Ltd, a joint venture between EY and Guardtime, a blockchain company whose experience ranges from the NHS to the US Air Force. It is a blockchain platform linking the shipping industry with the brokers, the insurers and reinsurers. At the moment it is focused on providing hull and war cover.
Insurwave is built on the open source version of Corda (See Corda's latest announcement). The reason for this choice is that Corda is a very mature and privacy-focused blockchain. In other blockchains every peer has access to all the data on the blockchain. Insurwave, however, deals with sensitive company information and requires certain data to only be accessible by certain peers, making Corda the best choice.
Building Insurwave Building Insurwave required looking beyond the insurance industry. Guardtime was chosen both for its expertise in blockchain and its range of experience. Gathering a group including shipping, insurance and technology leaders created a team capable of critically examining existing processes to build a new product from the ground up.
The first step in building Insurwave was to create a PoC. This revolved around ten use cases and considered how blockchain can improve efficiency and reduce costs. In doing that, it was always important for Insurwave to be a new proposition, a completely new business model, rather that a digitisation of existing processes. Insurwave has been an opportunity to re-imagine how the underwriting process would be in the future and how claims handling could become more efficient. The end result is that Insurwave can improve cost efficiency by at least 40 per cent.
As the insurance industry isn't particularly known for embracing change, building a completely new platform can be challenging. What made Insurwave feasible was having a small team. Having just one shipping company, one broker, an insurer and a reinsurer ensured that the team could examine all facets of the insurance industry while also remaining flexible.
Insurwave's potential Creating an immutable audit trail and seamlessly sharing data between parties has the potential to improve existing practices in numerous ways.
- Bring risk closer to capital
For shipping companies like Maersk, a major benefit of Insurwave is that it allows them to bring risk closer to capital. In the traditional model, shipping companies have an enormous amount of data that is not being used when the insurer prices a journey. Insurwave can provide the insurer with this data in a structured manner, allowing them to have more certainty, better quantify the risk and provide a better price. The data will also be helpful to brokers, who can use it to look for the right type of insurer and provide a more compelling service.
- Improve the title process and claims handling
Having an immutable audit trail means the title process will become easier and more efficient. All the relevant data will be found at one place, speeding up the process significantly.
Welcome to the first episode of our new News Flash series, where we share the latest developments in the blockchain space, straight off the press. In today’s episode we have Ryan Rugg, Global Head of Insurance at R3 and a regular speaker at Insureblocks.
R3, which featured in one of our previous episodes (R3 – The blockchain banking consortium) started in 2015 as a consortium of financial institutions that joined forces to test blockchain solutions. Three years later, their hard work has culminated in an exciting new project and we are proud to announce the release of Corda Enterprise to the insurance industry.
Corda Enterprise is R3’s commercial offering that brings greater enterprise capabilities to the Corda platform. It builds upon Corda’s functionality, enhancing availability, security and performance.
Corda Corda, the blockchain created by R3, is the only blockchain that has been designed and built specifically for business. Corda’s focus on privacy, security and scalability distinguish it from other blockchains. Unlike Ethereum and Hyperledger Fabric, where all the information is shared between every node on the network, Corda shares information on a bilateral and multilateral level only with parties that need to see it.
This choice has certainly paid off as there are currently over 200 financial institutions, regulators, insurers, trade associations, professional services firms and ISVs that are working on Corda. Many of these have featured on Insureblocks, such as B3i, which replaced the IBM Hyperledger Fabric with Corda, Insurwave and RiskBlock.
Corda also appeals to industries beyond insurance. Fusion LenderComm, a syndicated lending platform and GuildOne’s Royalty Ledger, a blockchain solution for the oil and gas sector, both utilise Corda.
This wide participation across industries is the reason Corda is an open source project. R3 wanted Corda to be a decentralised and open environment where every company can work with others or create and share their own innovative solutions. Continuing in this spirit, Corda and Corda Enterprise are fully interoperable. Anyone can remain on Corda without procuring the Enterprise licence. Anyone can upgrade to Corda Enterprise and still work with applications on the Corda blockchain.
Why Corda Enterprise? The whole idea of Corda is to enable businesses to transact directly and privately, reducing transaction costs and streamlining operations. However, many large users faced technical, regulatory and compliance issues that prevented them from using blockchain internally at scale. After listening to Corda members’ requests, R3 is launching Corda Enterprise and has implemented additional functionalities so that every business can benefit.
These extra features enhance security and make Corda Enterprise easier to scale:
Blockchain Application Firewall - enables Corda Enterprise to be deployed inside corporate data centres while retaining the ability to securely communicate with other nodes on the network. This is a unique feature that is not present in any other blockchain 24/7 support Predictable release schedules Governance, performance and availability monitoring Enhanced security Disaster recovery Support for Oracle and SQL databases Corda network
The Corda Network People often talk about ledger interoperability but forget about interoperability within ledgers themselves. Within differently designed networks, such as Ethereum and Hyperledger Fabric, users cannot seamlessly operate from one application to another, leading to trapped assets in different channels.
In reality businesses want to operate with more than one application at a time. With Corda Network, members have a unique ID. This means they have a single identity on the platform and can seamlessly operate within all applications, whether on Corda Enterprise or Corda open source.
Starting out: Corda or Corda Enterprise?
Creating a decentralised insurance model with blockchain & smart contracts - Etherisc This week we are taking a broader look on how blockchain can transform the insurance sector. Specifically, we will consider how blockchain and smart contracts can be used to create a decentralised insurance model.
With us we have Stephan Karpischek, co-founder of Etherisc. Etherisc is building decentralised insurance applications on the Ethereum blockchain. They began in 2016, pioneering a flight delay application utilising a public blockchain. Currently they are developing over 20 products and will soon release a product covering hurricane insurance for Puerto Rico.
Etherisc’s vision is much larger than simply developing its own applications. It is building an open and free protocol for decentralised insurance so that companies can develop their own insurance products using smart contracts.
Blockchain (and Ethereum) in two minutes On a first level, a blockchain is a data structure. On a larger scale, blockchain is an experimental field where we can try and build new incentive schemes. It is an opportunity to re-evaluate how economic actors cooperate and make decisions. We can use blockchain to develop new financial instruments, and more generally a new financial system, that works better than the current financial industry and economic structure.
The Ethereum blockchain adds another infrastructure layer. At its core, Ethereum is meant to be an open space. Everyone can join the Ethereum network and develop their own applications and financial products. This means that Ethereum is supported by a large and diverse community of developers who make sure the blockchain rises up to any challenges it faces, such as cost of transactions. This makes Ethereum one of the most mature blockchains to tackle the decentralisation of the insurance industry.
The decentralised insurance model 1. The goal of decentralised insurance
So why should we decentralise insurance in the first place? In the current insurance model there is an asymmetrical relationship between the insured and the insurer. The insurance company manages both the risk pool and the pay-out. They are therefore incentivised against paying out claims, at the expense of the insured.
A decentralised model using blockchain offers a solution to this problem. Blockchain can be used to build automated systems that manage the risk pool just like an insurance company, minus the commercial incentive to withhold pay-out.
2. Smart contracts as a public utility
A decentralised insurance model assumes that any company can provide their own insurance product. To achieve this, it is necessary to make the means of providing insurance easily accessible. Etherisc's solution to that is a smart contract that is freely available to copy and use. Anyone would be able to use this technology without requiring a licence.
As often happens with free software, funding can be an issue. Etherisc is using a token sale to fund this idea and has already raised enough money for a few developers to start work on this protocol. In the end, however, making smart contracts a public utility is a community project requiring the feedback and engagement of the developer community. This makes the open Ethereum blockchain an ideal environment.
Centralised versus decentralised insurance models, both utilising blockchain
- Traditional insurance actors in the decentralised model
Smart contracts can automatically examine a balance sheet, collect premiums and make pay-outs under certain conditions. This technology becoming freely available would mean that traditional insurance companies would have to fundamentally adapt their business model.
The first step to do that successfully is educating themselves. Stephan firmly believes that insurance companies need to use a decentralised system in order to understand it. His advice for insurance companies is to start using blockchain applicat...
Bonus episode: diversity in blockchain Ryan Rugg & Madeline Bailey on Insureblocks
As a man of mixed origins and as a father of two little daughters I am concerned by the lack of diversity that we find in blockchain and in the insurance space. To help me tackle this important issue I had the great pleasure to have Ryan Rugg (previously on Ep. 6 - R3 - the blockchain banking consortium), Head of North America for R3, and Madeline Bailey, Head of Strategic Initiatives at MS Amlin.
At MS Amlin, Madeline is head of strategy and innovation, charged with leading the blockchain efforts on the Insurwave platform, whilst Ryan spearheads the insurance effort at R3, working alongside other B3i collaborators on the Corda platform.
Is there a diversity problem in blockchain? Between Ryan and Madeline, both recognised that diversity is vital for collaboration amongst teams and across the industry within such radical innovations such as blockchain. By ensuring that all individuals are heard equally, all perspectives can be included making the sector stronger. The collaborative nature is at the heart of blockchain’s use in insurance, where its purposes are to break down the barriers associated with different individuals and allow effective communication across all groups, with Madeline expressing her pleasure in collaborating with all involved parties whilst working on Insurwave.
Efforts to ensure diversity exist, with various internships targeting minorities and women in the financial sector, however Ryan also states her focus on mentoring start-ups helping to provide women with opportunities to succeed in InsureTech. Madeline joins her in these beliefs, aiming to provide more gateways for women into technology, whilst showcasing current female movers-and-shakers, such as Hélèn Stanway and Charlotte Halkett, in attempt to improve the female outreach for the industry.
The gender pay gap Following on from a social experiment in Norway (where young boys and girls were asked to undertake an identical task and then given different size rewards), both Madeline and Ryan expressed the need for equal pay, with rates of pay based on skill sets rather than gender or race.
Ryan supported this by mentioning the sales force CEO, who analysed the pay across his whole company, and then levelled off the gender pay differential, costing him 3 million dollars in the process. He was then shocked to discover merely a year later, that the differential had reopened, calling for increased awareness for equality in the process. Whilst Madeline and Ryan both agreed with this statement, they also recognised the need for women in senior management rolls and conference positions to ensure that the richness of views is captured at all levels of business.
Equal opportunities Whilst increasing female presence in senior management positions is important, education and support are also crucial in providing equal opportunities for women in the InsureTech. Madeline outlined a great example where a ‘women-in-InsureTech’ network ensured that conference panel featured a female speaker thereby increasing female outreach. Alongside this, Magda Ramada Sarasola, of Willis Towers Watson (previously on Ep.9 - Blockchain's disruptive potential) is looking to create a YouTube channel, providing blockchain education for boys and girls alike, and offering opportunities for young people to understand and appreciate technology, providing a gateway into the industry. Ryan also recognises the need for young girls to understand that it is possible to maintain a family and be a great parent whilst simultaneously reaching the top of their career.
How are organisations promoting diversity? Both Madeline and Ryan outlined various strategies which companies used to promote diversity. Ryan identified mentoring within companies as a way of promoting discourse between groups, and providing outreach talks to students, specifically targeting women.
An Italian Commercial Insurance Blockchain Pilot Here at Insureblocks we love hearing about interesting real-life insurance blockchain pilots. So we were very excited to hear about the launch of Generali’s quotation process blockchain pilot. To learn more about this pilot we had the great pleasure of having Marco Boni, Group Head of Operational Excellence & Transformation at Generali, who is “genetically in love with technology”, join us for a chat on Insureblocks to take us through the journey they went through in building this Italian commercial insurance blockchain pilot. 2 Minute Definition of Blockchain Instead of blockchain, Marco preferred to define what is DLT (distributed ledger technology). Small note to remember is that blockchain is a type of DLT. DLT is a technology that allows the storage of information in a distributed way. You can write on this distributed database, in an encrypted immutable way, after reaching a consensus amongst the participants. This technology enables you to increase the trust between all parties within an industry.
As the data is visible, agreed and secure, you can leverage smart contracts, self-executing codes, to automate business rules. Challenges of the Italian commercial insurance ecosystem Marco refers to the Italian commercial insurance ecosystem as “Spaghetti Insurance” as it isn’t that evolved. Therefore, the steps for the placement of commercial risk is done through manual activities. Back and forth information flow between carriers and brokers is done by phone and unstructured emails which complicates the matter when you have to draw up a policy based on this kind of unstructured information. This requires you to chase all the relevant parties to try and rebuild the entire negotiation, for the structure of the policy, that is perfectly in line with the needs of the client.
This is a very inefficient process which increases the risk of misalignment when structuring a policy. Market perspective solution Generali tackled those challenges by taking a market perspective and a market cooperation approach. They started from a business pain point that wasn’t connected to technology and realised that there existed problems that were shared at a market level.
They started by taking a market perspective approach by identifying the business pain points that were shared at a market level. This type of initiative and desire to solve those common problems together is within itself the biggest innovation they carried out over the last 2.5 years in the Italian market.
The initial founders of this initiative from the carrier side were Generali, AIG and UnipolSai with Zurich Italy recently joining the initiative. From the broker side the original founders were AON and Willis Tower Watson with Assiteca recently joining in.
Why was DLT selected over other more traditional technologies and what are the challenges with it? Once the pain points had been identified in early 2016, the initial approach to resolving those problems was with traditional technologies such as centralised relational databases. However, with so many competitors sitting around the table it was quickly realised that such a solution wouldn’t be viable as it would require building a centralised infrastructure. Towards the end of 2016 they started investigating the power of DLT and its ability to offer competitors the opportunity to work together in a decentralised manner whilst providing the necessary security, confidentiality and privacy they all required.
Marco does point out that whilst the features of DLT were superior to traditional technologies, for their requirements, there were challenges to its adoption. The main complexity with DLT wasn’t necessarily around technology but was related to coopetition (cooperation between competitors), a first in the Italian market. Defining the legal framework on how the participants of this prototype will be working in the future is the biggest challenge they...
B3i: building a blockchain digital network of trust B3i, the blockchain insurance industry initiative, often comes up in episodes on Insureblocks. Greg Crow gave us an introduction to B3i in Episode 2 from an XL Catlin stand point. So we were very excited when we had the opportunity to talk to B3i’s CEO, Paul Meeusen. In this exciting episode we discuss not only how blockchain can help build a digital network of trust but also hear about why B3i chose to replace the IBM Hyperledger Fabric with R3’s Corda to become their new blockchain platform.
2-minute definition of blockchain Paul describes blockchain as a Cloud + +. What are the “+ +”? Cloud computing is about sharing. Sharing reinsurance contract needs to be done in a safe manner. Safety whilst sharing on the blockchain is secured through cryptography to safe guard data so that only the parties who are part of the contract can see it.
Another element of the “+ +” is the smart contract capability, which enable us to codify business rules for the sharing of value in an intelligent way.
B3i and its journey B3i as a company, is only a few months old as it was recently incorporated in Switzerland. However, its journey started 2 years ago as a loosely held together joint venture. Initially as a group of 5, then 15 and then more insurance companies sharing their experience of blockchain. Early 2017 they built a blockchain prototype that became a minimum viable product (MVP) developed on IBM Hyperledger Fabric for a reinsurance application.
In the fall of 2017 they had a total of 36 market participants to market test the reinsurance prototype by simulating a range of CAT events. The positive results from this test formed the basis of B3i’s business plan to incorporate and raise funding from 13 insurance companies who became their funding shareholders. B3i is now raising a second round.
Paul Meeusen’s journey to blockchain During one of Paul’s last role at Swiss Re, he was setting up a finance service centre in India. Paul was stationed in India’s tech savy city, Bangalore. 3 years ago he tried to envisage the possibility of using blockchain for reinsurance processes by testing out its concept with his front line staff. They quickly realised that the technology could be used to reduce the inefficiencies around duplication and reconciliation.
Such a blockchain technology could bring all the brokers, reinsurers and primaries on a platform for working together and sharing data to make their lives easier.
Outside of the business environment Paul also noted that blockchain could be used for identity management and counter party management (eg. audit trail of provenance) in a country like India where proof of identity and of ownership is important where most information is stored on paper.
Blockchain providing peace of mind In spite of having a laudable objective, insurance isn’t known for having a positive brand, or a positive customer experience as the likes of the ones of Silicon Valley. Paul makes the comment that “would you take your children to the broker on a Saturday morning or to the Apple store?
There’s obviously a gap. Part of the problem lays with the two primary customer touch points. The first is the buying experience which is quite poor, most customers don’t fully understand it and it often feels to them as paying though they are paying for taxes when paying their premiums. The second touch point is when a claim happens. This isn’t a pleasant experience as the insured usually has to provide proof in a cumbersome way to be entitled to a reimbursement. Blockchain can help alleviate the challenges of those two touch points by making them more efficient. Contracts could be made to be more easily understood. The data we have on our policy holders and their assets can help us be more in touch with those customers and help them with loss prevention. Insurance companies can be more preventative in many different ways from black...
Ep.14 – Blockchain use cases outside of insurance For this week’s podcast we go out of the insurance world to explore some interesting blockchain use cases and pilots in other industries. In episode 6 we had Ryan Rugg introduce us to R3 the banking blockchain consortium. But for this one we wanted to go out a little bit further. As our guide for this journey we had the pleasure of having Lee Brenner, Chief Engagement Office at the Global Blockchain Business Council, live from Pennsylvania!
2 Minute Definition of Blockchain Blockchain technology is a decentralised database that is connected together to create a permanent unchangeable record of data that is loaded onto blocks. Those individual blocks of data are connected to other blocks of data (ie. chained together) on this database. Blockchains act as global notary. Eliminates the middle man by creating a system of trust and a level of confidence between the actors on the system allowing for P2P transactions.
The Global Blockchain Business Council The Global Blockchain Business Council (GBBC) came out of a meeting of thought leaders (blockchain, government and different industries) hosted by Richard Branson on Nectar Island to really think through how blockchain technology can affect civic society.
The idea of a global institution that unites individuals from the business community and from the blockchain community. The GBBC tries to advocate on behalf of the broader ecosystem to regulators around the world that if they try to regulate blockchain that it is done from an educated point of view.
Another aspect of the GBBC is engaging with government questions on who they should be talking to if either they want to get advice on blockchain or if they want to implement a blockchain solution such as on a land trust or a voting system for example. The GBBC can advice them on which companies can help government implement that whether it’s a startup or an enterprise. They can also share interesting case studies from the business world or from other countries.
The GBBC thus tries to build a broad network from the blockchain industry, the business world, to governments and regulators and to NGOs and charities.
Uses cases Business Processes & Payments - BitPesa A good example of how blockchain technology can be used in sectors outside of insurance is Bitpesa. Bitpesa tries to answer the question “how can we make financial transactions in Africa more efficient and secure?”. The current system is one were transactions are extremely slow, numerous intermediaries are involved, high costs and in general a very inefficient system.
Bitpesa created a blockchain solution that has built in data privacy, minimal fees and is mobile based thus providing the unbanked in Africa with financial solutions. This provides their customers the ability to make P2P transactions and regulators with automatic real time auditing.
Logistics & Supply Chain: Walmart Walmart has started to use blockchain technology in their supply chain. An example of this was used for tracking pork from Chinese producers to the store front. Walmart wanted to track the origins of the meat and its location in transit along the supply chain. This process would usually take days but with blockchain it could be achieved in minutes.
Applying this technology to the Chinese market was an important move for Walmart as Chinese shoppers remain sceptical of the quality of domestic food products, after various food-related scandals, such as one involving baby milk formula tainted with industrial chemical melamine, dominated headlines for weeks in 2017.
Now Chinese shoppers will be able to scan the food in Walmart shops to see the entire history of the food from farm to store:
Healthcare – MediLedger How can patients' medical records be stored, tracked and verified on the blockchain? How can we move from a paperless system to a very secure blockchain one?
Blockchain & Trade Finance This week’s podcast is all about blockchain in trade finance. We were very lucky to have Marilyn Blattner-Hoyle, Head of Supply Chain and Trade Finance at AIG. In this episode she will share with us the pilot they ran with Standard Chartered and with TradeIX.
2 Minute Definition of Blockchain Marilyn, approaches blockchain as a layman, so the way she looks at it, is blockchain is a form of distributed ledger technology, which simply put is a distributed database or ledger that can record and track transactions in a secure environment with optimal transparency. Cryptography underpins the way this is done.
The way AIG, and particularly Marilyn’s trade finance team look at blockchain is how it can be used to providing solutions to their clients by creating simpler ecosystems for allowing trade finance to occur.
What is trade finance? Simply put, trade finance is the facilitation by banks, financial institutions and other funders to support sellers selling goods and services and buyers buying them. There are many different ways to do trade finance whether with receivables, payables, loans or traditional trade finance with instruments like letters of credit. All areas of trade finance are ripe for blockchain/DLT solutions as we have seen with many pilots. So the issues with centralized databases, legacy systems, and fragmented paper driven solutions and even with fraud make blockchain a great potential solution for this industry.
Hurdles with trade finance that blockchain can overcome The reason blockchain and trade finance are natural partners is because much of trade finance is paper driven, fragmented, with different systems even within corporates, and certainly centralised databases that have a single point of failure.
For example, there is lots of paper-based invoice requirements. There are requirements for following different stages of an invoice life cycle and so there are lots of different data points that are super key for trade finance and so by being able to optimize all of those data points in a centralized place, where there's essentially one source of the truth; that's a game changer for the industry.
That’s something that the trade finance industry doesn't have right now and if it can be solved you can increase the trust between the parties. You can make it simpler to execute transactions at volume and then you can also add far more ecosystem participants such as corporates, banks and insurers.
But at the moment, that's all very difficult. So even within trade finance you have lots of corporates that use multiple banks to do lots of their different trade finance around the globe with lots of different systems for each jurisdiction and it's very difficult to merge those. By using blockchain or in fact even other forms of technology, such as even API's to be able to integrate legacy systems with something like a distributed ledger, that opens up opportunities that don't mean that you have to make full scale adoption a requirement now.
The first blockchain-enabled trade finance system
In October 2017, AIG launched its first blockchain-enabled trade finance system alongside Standard Chartered and TradeIX. The proposition is essentially based around a receivables finance deal where a large multinational corporate logistics client wanted to sell its receivalbes to Standard Chartered to give its core customers more time to pay. The reason blockchain was used was because the corporate wanted the capability to have a multi-bank structure as well as multiple insurers supporting the same.
The operational benefits - the use of the blockchain improves the transparency of the data in the invoice lifecycle which makes it easier to track eligibility of the invoices, insurance limits, premiums / margin and all the data driven aspects of an invoice being funded and insured. So those are huge changes from what's currently the case where you know as an insurer ...
Insurwave - A Maersk pilot for marine blockchain insurance Too often in the insurance industry we entertain in navel gazing by looking at what we do and what our competitors do, instead of really focusing on who keeps our lights on… our customers. So, for this week’s podcast we look at a customer’s perspective of marine insurance by talking to Lars Henneberg, Head of Risk Management at the logistic and transportation giant Maersk.
Maersk is the pilot customer of a new marine blockchain insurance platform called Insurwave that was launched by EY, Guardtime, Microsoft, Willis Tower Watson, XL Catlin, MS Amlin and ACORD.
As a special treat I was joined by Marilyn Blattner-Hoyle, Head of Supply Chain and Trade Finance at AIG as my co-host.
2 minute definition of blockchain For Lars, blockchain is a technology to share real time data. It gives perfect visibility to the participants. It can conduct a number of transactions simultaneously across a multiparty value chain.
What is marine insurance and how does it work? Shipping has always been in the business of taking risks. As Lars says, “in shipping we like risks we just don’t like the burden of them which is why we come to insurers”. There are four type of risks that require marine insurance:
hull and machinery of the vessel itself, container boxes, the cargo that is inside the container and all the liabilities that you can incur as a ship owner (Eg. pollution, damage to the cargo, or injures to the crew)
The marine insurance value chain and its challenges The way that risk is transferred to the insurance market is very long and cumbersome. The distance between risk and capital is simply too long. You’re left with a very long value chain with too many intermediaries, that is very manual:
A ship owner goes to a broker The broker goes to an insurer The insurer takes the risk and goes to another broker The broker finds a re-insurer who takes part of the risk The re-insurer goes to another broker to find a retrocession insurer
This value chain is very sequential and linear in how business operates with many frictional costs involved in it. As an example, for Maersk to insure one of its vessels it would typically take 100 document transactions and involve about 50 different stakeholders across the value chain.
There is a lack of transparency in such a value chain because a lot of information gets lost. Significant value leaks because all the intermediaries in the value chain take a portion of the premium as it goes through the value chain. For example up to 40% of the premium is transactional costs. This creates a level of dissatisfaction amongst insurers' customers as the system is antiquated, it is costly and inefficient.
Challenges within the marine industry The lack of data is a big issue to the marine industry. No one has a holistic view of the risk because insurers have chopped up the risk in fragmented lines of business. Some insure the ports, some insure the vessels, some insure the finance but no one has a holistic view. At the same time there is no real time visibility to the participants in the value chain.
Overall it is a very fragmented, reactive and slow industry which needs to be more forward looking.
This present system ties up too many resources for the customers of marine insurance. It ties up to 75% of their time on insurance contract administration and 25% on risk management. It should be the other way around.
Lars recognises that there has been some initiatives in the insurance industry to make the business model more efficient. Some of these initiatives have looked to get more shared real time visibility of the risk, which means that instead of using static demographic data you can follow the risk in real time such as where are the vessels, where do they trade and at what ports do they call. Additional initiatives have been towards automating underwriting through blockchain smar...
Bonus episode - "Pulse" episode of blockchain in insurance This is an exciting “Pulse” episode where we get a sense of what the insurance industry feels about Blockchain. In this episode I interviewed 12 delegates who attended the Blockchain for Insurance summit here in London on the 22ndand 23rdof June.
Each delegate was asked to answer two questions:
Is Blockchain all hype? Is the insurance industry ready to embrace blockchain?
We would like to thank the following participants for participating to this “Pulse” episode, in order of appearance:
Benoit Abeloos, Policy Officer, Blockchain, FinTech, Startups and Innovation at the European Commission Susan Holiday, Principal Insurance Specialist at IFC - International Finance Corporation Dante Disparte, Founder and CEO at Risk Cooperative / Co-Author Global Risk Agility and Decision Making Martijn Minkenberg, Dutch Association of Insurers Ruth Cameron-Errington, Deputy Global Claims Operations Manager at SCOR Mark Cook, Global CIO at Marsh Sylvain De Crom– Head of Research and Development at Aegon Blue Square Re Mark Simpson– Head of Consultancy at Armour Risk Management Limited Lee Brenner– Head of Partnerships & Marketing Strategy at the Global Blockchain Business Council Mark Nance– VP, Chief Data Officer at American Fidelity Michael Smith– Innovation consultant at American Family Insurance Cecilia Persson– Manager Underwriting & Risk Control
Have a listen to this episode and let us know what you think by writing your answers in the comments below:
Is Blockchain all hype? Is the insurance industry ready to embrace blockchain?
Building a blockchain insurance ecosystem in Singapore For this week’s Insureblock’s episode we headed to Singapore to meet an interesting startup, called Inmediate.io. which utilises blockchain and smart contracts. We had the pleasure of interviewing its CEO, Otbert de Jong and CTO, Nelius Strydom.
Inmediate is the first Singapore digital broker. They operate a b2C platform for retail insurance and operate a b2b insurance technology distribution business. They have specialised in building a connectivity platform with insurance companies by creating an API network that enables them to offer real time processing of insurance. Now they are aiming to build a new age ecosystem by utilising blockchain and smart contract technology where insurance can be sold in a quicker and more efficient manner.
2 Minute Definition of Blockchain Blockchain is a digital wallet that allows you to store information and validate that information in a decentralised way.
The traditional model in cryptocurrencies is one that allows you to run digital wallets for customers to make payments. Inmediate takes that very model to the next level by enabling their digital wallets to enable insurance contract information and allowing them to run standard insurance contracts for customers. This removes the ambiguity around policies and contracts as everything is hard coded onto the blockchain. The smart contract then allows you to monitor triggers against the blockchain, which when any of them are affected they can have a predetermined outcome.
Why Singapore? Otbert and his wife were living in Singapore and needed to purchase an insurance policy for their car. They found the traditional local experience in Singapore was very inefficient and along with Nelius they set out to modernise it.
Whilst Singapore is renown for big very tech savvy with a high penetration in mobile devices. Its insurance digital penetration is significantly lower, compared to Europe, resulting in much lower sales conversion.
For Nelius, this presents a large market opportunity that leverages that clear Asian big tech infrastructure and large market of mobile users into one that successfully purchases insurance policies online. The reason he believes this hasn’t yet happened is that the traditional online buying process isn’t where it should be, especially when you compare it to the one in Europe. Nelius and Otbert believe they can rectify that.
The Inmediate Ecosystem Otbert believes that if they want to have a smart contract based blockchain insurance, they require to have 3 stake holders: insurance companies, distributors and customers. These stake holders need to be able to work together in a unified way. Otbert and Nelius set themselves out to build a network in a similar manner that Visa has set up a payment network around a common set of standards. By getting these stake holders to agree to those common standards the participants can work together in a more efficient and easy manner to offer customers “smart insurance” presented in a unified way.
Why would insurance companies join the Inmediate Ecosystem? The main benefit for insurance companies is in the cost savings. A smart contract based blockchain can completely transform the existing policy and claims process resulting in significantly lower administrative costs that traditionally supported those inefficient processes.
This new infrastructure openness up opportunities for insurance companies to develop new products for new markets in a more cost-effective manner.
Benefits for consumers As insurance companies benefit from lower costs on the Inmediate Ecosystem they have the opportunity to offer their consumers more competitive pricing onto their insurance policies. Consumers will be able to get access to new insurance policies that presently do not exist. Policies themselves should become simpler and more straight forward.
Otbert believes that the main benefit though wil...
RiskBlock Alliance This week’s Insureblock’s episode takes us to Pennsylvania, USA, where we had the chance to interview Christopher McDaniel, President of the RiskBlock Alliance; an industry-led consortium that collaborates to unlock the potential of blockchain across the insurance industry.
2 Minute Definition of Blockchain For Chris, there are three fundamentals to blockchain:
Ubiquitous data – all data is synchronised between the participants behind the scenes. Immutable – data cannot be erased. It is a perfect audit trail with a one source of truce for the participants using the blockchain. Smart contracts – the capability of saying if a situation exists do something on the blockchain. It is a way of automating different processes that may exist on the blockchain.
What is the RiskBlock Alliance The Institute is an organisation that has been around for a hundred years in the property and casualty space. It provides education and research in that space. 18 months ago, the board of the Institute tasked the RiskBlock Alliances with:
Proof of concept - could blockchain be used in the insurance space Proof of collaboration - can we get competing firms to work together around a common goal
By June 2017, four proof of concepts were set up with over 40 insurance entities collaborating together, leading to the formation of the RiskBlock Alliance.
In Chris’ opinion, one of the smartest things that the RiskBlock Alliance did was instead of jumping into the deep end of the pool was taking 12 weeks to really define what the RiskBlock Alliance was going to be and what value it will bring to its members. They created a consortium of insurance carriers, reinsurance and brokers to build a blockchain framework with multiple use cases on top of it. The framework is really key, as it is the first truly enterprise friendly reusable blockchain framework.
Why use blockchain? Prior to the RiskBlock Alliance one of the Institute’s members built a Proof of Concept for a compelling need in the insurance industry and tried to get the rest of their peers / competitors to join in. They received a lot of pushback from their competitors. RiskBlock being an independent trusted source was able to bring that exact same solution with the participation of all its members in the roll out of that particular use case. Blockchain is a “team sport”. If you are doing something that is individual to your organisation there are more likely better solutions out there than blockchain. However if you are looking to join together different entities and competitors and want to have them share information in an ubiquitous, secure and real time manner, then blockchain is the best solution for that.
Getting competing entities to work together Everyone seems to think that they have the secret sauce. In one example of a use case need around subrogation – the process between 2 insurance firms who are involved in an auto accident (for example) with a need to negotiate a final financial settlement. Arbitration may be involved and it’s a very painful manual process. By creating a blockchain solution you can automate that process and create efficiencies for all parties. Effectively the way to getting competitors to work together is by ensuring that the value they get is greater than their competitive fears.
Building a truly digital process 80% of blockchain use case are in the efficiency area. 20% is in new products, new channels, new ways of doing things. Most of the low hanging fruits is around those efficiency gains. With efficiency gains comes process improvement needs. To maximise on the full efficiency gains of blockchain, insurance companies also need to ensure that not only do they input data onto the blockchain but that their back end systems are upgraded from a manual to automated ones.
How does the RiskBlock Alliance compare to other consortiums like R3 and B3i?
Blockchain’s disruptive potential For this week’s Insureblock’s episode we were extremely lucky to catch up with Magda Ramada Sarasola, Senior Economist at Willis Towers Watson, to discuss the disruptive potential blockchain can have in the insurance industry both now and in the future.
2 minute definition of blockchain Technically the definition is that it is a shared distributed ledger, whose core concepts are that it is a way for people that don't know each other and don't trust each other but need a way to transfer value between each other. A good example of that is Bitcoin – the first blockchain technology used for transferring value without anyone actually overseeing that market. For this to successfully happen you need three things:
The value being transferred arrives to its intended recipient without it being intercepted or modified. This a role which has traditionally been occupied by clearing houses or trusted partners. In a blockchain world you don’t need them You have to make sure that whoever is sending that information or that value owns it and hasn’t spent it before to avoid double spending The transaction is considered valid between the two parties and is successfully recorded onto the blockchain
So to resume blockchain is a means of actually transacting value in a way that you know doesn’t require anyone to be providing trust in that system (ie. no central intermediary).
Your journey to blockchain 4 years ago, Magda was working on a micro-insurance project for a client looking to expand in Africa. At that point she came across blockchain as a concept and spent a whole week on YouTube videos trying to understand what it was and then convinced her editor to run a piece on it. 45,000 visits were reached within a week of publishing her article and Magda’s life changed overnight as did her role. Ever since that day Magda’s journey became one of increasingly learning about the technology, thinking about the impact it would have to the insurance industry and actually developing solutions for her clients.
Blockchain’s disruption potential – short to medium term In the short term it is about traditional insurers exploring blockchain in the content of how they interact as an industry to enabling shared databases in a semi trusted or trust less type of system. The use cases we are seeing are looking at interaction among peers, interaction among competitors, synchronisation or self-synchronisation of databases. At increasing efficiency and driving down costs around things like reconciliation in a semi trusted environment.
However, the actual attributes that makes blockchain a sociological revolution aren’t being used in that context. The same thing with smart contracts and how they are being explored in policies like marine insurance, supply chain management, and cat bonds, what we are doing is taking parametric insurance and using a very simple type of policy that we can automate and use a smart contract to automate that policy. Technically automation is something that doesn’t need the blockchain.
Magda sees the insurance industry using blockchain as an excuse to do automation that was long over due and that could have been done with other technologies. What a smart contract is automating is a relationship between two contracting parties that do not necessarily trust each other and have a conflict of interest and they agree on that contract and put it in a place where neither part can actually modify the terms. The first example of such an insurance policy was with the fight delay policy (eg. Etherisc & Fizzy). It wasn’t about it being automated, it was about customers willing to pay a premium for a policy being unstoppable and having an unbreakable escrow.
Whilst this makes a lot of sense for the end user what is the business case for insurance companies to be offering this kind of automation. Magda gives examples of companies that offer micro insurance policies for life...
Since 2016 we have seen a plethora of Proof of Concepts (PoC) in the insurance space. Some of these PoCs have moved up to the stage of becoming a Pilot. For this week’s episode I had the great pleasure of chatting to David Edwards, CEO at ChainThat and Ranvir Saggu, CEO at Blocksure to discuss building a blockchain PoC and/or pilot in the insurance industry. Both of their respective companies provide enterprise solutions using blockchain, DLT and smart contract to insurance companies.
2 Minute Definition of Blockchain David - Blockchain in insurance is a group of technologies that enables us to transact between parties without having a centralised service provider. Promise of a shared process and what you see, I see.
For Ranvir, it’s a scalable technology that allows insurance partners to build network ecosystems. That can remove up to 30 – 50%of back-office costs, speed up processes and drastically improve the customer experience.
Why hasn’t blockchain happened yet? The insurance industry is slow to adopt new technologies. 2017 was the year of demonstrations and proof of concepts whilst 2018 is the year of large consortiums coming out including the big 4 being involved in blockchain insurance. Ranvir reminded us that it took at least 10 years for people to start realising the potential of the internet from the moment it started - "We have to remember that we are dealing with a nascent technology which we are trying to apply in a very regulated industry". There are numerous hurdles that insurance companies have to overcome to be able to appreciate blockchain technology. Risk departments, compliance departments, claims and finance departments all have to learn how this technology can benefit them. This isn’t going to happen overnight but slowly and surely.
For David insurance companies have to work with their counterparties, potentially their competitors. It requires ecosystem to get these solutions off the ground, and that’s a challenge particularly relevant to the insurance industry. We have seen it with the challenges the London Market had in taking it of the ground. All counter-parties need to invest and be as enthusiastic about the project as each other.
Two years ago it made a lot of sense to go down the PoC phase as we weren’t quite sure what could be done with the technology and not many people had experimented with it. But now there has been so many completed PoCs, so many papers and studies that there isn’t any more real need to prove the technology. David - "So if you’re going to do something with Blockchain you should build a pilot, put some success criterias, with a mentality to get some value out of it instead of just getting a press release out." For Ranvir it’s also about how you do the pilot. Understanding what is it we’re trying to do? It is recognising that there is a lot people with a vested interest, managing their P&L and their cost base. Lets try to do it in a low risk way. What is the lowest risk way for getting to a pilot. You got to have a commitment to take this out to market and when that happens and we see the technology working we will then see a snowball effect.
How do I convince my peers to adopt blockchain? David – First we need to forget the terms DLT and blockchain and instead focus on the business value, the results it will bring to the business and what the savings will be.
Ravir – There are two ways of doing it. First thing the person has to realise what are the strategic aims of that business and the second is what can they do with blockchain? It is recognising that blockchain allows you to start thinking about new products and how you build them. You can start imaging how you build your policies and change the way you deliver your products to customers. Fundamentally you have to excite those executives and deliver the full benefits this technology can deliver. This technology is transformational and it will deliver the 30 – 50% cost reduction...
It is widely recognised that there is a growing trust deficit in our societies’ institutions, particularly in insurance. This isn’t confined solely to the question of claims on whether or not an insurance company will pay out or whether the insured is trying to defraud the insurance company. To help guide us through those issues and explain how blockchain can help restore trust we were privileged to have Dante Disparte Founder and CEO of Risk Cooperative, live from Washington DC on our show.
2 Minute Definition of Blockchain If the internet created a world of low friction communication, blockchain is creating a world of low friction transfer. How it works is by storing and decentralising information on anything from transactions to supply chain interactions. Blockchain is a way of scaling trust without having to have a centralised authority and providing transparency with high levels of confidence in those types of exchanges.
The Blockchain Journey Through a friend and colleague, Dr. Tomicah Tillemann, who runs the Bretton Woods II initiative, Dante was invited to the first ever global blockchain business council event during the annual Berkshire Hathaway shareholders meeting in Omaha. That one meeting led him to become an early mover in the insurance and blockchain community. That evolved into going to Nectar Island for the Third Blockchain Summit, hosted by Sir Richard Branson and BitFury, and most recently to Davos where Dante saw that blockchain was moving out of beta. It is important to recognise the importance of bitcoin and other cryptocurrencies in pushing blockchain out of beta on the world stage, through international corporation between individuals without central institutions.
Insurance, the very first blockchain sector? When you look back at the history of insurance you quickly realise that it hinges on the concept of upmost good faith and mutualisation. The Lloyd’s market works by syndicating risk and syndicating trust. That engine works right now but what blockchain provides us with, is the opportunity to enhance this engine of syndication and trust onto a massively scalable platform. In it you can code in the behaviours, the conduct, the trust and you can remove friction, opacity, asymmetry, and agency issues that weigh down our industry. Because of those reasons Insurance can be the winners of that digital transformation.
Declining trust, a blockchain opportunity? What underpins a currency, an insurance policy, or democracy is the expectation, in a binary manner, that if I voted for you it is counted, if a have a dollar bill it has a value, and in the insurance example that if I have a, a million dollar life insurance interest for my beneficiaries it is paid out when I pass away. This is critical because the user isn’t around to use it and there is no way of enforcing that trust in an environment that isn’t transparent where there are huge asymmetries of information.
The trust deficit is one of the biggest market drivers as to why blockchain is coming out of market beta. You see it everywhere, from where it is measured in the Edeleman Trust Barometer which shows a mark decline in trust in public and private institutions. You can see this in our streets and in our ballot boxes in some really profound ways. You can take Starbucks as an example in the US where it was ahead of the curve in its race together campaign and it only took one misstep in one Starbucks shop to shut down 8000 Starbucks across the country.
In the Harvard Business Review, Dante discusses the $7.4 billion in unclaimed life insurance money as a good example of a break down in trust and as an example of an asymmetry issue on information. The buyer and the user of a life insurance policy are two different parties and unless you connect the dots you run the risk of such an outcome of unclaimed life insurance policies. Lloyd’s has an interesting statistic which states that for every 1% increase in insurance ado...
R3 – the blockchain banking consortium For this 6th episode we are going to move a little away from insurance by visiting R3 – the blockchain banking consortium, to hear about their blockchain journey. For this episode I was privileged to have Ryann Rugg, Head of North America at R3, chat to me straight from New York. Ryan is spearheading North American Business Development and Insurance for R3, focused on building and empowering blockchain solution for her clients.
2 minute definition of blockchain For Ryan, there is no formal agreed definition which what makes it difficult to define in 2 minutes. In its most simplest form, blockchain is about getting to reach consensus on a replicated shared database across multiple sites / entities / institutions with no central institution. To be able to bring untrusted entities within a trusted environment.
The difference between DLT (distributed digital ledger) and blockchain. Blockchain is a data structure which is a form of DLT and it is comprised of immutable digitally recorded data called blocks. A blockchain is a way of implementing a DLT. But not all DLT are blockchains.
What is R3? September 2015, a group of nine banks got together with the founders of R3 as they were spending hundreds of millions of dollars on building PoCs (proof of concepts). They realised that it was an emerging technology and they wanted to mutualise the resources. One of the first projects they started working on was project Genesis who aim was to test out all the different blockchains out there such as Ethereum and Hyperledger Fabric to name a few, to see which one would fit for financial institutions.
As none were fit for purpose from a scalability and security standpoint they decided to build their own blockchain, called Corda, from the ground up by their members for their members. Since those days R3 has rapidly grown from the original nine banks to now over 200 banks, financial institutions, regulations and trade associations.
The R3's secret sauce… being a start-up! Being to fail fast is key. They have run 100-150 use cases and PoCs. Several of them were just PoCs for their members to learn from. They use a lot of agile development, with most projects running for 6 – 12 weeks. At the end of the PoC it is determined if it goes into production and what resources are required to enable that. If it is not put into production then the learnings are mutualised, put into white papers and shared within the ecosystem as to the reason why this PoC wasn’t put into production.
Close to 85% of the PoC’s code is open sourced to its members to help accelerate its members understanding and developments with blockchain.
Additionally, R3 partners with numerous startups including ChainThat, to help accelerate R3’s growth by building apps on top of R3’s platform. For this year, R3 expect to have five apps onto their platform.
Working with Acord A lot of the pain points that insurers are facing are very similar to the ones of banks in terms of identity, KYC (know your customer), AML (anti-money laundering), reference data issues, trade life cycle and codifying contracts. R3 quick realised that for them to work alongside the insurance industry on a blockchain they needed a set of standard. So R3 partnered with Acord to launch the insurance industry centre of excellence for DLT in April 2017. Acord was a way to accelerate working with insureds and optimise the messaging and reconciliation for insureds onto blockchain.
In addition to insurance, R3 is interacting with other industries such as supply chain which is starting to build on the R3, Corda blockchain platform.
Where to start with blockchain? In Insureblocks’ episode 2 - B3i, a question we had discussed with Greg Crow, Global Head of Architecture at XL Catlin, was should an insurance company join a consortium like B3i or try to build its own blockchain PoCs? Ryan agreed with Greg’s answer that you should do both....
Legal & regulatory framework of blockchain & smart contracts Over the last few weeks I’ve often been asked questions regarding legal or regulatory issues regarding smart contracts and blockchain. To help me answer these questions I am priviledged to have had the participation of Nick Pester from Capital Law and Lee Bacon from Clyde&Co for this 5th episode on Insureblocks.
2 minute definition of blockchain Lee – blockchain is a form of distributed ledger, built on encryption, which allows each person or entity to have access to the same information at the same time and allows the transfer of information and possible assets between the participants.
Nick tackled this challenge by using an example to illustrate what is blockchain. For example, if you were to share an excel spreadsheet between ten different participants you often will end up with multiple copies of the same spreadsheet which may lead to errors in terms of reconciliation. With blockchain that spreadsheet is automatically updated, reconciled, append only, with each append validated by the participants of the system. This leads to all the parties agreeing to a single source of truth.
Smart contracts – legal standpoint For Nick, smart contracts on a blockchain introduce efficiencies and are less time consuming for all parties in the contractual process. For example, in property purchases, smart contracts introduce a set of agreed parameters between the parties for payment or transfer of value to be made when certain triggers are activated.
Lee sees smart contracts as nothing more than automating, by the way of code, either in part or in full the traditional written contract.
With the immutability and irreversibility of the blockchain how do we address the issue of a wrong trigger that the parties want to reverse?
Live with the fact that you can’t A few clients introduce in smart contracts a pause mechanism that allows the two parties to reflect before something is automated. That seems to defeat some of the purposes of smart contracts and automation Understand that smart contracts are an automation mechanism and if something goes wrong due to bad code for example that you have an agreed mechanism to who is responsible for that and how to make the necessary changes
In last week’s episode, Smart Contracts 101, Olivier Rikken spoke also spoke about smart contracts having an auto destruct button when something goes wrong or ultimately having the option of going offline and take this matter to the courts.
Nick mentioned a fascinating quote that up to £80 billions of premiums are locked up in contract settlement disputes due to reconciliation issues. Smart contracts on the blockchain can help reduce those disputes through auto pay out of commissions to multiple parties.
Regulatory issues for smart contracts & blockchain FCA (Financial Conduct Authority), the UK’s regulator has adopted a technology neutral position and hasn’t adopted any special kind of rules applying to DLT (distributed ledger technology) technology whether for a public or private ledger. They are focused on the consequences on the usage of this technology to consumers and participants in the market. According to Nick, if you look at the FCA’s papers on DLT they are very clear in their view that the technology itself offers some real benefits to the consumers in terms of transparency and visibility.
In Nick’s opinion the FCA has a very proactive standpoint with its sandbox and direct access schemes.
GDPR and its implications to blockchain’s immutability As GDPR gives consumers the right to have their personal data removed, how does that work if one's personal data sits on an immutable blockchain? There are two approaches to this:
Removal of access rights through the removal of the private key is tantamount to erasure. There is a view that regulators will be fairly practical about this as it is impossible to remove data from the blockchain and...
Smart contracts 101 In this exciting episode I was very pleased to conduct my first remote podcast with Olivier Rikken, Director of Blockchain and Smart Contracts at Axveco, in Holland. Olivier has been working in this space for the last few years and will give us an introduction to smart contracts.
2 minute definition of blockchain Blockchain in its purest form is a shared database where everyone can read and write on it. Where the integrity of its content is always guarded through cryptography thus removing the need for trusted third parties.
The blockchain journey Olivier’s journey to blockchain started a few years ago when he was working on a concept for a peer to peer insurance company. Through the course of that work he wrote a white paper that illustrated that you could build an insurance company based on blockchain and smart contracts. He presented that white paper to the Dutch National Bank and authority for the financial markets. What intrigued the regulators was his point that technically speaking that insurance company wouldn’t need to adhere to solvency 2 regulation as there was no financial risk of not paying out to the customers in the case of a valid claim. This is possible thanks to blockchain and smart contracts. The regulators were quite interested in this idea as they believed this could be quite disruptive.
Around the same time Olivier was involved in the foundation of the predecessor of the Dutch Blockchain Collation a public / private partnership in the Netherlands set up to ensure that the Netherlands is the front runner in the field of blockchain in the world. However as there was a fair amount of confusion around what are smart contracts between its members who had either a technical or legal background, Olivier created a smart contract workgroup. Over the course of 18 months that workgroup composed of 20 organisations researched the legality of smart contracts and their future knowledge needs and presented that report in December 2017. You can download the report in English here: Smart Contracts – as a specific application of blockchain technology.
2 minute definition of smart contracts Blockchain smart contracts in their most simplistic form are accounts that hold a piece of logic (a deterministic computer program) that we can deploy on a blockchain. That deterministic computer program, or code, sits on the blockchain waiting for a message to come in. When that message comes in, the code determines what output to produce. Smart contracts can have a legal meaning but doesn’t necessarily need to have one. They aren’t particularly smart as they are only reactive as they will only do what they are programmed to do. So the term “smart’ is poorly chosen.
Can smart contracts be legally binding? Olivier described how he would often find himself in situations where you had lawyers on one side and developers on the other all using the words “smart contracts” but each with a completely different view on what they actually were. The mix-up really came down to language. Once a common language was agreed between the two parties it was recognised that most smart contracts weren’t legally binding but in some circumstances they could. So an analysis was done of the most common legal agreement forms in the Netherlands to determine whether or not can they be replaced by a blockchain smart contract. The answer was in most of the cases given the right circumstances the code can be the legally binding agreement.
The reason that smart contracts can be legally binding in its forms itself is that the Dutch law doesn’t prescribed a form of a contract. It doesn’t say a contract has to be in paper, so it can be verbally or in code. In addition one very important element to making a smart contract legally binding is the fact that the parties signing the code understand what the code is saying and what it will do. Whilst this is fine if you’re a blockchain developer it is more challenging if...
Blockchain in the London Market For this 3rd episode I had the pleasure of chatting to Steve Webb, Partner at PWC and UK Financial Services lead for blockchain. Steve has been leading PWC's financial service practice around blockchain for over two and a half years now. In this episode we explore some of the work Steve has done with the London Market Target Operating Model (TOM) and some of the other blockchain work PWC has done in the insurance space.
2 minute definition of blockchain Essentially at its heart blockchain is a mechanism for distributing data amongst multiple parties and where all parties have their own copy of the data and can see the same information. Updates to the data are managed through cryptographic computer driven consensus between computers on the network rather than through any individual parties acting as a central authority for managing and updating the data. In addition, it has elements of audit history, so you can see all of the updates that have happened on the chain. It works through peer-to-peer networking.
The blockchain journey Having done had a career in financial services, an industry mired in inefficiency for information transfer, it is easy to see that any service applications whether in banking or in insurance has to contend with silos of information. They send each other messages either electronically or through some other imperfect form to achieve an update and reconcile each other at enormous costs due to their inefficiencies. (eg. paper base for the insurance industry). For Steve, blockchain provides an extremely elegant solution to a problem which he has had to contend throughout most of his career.
PWC did a piece of work in 2017 that estimated the savings from administrative costs reduction for the global reinsurance industry alone to be to the tune of 5 billion US dollars per annum!
The London Market Target Operating Model (LM TOM) blockchain proof of concept (POC) Steve worked with the LM TOM innovation team at the end of 2016 / early 2017 to help them understand what the possibilities were of blockchain. They ran a of proof of concept that looked at removing the inefficiencies in the claims managements. Along with a number of insurers, risk takers, brokers and third-party administrators they reviewed the existing claims management process and mapped out what an ideal process would look like. A set of requirements were identified over a period of a week to set up the POC and then over a period of six weeks and three sprints they built out the POC on an Ethereum private blockchain.
The POC demonstrated a third-party administrator raising a claim, the claim grievance party looking at the claim, assessing it and agreeing it. The broker was given access to the blockchain to view the process so they could report back to the insured and a regulatory node was also added to the blockchain to be able to view the entire claims process.
Smart contracts were included within the POC to enable business rules that stipulated that under certain conditions: (a) a claim will automatically be approved when these conditions are met and (b) a claim can automatically be approved even if the claim agreement party is not actually active at that moment on the chain. That second element demonstrated the chains resilience that if for whatever reason a party is offline, those smart contract rules are still in operation as the business rules of that smart contract would have been previously agreed.
As the POC increasingly took shape the participants to the POC could see the benefits of automation and inefficiency reduction. Additional ideas were generated such as adding documents to support the claim (Eg. a damage report) on the chain. It was demonstrated that you could add a damage report to the chain, not by actually writing it into the blockchain itself but by writing a hash of that document into the chain that was tamper proof.
B3i the blockchain insurance industry initiative In our 2nd episode I had the pleasure of chatting to Greg Crow, Global Head of Architecture at XL Catlin. Greg, is XL Catlin’s representative at B3i which stands for Blockchain Insurance Industry Initiative. For this episode we explore what is B3i, its journey in discovering the potential of blockchain for the insurance industry and we also discussed the choices insurers who haven’t joined B3i can make.
2 minute definition of blockchain The Greg Crow version of blockchain is all about the ability for everyone to see the same data and to have a copy of it in a certifiable and immutable way. Having a copy of that data is a real game changer as are smart contracts. For Greg, smart contracts are here to replace contractual paper documents into code. The code sits on the data on the blockchain and is triggered by a certain set of rules which can mean executing a claims payment or collecting a premium for example.
The blockchain journey What prompted XL Catlin to explore blockchain in 2016 was the desire to make it easier to administer contracts, especially reinsurance contracts. In Q1/Q2 2016 they partnered with a blockchain start-up called ChainThat to build a PoC (proof of concept). ChainThat blew them away at the speed at which they worked at in helping XL Catlin demystify blockchain technology.
In November 2016, XL Catlin joined B3i by becoming its sixth founder and worked on numerous other blockchain initiatives including one with Maersk. By January 2017, B3i now had 15 core members and in September 2017 another 23 members joined including three brokers at the Monte Carlo RVS conference celebrating the launch of its prototype market testing phase named Codex1. Codex1 is a platform that enables a distributed ledger smart contract management system for Property CAT XOL contracts. Market participants will be able to more easily cede, handle and trade risks.
B3i Monte Carlo RVS Conference Why B3i? As Greg says, members who join B3i have a range of reasons. Some wanted to learn more about blockchain, others wanted to take costs out of the industry and some heard about blockchain and wanted to be involved in it without knowing exactly how or why.
B3i is here to build a blockchain platform for the industry, not necessarily to give its members a competitive advantage, but a platform for all market participants. However as in any consortiums, especially one with 15 insurance companies around the table, making decisions can be challenging. It is for this reason that B3i is reinventing itself from a consortium into a start-up with a start-up feel and start-up speed in the hope it can now scale up to generate the kind of value needed for the industry.
To the question on whether or not a large insurance company should join B3i or attempt to build their own blockchain system, Greg advised that they should do both. They should both join B3i and try building your blockchain platform to increase your learnings. It is evident that at this early stage that there isn’t going to be one blockchain to rule them all.
What’s next? Greg’s view on the big opportunity for blockchain in the insurance industry is:
Contract administration Creating dynamic insurance policies for assets that go through different states in the supply chain
It is in this second big opportunity where we see the obvious combination of utilising IoT (Internet of Things). IoT applications, will assist insurance companies’ clients who deal with logistic supply chain to track assets, by recording data onto the blockchain about assets.
Whether it is B3i or a PoC run by an insurance company, 2018 has to be the year when we see an example of a real life blockchain project going into production. Who do you think it will be?
Your turn! Greg shares many other fascinating points in this podcast, so please have a listen and tell us what you think?
Welcome to the first Insureblocks episode! In this "genesis" episode (a punt to the blockchain community, regarding the first block of a chain often referred to as the genesis block) we have a chat with Gary Nuttall, managing director of Distlytics., who explains to us the basics of blockchain. Have a listen to our podcast above or read some of the show notes below. 2 minute definition of blockchain A good starting point is to try and define what is blockchain? Gary takes a very pragmatic approach which recognises that there isn't a formally agreed definition on what is blockchain as there are many different types of blockchains. He tends to describe blockchain in two ways:
A protocol - essentially an agreed way of doing business or transactions. So blockchain is a protocol as much as TCP/IP is a technology protocol for the World Wide Web The second and probably easier one to digest, is that blockchain is a write only database which is decentralised, distributed, time-stamped and cryptographically secured
I hear you! What do you mean by "cryptographically secured"? All it is, is the application of computer generated algorithms (mathematical formulas) that transform the data in a manner that it can be securely shared between people. Smart Contracts I loved Gary's quote regarding smart contracts as being "the most misnamed thing I've ever heard". "smart contracts... the most misnamed thing I've ever heard" The fascinating thing about smart contracts is that they're neither smart nor a contract. All they are is effectively a computer program that enables a blockchain to interact with external activities or triggers. So for example with a flight delay insurance policy a smart contract can be used on a blockchain to determine whether or not your flight is delayed. If it is delayed then an automatic payment is made to your bank account without the insured having to make a claim.
Here is an example of such a flight delay policy by Axa insurance with Fizzy:
Blockchain in the insurance space Having analysed the entire insurance value chain for commercial insurance, Gary has identified around 88 potential use cases for blockchain. Ultimately his view is that anywhere you've got data that is shared between multiple parties, with a need to prove the accuracy and completeness of it all in an efficient manner, is an opportunity for blockchain. Of course for the insurance world this means reducing the inefficiencies in the bordereau process, claims process, and even managing your KYC checking for on-boarding an organisation to name a few. By reducing those inefficiencies and costs you open up the opportunity for truly innovating product developments with other emerging technologies from Internet of Things (IoT) to artificial intelligence (AI). When combining these new technologies with blockchain you open yourself to some very exciting opportunities.
One of the qualities of blockchain is that it helps to remove intermediaries. As we all know there are numerous intermediaries in the insurance ecosystem and everyone wants to make sure that they're not the one who will be disintermediated. As Gary found out that depending on who you speak to, brokers will say there will be no need for underwriters in the future, underwriters say there will be no need for brokers in the future and when you get them both in the room they'll say that it's the likes of the bureau that won't be needed in the future. So everyone's just trying to protect their own turf in some way. What we can all agree is that it is unclear what will happen in the future but it will definitely be very different in a few years. Your turn! Gary shares many other fascinating points in this podcast, so please have a listen and tell us what you think? If you liked the podcast please do review it on iTunes or Google Play. If you have any comments, suggestions on how we could make it better please don't hesitate to a add a comment below.