Insureblocks

Ep. 178 – SDX – SIX’s regulated digital asset exchange platform

Mon, 25 Apr 2022 10:27:43 +0000

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.

The project proved that such kind of transactions were possible but achieving scale is a whole other question.

For example, if assets and cash aren’t on a similar ledger you have the question of interoperability that needs to be addressed. When they are on the same ledger you enter into the topic of whether or not these assets have to be digitised? Cash is easy to digitise but for securities that’s a different question. For example, for a security where does the security sit on the CSD? Is the CSD allowing for tokens? With SDX yes, but with others, no. Thus, you need to be building more digital securities platforms than SDX. So, the benefits on cash do not really help the financial system unless you have digital securities and vice versa.

SDX and crypto currencies?

In December 2021, SDX announced a joint venture with SBI Digital Assets, a fully owned subsidiary of Japanese banking giant SBI Holdings.

The joint venture, Asia Digital Exchange (ADX), would be set up in Singapore through a crypto issuance company and aims to launch an institutional spot crypto exchange.

The new undertaking will offer a range of digital asset products and services in the form of tokenized securities such as digital bonds, digital equities and digital securitized loans.

SDX sees ADX as a potential partner in the future as a consumer or as a servicer of the SDX business.

SIX already has more than 60 ETPs, exchange traded products, based on cryptocurrencies. SDX, being a natively digital company as big crypto plans of its own.

SDX plans for the next 12 months?

SDX frames itself in three big pillars:

Digital securities: growing the FMI business
Crypto
Exploratory business for new business models enabled by blockchain such as a carbon registry, tokenisation of art, NFTS for institutional investors, DeFi and real estate

Ep. 177 – Why decentralised finance matters and the policy implications? – OECD Report

Sun, 27 Mar 2022 20:39:05 +0000

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 13^th 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 that they already held. Because of that collateralised lending rapidly became the fastest growing DeFi product followed by decentralised exchanges (DEX) while other applications such as derivates and synthetics also grew in popularity.

Institutional investors alongside decentralised exchanges are also participating in collateralized lending.

Growing interconnectedness between crypto and traditional markets

The OECD Committee on Financial Markets has noticed a shift in traditional financial institutions from the education phase of what is Bitcoin and what is blockchain to the investment phase where they are allocating parts of their portfolio in such assets. The Committee is looking at the potential risk of growing interconnectedness between decentralised and traditional finance which could lead to the potential spill over to the traditional financial system and the real economy.

Iota gives an example that if there was a generalised distress in the crypto market, an investor who is exposed to losses on his crypto related investments may have to close his positions on other parts of his portfolio therefore propagating this kind of shock.

KYC & AML

this is a bit of a paradox because we know that the blockchain allows for complete transparency. And all transactions are traceable and verifiable on the chain. But they are verifiable and traceable in pseudonymous way, we don’t have recourse to the identity of the participating node. And this is what makes it complicated.

Unlimited leveraged trading of crypto-assets

The possibility to engage in almost unlimited leveraged trading of crypto-assets is one of the main risks involved in DeFi. Whilst current DeFi applications benefit from high levels of over-collateralisation, it could be expected that further growth of the Defi market would bring it that level down to allow for better capital efficiency, as competition would put pressure on tokenomics involved in DeFi protocols. The volatility of crypto-asset prices intensifies the fragility of the DeFi market, and volatility spikes in the price of main crypto-assets pledged as collateral for borrowing and leverage or provided as liquidity for yield farming can induce massive automatic liquidations in DeFi protocols. Such liquidations can have a domino effect on investor holdings across the board, and may even have spill over effects in traditional financial markets.

Positives that DeFi applications can provide to financial markets

DeFi applications have the potential to provide benefits to financial market participants in terms of speed of execution and transaction costs, driven by the efficiencies produced by DLT-technological innovation and disintermediation of third parties replaced by software code of smart contracts.

The governance arrangements along with the open source nature of DeFi allow for possibly more equitable participation of users and the promotion of innovation in financial services.

Drivers of institutional investors in digital assets

The OECD has identified three forces that underline and contribute to this increased institutional investor interest in digital assets of which the majority is in Bitcoin, followed by Ether.

The first force has to do with this search for yield in what was until recently a prolonged low interest rate environment. The same kind of speculative forces, the same kind of fear of missing out that led retail investors has been driving also institutions.

The second reason is the potential of crypto assets for diversification and portfolio optimization. Investors perceive as uncorrelated nature of returns, they wish to diversify their portfolio by adding this kind of non-correlated assets such as crypto. However, the OECD’s report dismisses this hypothesis as they have been seeing a growing correlation between mainstream crypto assets and the large traditional asset class.

The third reason is the perceived benefit of crypto for institutional investors as an inflation hedge. However, the OECD’s analysis finds that the main crypto assets have not really performed as effective inflation hedge, but that does not prevent investors from perceiving it as a good inflation hedge which drives them demand for Bitcoin in particular

How can existing regulatory frameworks work with decentralised structures?

Some of the tools that are being used in centralised settings may need to be redesigned in order to be interoperable and compatible with decentralised structures.

One other approach is to re-centralise DeFi in order to get some kind of comfort from a supervisory and regulatory standpoint without necessarily completely undermining decentralisation. Some forms of centralization already exists in such networks and could be considered as this single regulatory access point. For example DAOs could play this role or majority governance token holders.

Other tools could be around regulatory compliance embedded in code, allowing and or demanding the audit of smart contracts, having mandatory reporting in an automated fashion through machine readable formats.

Roles policy makers can have in DeFi

The report lists a number of roles policy makers can provide:

Financial education
Improved disclosures in DeFi applications can be seen as a first easy step towards greater protection of participants. For example disclosures on whether or not someone holds an admin key and what kind of rights it gives its holder.
Increased regulatory clarity
Identify new rules if policy gaps are found and identified.

Ep. 176 – Etherisc’s flight delay blockchain insurance in production

Sun, 06 Feb 2022 22:03:51 +0000

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.

Their IT managers and security managers, who are responsible to keep the systems running, are not comfortable with blockchains, and even less with public blockchains. Christoph states that it is completely against their thinking to have an open, anonymous platform that they can’t control and where they don’t run the nodes. Thus, it’s very complicated for a traditional financial institution to integrate with a public blockchain.

User experience

A customer goes to Etherisc’s flight delay website to select airline, enter flight number and date of departure. The price is always the same, set at $15 and the payout varies according to the risk of the flight being delayed. Etherisc believes in transparency as it shoes the probability of the flight being delay in percentage terms and also the percentage of flights which have been cancelled in the last month along with the possible payout.

The purchasing process happens when the customer links their MetaMask crypto wallet. No other details is required. No need to enter name, address, passport and no KYC because the $15 premium is below the threshold of when KYC is needed. In comparison to traditional insurers, there is no personal data that is stored by Etherisc, no paper work and the customer remains anonymous.

If the flight is delayed or cancelled the payout happens automatically and the funds will be placed in the customer’s MetaMask wallet. No need for the customer to file a claim as in the case with traditional insurance.

Chainlink

A smart contract that lives on a blockchain has no direct connection to any external data source. For it to connect with external data you need an oracle as the ones provided by Chainlink. Insureblocks did a podcast with Sergey Nazarov, CEO of Chainlink. Chainlink provides to Etherisc decentralised networks of oracle data which is then aggregated into a single data file which can then be processed by Etherisc’s smart contracts.

With Chainlink, Etherisc has access to an open data marketplace where it can select the relevant data sources such as FlightStats which has access to high quality data from all airports and all airlines.

What’s next

For the flight delay insurance, Etherisc is look for distribution partners such as travel agents as flight delay insurance needs to be integrated at the point of purchase.

Etherisc is launching a platform for them to launch their own risk pools and are also forging a Global Alliance for Climate related risks.

Ep. 175 – Coadjute – blockchain platform launch & mortgage stablecoins

Sun, 23 Jan 2022 17:18:22 +0000

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.

Seven of the most respected software companies in the property industry – including Osprey Approach, Redbrick Solutions and conveyancers AVRillo – have already signed up to the Coadjute network with the full backing of the Land Registry.

There are over 100 software platforms in the UK property market who each have different APIs if they have an API. They all have different data models and data schemas. So for one of those platforms to connect to every other platform it’s an enormous job.

With Coadjute, they connect to one platform they connect to many. Their users can then connect, interact and collaborate with users on all other platforms.

Overall each software platforms that connect with Coadjute gets new features for their users, reduced connectivity backlog, and get to control their own data.

Dan also commented that he was getting feedback from their participants on the network that they were getting closer to each other as if the simple fact of looking at the same data they seem to be getting better along with others on the network. Have you seen something similar to that on your own blockchain network? If yes please do add your comment onto this post.

Top learnings

The need to engage the ecosystem and the role blockchain can play in it. Coadjute has taken the view that blockchain is not a disruptive technology but a connecting technology. John’s advice is when you are looking to transform at the level of the market you really need to understand that market and its current software. Understanding how you can fit, complement and connect within that ecosystem is very important because blockchain is here to connect with it and add value to it.

A mortgage stablecoin

A “stablecoin” is a type of cryptocurrency whose value is pegged to another asset class, such as a fiat currency or gold, to stabilize its price. Today the purchase of a property has numerous different money flows between the conveyancer, lawyers, estate agent, mortgage lenders of the buyer and seller. In addition to payments to HMRC for stamp duty and a whole bunch of other sort of micro payments. All of these money movements are done over the CHAPS system without any kind of orchestrating application. These movements are done as push payments followed by an email or phone call confirming the transaction has been done, which in turn is followed by a number of reconciliation exercises between the parties.

This creates high levels of administration which frequently cause last-minute delays in completion, and the familiar “Friday afternoon rush”. The traditional process is also vulnerable to fraud.

The promise of a stable coin is that the lender could have a node on the network, they then capture the funds within the mortgage account, and they issue a token onto the ledger. That token can freely move around within the Coadjute network.

The benefit of that is that the funds are staying locked securely with the bank, the tokens move around on ledger. Everyone has transparency and visibility of how the funds are being moved around. But the token itself is a claim on the actual mortgage funds that are sitting in the bank account.

The party that then ends up with the token, such as the estate agent, ends up with a token for their portion of the of the sales fee, they can then redeem the token from the lending bank. What it does is it takes out a load of risk around push payment, fraud, it creates radical transparency, so everybody knows what’s going on.

But a major benefit of this system is that you can programme the movement of tokens which enables 24/7 365 days a year, programmable property transactions that happen under a certain set of rules.

New round of funding

In December 2021, Coadjute raised a round of £6m from Praetura Ventures. The funds will be used for Coadjute to roll out its platform across the market. Dan shared that there has been a lot of interest abroad for Coadjute. The markets in which they are the most interested in are ones that have many of the same problems as the UK, being a highly fragmented market with a degree of digitisation and where there is a certain number of platforms for which Coadjute can connect with.

______________________________________________________________________________________________________

This episode is brought to you by our friends and sponsors at R3. In this digital-first world, now more than ever, businesses need to modernize existing processes, systems and models – and enterprise blockchain provides the ideal solution for transacting directly and streamlining business operation.

Developed by R3, Corda is light years ahead of other blockchain platforms in terms of privacy, security, scalability and interoperability. And–because Corda was built to meet the stringent requirements of highly-regulated industries, it can be used by firms of any type or size and in any industry.

Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.

Check out r3.com to find out more.

Ep. 174 – R3 Product Vision: Market Trends & Needs and R3’s Long-Term Product Investment

Sun, 09 Jan 2022 21:59:56 +0000

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 24×24 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 18^th 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 networks.

However, transactions and data need to be shared within networks but also across networks. Corda has been investing into interoperability overall. That applies to across Corda networks, and to legacy and emerging networks.

With Corda there is a growing installed base of financial services. The question that arises is what is the ability for digital assets that live outside the regulated financial services. Is there a way for them to safely interoperate and take advantage of regulated digital ecosystems like an SDX who has the foundational bedrock for these digital assets on which to operate on?

Conclave is about protecting data in use from prying eyes. It enables business to perform transactions that need to leverage data in a manner where they can still adhere to regulation on the data’s sovereignty. It’s about freeing businesses up from the knots that they potentially are tied in from regulation.

Interoperability

R3 is squarely focused on regulated networks. Todd mention that it’s interesting to see how crypto assets can be brought into an institutional setting, which is something that R3 is working on. There is a need for crypto assets to access settlement services which R3 can provide.

Todd sees Corda as an incredibly compelling private side-chain for crypto networks.There could be a point where regulated assets could flow into permissionless systems such as Defi. Especially around the point of openness, programmability and identity.

Across the crypto industry there is a trend towards openness. That however has to be balanced correctly with privacy. Openness is important as long as its accompanies with protection.

Programmability another key factor has to accompanies with some form of safety. With programmability in environments such as DeFi, code is law. Transactions are fully automated. When errors happen either thought negligence or a misalignment of incentives you can have a problem which begs the question of the role regulation can take

Identity can play a very important role, not necessarily in knowing the identity of all the participants but at least in knowing that the identity of a participant on the network has been validated.

By bringing all these points together you can see how a regulated network can work in bringing in assets from these open networks to bring in a higher level of safety.

R3 long term vision

R3’s long term vision is incredibly focused on digital assets and digital currency and how those are safely issued, settled and traded. They are investing in the future of interoperability whether it is on the networks of networks and bridging the space to open networks and crypto.

They will be focusing on their sandbox for digital currencies and investing in building tools and accelerators so that R3’s customers can more easily natively issue digital assets onto Corda and more easily tokenise arbitrary assets on Corda.

About to release their Corda payments capability which will be able to integrate into existing payment service providers.

Investing to facilitate the creation of asset network and for existing assets networks to integrate into existing payment rails so that over time to have on chain settlement via tokens or central bank digital currencies.

Corda 5 will take the existing Corda and improve its scalability, security and performance for it to provide a market infrastructure that can last decades.

______________________________________________________________________________________________________

Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.

Check out r3.com to find out more.

Ep. 173 – Obscuro: a secret spell over DeFi

Sun, 12 Dec 2021 14:32:44 +0000

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, that has created a bottleneck issue where people have to bid more to have their transactions processed.

The fees to process the transactions can start to rise very rapidly where whilst it may not be felt so much for low value transactions but for a newly minted NFT piece of art the fees can go very high.

To address this issue other layer 1 networks (L1) like Ethereum, such as Solana, Cardano or Avalanche who reduce the number of validators in the work, or require the validators to run more powerful hardware.

Another approach is to use the L1 as a record keeping layer where the transactions won’t actually be processed but will instead be processed on a second network (L2) and where periodically the transactions from L2 will be recorded onto the L1.

Obscuro

Obscuro, whose origin is Portuguese means “obscure” in English. For James and his team they chose Obscuro due to Harry Porter as it was the incantation of a charm used to conjure a blindfold over the eyes of the victim, therefore obstructing their view of their surroundings.

The objective of Obscuro is to provide confidential, smart contract execution.

It means that until now applications that may have been deployed directly onto an Ethereum distributed application or deployed onto an L2 network, they can now be deployed onto an Obscuro network. The contents of those contracts would remain secret and hidden from users.

A users’ wallet encrypts the transaction and sends it to an Obscuro node on the Obscuro network. Only the Obscuro nodes themselves can understand the transaction. The transactions interact with contracts that have been deployed onto the Obscuro network and the contents of all of those contracts is also encrypted. The Obscuro network is a group of nodes that works within a gossip network, a peer to peer permissionless network.

And it’s encrypted so that only the obscure nodes themselves can understand the transaction. And the transaction interacts with contracts that have been deployed onto the obscure network. And the contents of all of those contracts is also encrypted.

The network processes the transaction and updates the state of the contract. To illustrate this, James provided us with an example of an auction. In an auction on Ethereum everyone can see all of the bids, they can see the addresses of the bidders and the bidding patterns. An auction contract deployed onto the Obscuro network would be hidden. It’s effectively a sealed auction with sealed bids. No one can see other bids. The bids themselves have been encrypted and the linkage of the bid to an identity is also hidden. Privacy is thus achieved for users. Whilst privacy is achieved it isn’t an ultimate form of privacy as if necessary law enforcement bodies can take action against those who would use Obscuro for illegal actions.

One of the design goals of James’ team is that standard Ethereum contracts can be deployed onto the Ethereum contract without changing it.

Incentives and governance

There are a set of economic incentives for people to participate in the network whether they are users or aggregators. Users get some personal benefit from transacting within these contracts whilst aggregators need to be rewarded for running infrastructure. These rewards will be some form of utility token.

James expect that they will set up a decentralised autonomous organisation to govern this network.

Obscuro’s relationship with R3

Obscuro isn’t part of R3’s core business. R3’s core business is trust technology for regulated industries. Whilst the work being done at Obscuro might be very beneficial for regulated industries it isn’t aimed solely at regulated industries. Obscuro is likely to be spun out of R3. However it could actually drive utilisation and interest in R3’s confidential computing product called Conclave.

Ep. 172 – Confidential computing tackling human trafficking – insights from Hope for Justice

Sun, 05 Dec 2021 21:43:55 +0000

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 generates annual profits of US $150 billion. This makes it the second most profitable, serious and organised crime in the world after drug trafficking. What traffickers say is “if I sell a kilo of heroin, I can only sell at once. But if I can have a person who’s enslaved, I can have them held for years.” To compound this issue Tim believes less than 1% that is being spent against drug trafficking is being spent on stopping human trafficking.

Tim gives the example of a Filipino lady in Los Angeles that was held for 33 years as a domestic slave forced to sleep in a garage and now allowed to leave the house.

There’s roughly 20,000 individuals who are working every day on human trafficking, globally. The majority of those organisations sit in the aftercare space or the awareness space. As a result, the response doesn’t meet the problem. From a UK perspective, last year, there were 10,613 individuals, people who presented the signs of being a traffic of victim, who were entered into the national referral mechanism. For Tim, the challenge for what they’re doing is how can they use technology to help augment the work their doing so that it amplifies and magnifies the impact that they’re making.

The Slave Free Alliance

The UN SDG 8.7 has set the goal of ending slavery in the supply chains of major multinationals. Hope for Justice realised that a number of individuals they were rescuing where from the supply chains of businesses. Hope for Justice worked with Accenture who helped them to productize what they were doing and helped them to set up the Slave Free Alliance in 2018.

Businesses are invited to join a membership scheme where they are given access to the support and services from the Slave Free Alliance. Slave-Free Alliance offers a wide range of services and access to its experts, including training, gap analysis, due diligence, risk management resources, and help with investigations, crisis response, remediation and Slavery and Human Trafficking Statements

Within the last 3 years they have signed up 95 major multinationals and are planning to launch in the US, Norway and Australia by the end of 2021.

Battery

Whether it’s in your mobile phone, laptop or electric car, most batteries today are produced using cobalt of which 70% would have originated from mines in the Democratic Republic of Congo. These are mines are mined by children and or forced labour.

The Paris Accord has set for the increase electrification of cars by car manufacturers. However, to achieve that objective in just Europe and the US would require a 30 times increase in production of cobalt mining for that to happen.

Using confidential computing to fight human trafficking

Tim explains that it’s not until you look at the data that you can start to draw correlations to what needs to happen. There was a clear need to start using data and AI to drive up intelligence that can help the organisation to make the right decision.

An example would be to start pulling information together from various countries to identify a particular type of person that is more susceptible to being trafficked. This can help create red flags Border Force officials to look out for a certain type of person of a certain age that is more susceptible to human trafficking.

It also helps to identify regions that are more susceptible to human trafficking for example in the case of one particular country up to 95% of all victims were coming from within 35 miles of one city.

The hope is to build a blockchain solution that will enable them to have a database that would benefit many industries for there to be a clear a clear understanding of who the good and bad actors are in a particular area. The key point is that when a supplier within a supply chain is identified that industry players don’t just walk away from the supplier but actually try and drive change. Because, if you walk away from that supplier, it doesn’t actually stop it from happening. Whereas if you go back to the supplier and offer to bring real systemic change to that supplier then change is possible.

R3’s Corda blockchain

In terms of identifying a blockchain for Hope for Justice and the Slave Free Alliance’s requirements, Tim’s team chose R3’s Corda as it provided the combination of safety and security they needed. A lot of the trafficked victim’s data that is being stored is very sensitive. As it carries their location but also these are individuals who could potentially form part of court cases, both on civil and criminal litigation.

By having a combination of both Corda and Conclave it provided them with the double level of security and safety that they required.

Plans for the future

In 2020, they have helped 18,110 individuals find freedom. In terms of their plans for the future, they aim to open up another set of operational investigating hubs in the UK, expand in more states in the US and to expand into other countries so that they can operate out of every continent across the globe.

How can you help?

Readers and listeners of Insureblocks can help Tim and his team in three ways: time, treasure and talent.

If you have a core skill and the time to support Hope for Justice head over to their website and tell them how you’d like to help.
Firms have CSR budgets, some give financially directly to charity, some give via fundraising events. Individuals can also donate money for example if costs roughly $500 to see an individual child taken from exploitation, given trauma informed care, catch up education, medical care, clothing and food, looked after for a period and then reintegrate them with their families or foster families and were not appropriate look after them for up to 2 years in that process.

A few years ago, a 14 year old girl raised $65,000 by walking 300 miles.

To donate your time and talent to Hope for Justice: https://hopeforjustice.org/

To donate treasure: https://hopeforjustice.org/donate/uk/

_______________________________________________________________________________________________________

Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.

Check out r3.com to find out more.

Ep. 171 – Exploring CBDCs – insights from the Bank for International Settlements

Sun, 21 Nov 2021 20:52:01 +0000

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. Daniel then asks “would you be more comfortable just in terms of that privacy aspect to pay with your Visa card, knowing that visa has your data and visa can do whatever they want with your data, as long as it falls within they’re licence as a payment provider versus, something that’s issued by a central bank that the central bank has no other objective other than what’s best for the social good.”

Bank for International Settlements (BIS)

The Bank for International Settlements (BIS)’s mission is to support central banks’ pursuit of monetary and financial stability through international cooperation, and to act as a bank for central banks. As individual’s lives are increasingly becoming more digital and it is increasingly apparent that any central bank whose aim it so provide financial stability has to invest in the digital space. In 2019 the BIS launched the Innovation Hub Network, to support the Innovation Hub priorities, share knowledge about technology projects and discuss innovative answers to problem statements relevant to central banks.

The Innovation Hub Network is a joint partnership between the BIS and regional central banks to open innovation hubs that service the central banks their surrounding regions. The first three were in Switzerland, Hong Kong and Singapore. Now there are new hubs in London, Stockholm, Toronto and a strategic partnership has been set up with the New York Fed. They’re also planning to open hubs in Frankfurt and in Paris amongst many others.

These hubs are going to engage the private sector to bring technical talent and know how to inform policy markets and the central banking community.

CBDC is one of the six verticals that the Innovation Hub Network is working on: supervisory and regulatory technology, next generation financial market infrastructures, open finance, cybersecurity protocols and on green finance.

Project Inthanon-LionRock to mBridge

In May 2019 the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BOT) launched Project Inthanon-LionRock a first common platform for multiple CBDC settlement. Phase 1 of this project achieved a PoC built on R3’s Corda designed to allow the participants of each network to conduct fund transfers and foreign exchange transactions on a peer-to-peer basis, thus reducing settlement layers.

Phase 2 of this project was built by ConsenSys on Hyperledger Besu to extend Phase 1 to two other jurisdictions being the Digital Currency Institute (DCI) of the People’s Bank of China (PBC) and the Central Bank of the United Arab Emirates (CBUAE). The participating central banks are able to control the flow of their CBDC on the prototype, monitor transactions and balances of their issued CBDC, utilise programmable levels of transaction privacy, and automate certain compliance functions.

The project then evolved to Phase 3 called mCBDC Bridge, “m” for multiople, or in short mBridge. As the name implies the platform is built to facilitate multiple different central digital currencies to perform cross border payments in a cheaper, faster and more efficient manner.

Today is obvious that there is no public sector organisation that has the mandate to facilitate cross border payments. It is all provided by private institutions who are commercially driven. The amount charged will depend on locations, currency pairs and the amount of money being sent. Currency pairs for example that do not have a lot liquidity may have to go through a third currency pair to facilitate the transaction leading the user to have to pay 2 FX rates. This contributes to the reason on why remittances can cost 6.5% of fees on the transaction.

With mBridge there is the opportunity to provide a faster, better and cheaper way settling payments in central bank money. Transactions for example have moved from a few days to within two seconds!

mBridge looks to drive the use case around international trade settlements to facilitate international trade between those jurisdictions and also to open up the platform to additional central banks and also to private sector players.

+Inthanon-LionRock to mBridge
+

Electronic Hong Kong Dollar (e-HKD)

e-HKD is a joint partnership between The Hong Kong Monetary Authority (HKMA) and the BIS Innovation Hub is an attempt at exploring retail CBDC. Retail CBDC is very much about the last mile solutions. It’s about the privacy, offline, how the retail space interplays with the wholesale space and how this doesn’t influence the role of commercial banks in the economy.

In September a whitepaper was published entitled “e-HKD a technical perspective” that explores potential architectures and design options that could be applied to the construction of the infrastructure for distributing e-HKD, and reports the initial thoughts and findings. Specifically, it aims to explore technology solutions that address the problems of cross-ledger synchronisation, over-issuance prevention, privacy-preserving transaction traceability, and flexible instantiations of different two-tier distributions models.

+e-HKD_A_technical_perspective
+

The paper displays the focal point on how money moves between two interoperable systems, one being the wholesale monetary base and the second a retail monetary base with a special focus on privacy.

7 Central Banks exploring retail CBDCs

Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Sveriges Riksbank, Swiss National Bank and BIS have joined forces to explore what a retail CBDC might look like.

+BIS - CBDC
+

In their 1^st report, the banks got together to create some baselines for the thinking around retail CBDC. In September 2021 a new report was published that had three categories:

systems design and interoperability. As central banks operate within a domestic agenda, the piece of interoperability is critical to ensure that they can connect to each other
user needs and adoption
financial stability implications

_______________________________________________________________________________________________________

Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.

Check out r3.com to find out more.

Ep. 170 – Leveraging Mastercard’s DNA onto blockchain – Mastercard Provenance Solution

Sun, 19 Sep 2021 17:52:36 +0000

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. Through enhanced supply chain insight, financial institutions leverage data-driven credit decisions to drive lending confidence and increase trade finance opportunities for farmers.

Exporters can now know exactly what they’re receiving from the growers. They can keep their payment terms of 30 – 45 days to pay the growers, however the growers can access discounted invoice pay where they can get paid within 48 hours.

The buyer knows exactly what’s going on and doesn’t need to spend a lot of money on the reconciliation process. The growers have much more confidence they are going to get paid for what they have delivered and they get paid sooner than usual thus increasing their cash flow.

Networks of networks

During COVID Mastercard made an announcement with AON to introduce a new solution to provide supply chain protection for global Covid-19 vaccine shipments.

The solution provides transparent cargo insurance coverage for Covid-19 vaccines by combining sensor data and analytics. The offering enhances all risk marine cargo insurance with timely payment for doses that fall outside of the agreed-upon temperature range while being transported or stored, enabling more effective risk management and claims support. Real-time reporting of any temperature deviation will also provide for the mitigation of losses and help maximize the number of doses that are administered to the public.

The solution initially started through the partnership between Mastercard Provenance Solution and ChronosCloud alongside DW Morgan partnered to connect all partners of the supply chain with real-time IoT sensors for active condition monitoring. At this point they realised the opportunity existed not just to use supply chain data for payments but also for insurance thus bringing on AON and demonstrating the opportunity for networks of networks

Use case: Zimbabwe – cattle traceability system

In 2018, 50,000 cattle in Zimbabwe died because of a tick-borne disease.

The lack of a traceability system has seen Zimbabwe unable to export beef to lucrative markets in Europe and the Middle East, reducing export earnings from beef to the tune of $50m due to sanctions. The government of Zimbabwe had the challenge to resolve this issue.

E-Livestock Global solution brings end-to-end visibility to the cattle supply chain. Commercial farmers and dipping officers tag each head of cattle with a unique, ultra-high frequency RFID tag – as mandated by the Ministry of Agriculture – and register it and its owner onto the solution. Each time the animal gets dipped, vaccinated or receives medical treatment, the tag records the event onto the traceability system.

Leveraging Mastercard Provenance Solution, E-Livestock Global records these events to maintain a secure and tamper-proof trail of each animal’s history. This, in turn, supports the entire supply chain with trusted, transparent and verifiable data. For farmers, it provides an irrefutable record that proves ownership, supports sales and exports, as well as allows them to obtain a loan, using their cattle as collateral. For buyers, it enables them to efficiently manage their operations and guarantee product quality to their customers.

Coming back to the point about networks of networks is how this solution can enable to provide financial inclusion to the farmers in Zimbabwe by providing them with a digital wallet. It also opens up the opportunity for an insurance company to leverage the data and offer parametric insurance.

Use case: GrainChain

In October 2020, Mastercard announced a collaboration with GrainChain, a technology company that enables supply chain visibility, empowering suppliers and farmers while reducing risks to buyers in the United States, Mexico and Central America. GrainChain tracks over 24 commodities in four different countries.

Together with GrainChain, Mastercard Provenance Solution delivers end-to-end visibility throughout the supply chain, allowing participants to forensically track commodities, from the initial inputs and raw materials to harvesting and processing to logistics and delivery to the consumer’s hands. Doing so enables brands and producers to proactively protect consumers and manage their brand reputation, business efficiencies and bottom line.

The increase visibility enables farmers to get access to finance and also to cheaper finance as the platform can demonstrate the payment guarantees farmers get from the traders.

Key learnings for building scalable solutions

Having worked on a number of use cases with Mastercard across industries Leandro has the following key learnings he shared on Insureblocks:

Build a business incentive model where the participants see the benefit for adopting the solution. It cannot be a big brand mandating them to come on board
Understanding capacity of the participants. They may not have the resources to allocate for a new project
Bring other assets that can enhance the core solution

Use case: Seafood traceability system

Consumers increasingly want to know the story behind the food that they consume–the source of the produce, meats and seafood, and their journey to the table. In October 2019 Mastercard announced a partnership with Envisible, a supply chain visibility in food systems company, to launch a pilot with the largest United States food co-operative Topco Associates and the supermarket chain Food City for its seafood inventory.

Envisible has a platform called Wholechain, a traceability platform. They provide over 10 species of frozen seafood to Topco Association of supermarkets in the US, where each of the items come equipped with a QR code. When Topco distributes the seafood to their member supermarkets they have the traceability of the seafood via the QR code. What Leandro likes about this solution is that each of the supermarkets do not need to adopt the blockchain technology they just need to adopt the Topco programme.

Consumers in the supermarkets can scan the QR code and see where the seafood came from, how it came to its destination and is the sustainability of the supply chain.

The solution is now in production.

Monetisation

Mastercard Provenance Solution uses a SaaS model for monetisation where payment is made upon usage of the solution. When you bundle this approach with a payment component, a transaction fee is charged that comes along with provenance and traceability.

Ep. 169 – The future of governance and collaboration – insights from R3

Sun, 29 Aug 2021 22:22:54 +0000

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 traditional networks

Moving from a small centralised consortium to a larger decentralised one.

In Alisa’s experience working with a small group of companies trying to affect governance isn’t necessarily easy. Each of those companies may be doing exactly the same process but they’re calling it different thing, they may not have a shared lexicon.

Establishing this shared lexicon and a flow that works for those initial companies is important but equally important is to make it palatable for every new member of the consortium that joins. Thus, it becomes very important that the decisions structure that is developed has the ability to change as the number of new members grows the consortium.

It is important not to lock in too many decisions early as the goal is to grow. You want other companies who join the consortium to see that the process that has been built is easier for them than the existing one and that they have a means to contribute to it.

One of the pieces of work Alisa did was to build the standards body that was initially started with the Marco Polo banks which has since been handed over to the International Chamber of Commerce, now rebranded as the Digital Standards Initiative (DSI). During her time, she surveyed all members to answer 10 – 15 questions, which included questions like:

How many people should be on the board?
Should founding members have special rights once the consortium expands?
Should there be a membership fee?

The output of that survey was used to help build the governance structure. What you don’t want to do is form a working group and ask these questions without having any idea what people incentives are. Because that means you’re working group meetings will take five hours and they’ll just be people yelling at each other.

Having that document enabled Alisa to enter meetings knowing what each players want and have a point to discuss together to establish a common governance.

Administrative governance

The administrative governance structure is the longer term business and commercial activities that are associated within the business network.

The body that administers these functions can be called the Business Network Governor (BNG). This is just a name, it can be a specific company, a group of companies, a board, or any structure. That entity is meant to facilitate the contractual relationship. It is generally responsible and accountable for establishing and maintaining governance policies, and accountable for their implementation and enforcement.

Choosing a legal entity and where it is domiciled?

Choosing a for profit or not for profit legal entity involves important choices such as how they generate revenue. For profits make their money by selling a product whilst a not for profit may generate its revenue from membership dues. Will membership dues be in a tiered way or just one price. Are they per individual members or via a corporate membership.

Choosing what type of legal entity has implications on the jurisdiction that legal entity is in and will influence the structure of that entity.

Policies

Negotiating policies amongst members of a consortium forces the entities to talk about things like how to onboard and offboard an entity. This can be very important especially when thing go wrong. Alisa gave the example with B3 (Brazilian Stock Exchange) about what happens to a misbehaving node.

B3 runs a blockchain network that essentially includes the entire sector. So, if a node is misbehaving, that raises the question, do you kick that node off the network? Because then if all the other companies in that whole entire sector are on the network, can you really exclude just one because then they don’t have access something that the rest of the industry does.

Offboarding is often a lot more complicated and something that isn’t thought off until something goes wrong.

Other policies to look at include: data privacy, data retention, prioritization of features, dispute management, inter-network policies, service level, legal contracting model, business model, data resiliency and system availability.

Technical governance

Technical governance includes the rules and processes that maintain the everyday functioning of the business network. Maintaining system integrity involves tactical decisions around shorter-term tasks like ensuring all of the nodes in the business network are upgrading at the same scheduled time. Technical governance is run by an entity called the business network which could be a number of different types of actors.

Due to some of the difficult decisions that the business network has to take it’s important that this is a neutral entity. For example the off boarding policy is made by the administrative governor but its actual execution of the off boarding will be done by the network operator.

_______________________________________________________________________________________________________

Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.

Check out r3.com to find out more.

Ep. 168 – IDunion a European decentralised identity management platform

Sun, 15 Aug 2021 14:14:50 +0000

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 obligations to enable legally binding relationships which are in harmony with the European legal framework (especially eIDAS and GDPR).

Benefits for the user – user centric design

The interesting aspect for the end user is that with IDunion they will have peer to peer encrypted communication channels which they can use to exchange verifiable information.

One of several wallet apps offered can be downloaded to the mobile device and used to receive, store, manage and present digital credentials. The data is stored locally on the mobile phone and can be transferred from wallet to wallet thus ensuring data portability.

Selective disclosure of personal data and encrypted communication prevent the creation of user profiles by third parties. The wallet offers the possibility of storing, managing and sharing all personal data in a bundled form as required. For example, users will have a clear history of what information was shared with whom and when giving them a clear history of the shared data and that they can execute data protection rights such as the right to be forgotten.

This facilitates access to online offers of companies and institutions and creates transparency for all parties involved.

Benefits for the corporation

The network enables the clear verification of customers, companies and institutions. This facilitates access for customers and saves companies time, costs and administrative work. Since companies can independently verify the identities of business contacts, identity fraud is prevented to a large extent.

Furthermore, the single sign-on functionality offers the user a user-centred alternative to a password or the dependence on a single technology provider. Since users store their data themselves, this leads to fewer obligations and potential penalties of data protection regulations such as the GDPR.

What we have to remember is that personal data can be a liability for companies. If we look at some of the recent data breaches that have led to massive GDPR fines it shows that storing personal data in a centralised way acts as a honey pot for hackers.

Benefits for institutions

Institutions such as educational institutions, state authorities or citizens’ offices can use the network to identify citizens in an eIDAS-compliant manner and thus provide easy access to their services and systems. Once a connection is established, information requests can be sent directly to the citizens’ wallet via an encrypted connection.

Ep. 167 – Empowering individual’s consent using NFTs and blockchain – insights from Acoer

Sun, 25 Jul 2021 14:49:06 +0000

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. First of you have who is consenting? With that you have a signatory piece which can be a wet signature on a piece of paper, a digital signature or even an oral consent on a transcript record.

In 2021 and going forward all this information should be captured digitally and traceable digitally. Metadata of the consent needs to be captured such as the time stamp and other characteristics of the consent file such as file size, who touched the file.

Consent files can also be aggregated for reporting purposes such as for understanding what’s happening in terms of vaccinations for COVID-19. This needs to be done within a context of traceability, accountability and traceability and crucially in a privacy preserving manner.

Blockchain and consent

The future of consent is one where it is dynamic. It recognises that individuals will have different states in their life cycles which won’t be contained within one app or one organisation. So, the questions are:

How do you transfer the rights of consent?
How do you maintain the state of consent throughout those different life cycles?

Public blockchain ledger is designed for collaboration amongst parties that don’t know each other. It provides an immutable reference point that can be trusted due to the cryptography and public nature of the network.

Public blockchains can provide the facility to have a public anchor of that consent without the public have access to the file thus keeping the data private. That anchor on a public ledger effectively acts as a chain of custody.

Launch of RightsHash

RightsHash, is a decentralised engine that allows to associate NFTs (non-fungible token) on the Hedera Hashgraph network to any digital asset that will have different states within its lifecycle.

Jim takes us through an example of where a patient goes to see a doctor and signs a consent document. Using OCR, optical character recognition, this document can be digitised as a PDF making into a digital object with its specific public token ID that can be tracked. Which means any time the file is accessed or any changes to its state for example if it expires or if it is renewed, it can all be tracked using that one token ID.

By building on the Hedera network, RightsHash brings a full range of benefits to the underlying process of managing an individual’s rights. These include the ability to track and monitor discrete rights and protections in real-time, tracking transactions from different data sources and across different apps, demonstrating cryptographic proof of action and providing an automated, continuous, transparent auditing of all related compliance transactions. Additionally, RightsHash uses its own distributed architecture, decentralized processing, and storage nodes, physically located across the globe and on different cloud providers to ensure fault tolerance and high performance.

The first production deployment of RightsHash has been dedicated to the process of consent management, in particular for clinical trials with patient health or medical consent scenarios. Acoer has been working exclusively with the Consent Custody Corporation to develop a fully functional blockchain-enabled consent platform based on RightsHash called ConsentHash. Consent Custody Corporation is a custodial bank for consent agreements and personal data assets, and acts as a data fiduciary. Consent Custody Corporation protects people and organizations by safeguarding consent agreements while making consent information available, transparent, and certified anywhere data is managed.

Ep. 166 – PharmaLedger – the Pharmaceutical Blockchain Consortium

Mon, 12 Jul 2021 06:12:45 +0000

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 kind of diagnosis or treatment the patient should have in the future.

Competitors collaborating together

For Marco the real transformational aspect of using blockchain is that the entire industry is working together in building digital ecosystems to benefit together from this technology. Building this digital ecosystem means the members have to work and collaborate together to define standards.

All technologies that is developed in the PharmaLedger consortium is open sourced. So, whoever within the consortium develops some code it is open sourced for all other members to use and to build upon.

Governance

Daniel looks at governance from a project governance standpoint and from what he calls a next generation governance structure. From a project governance perspective, they have a steering committee, a project management board and a general assembly for all 29 partners. Any major changes to the membership of the consortium requires unanimous approval of all 29 partners.

The next generation governance structure is here to provide a governance body to manage a blockchain network and ecosystem which should be decentralised but with some kind of control or guidance. The present thinking is to have a foundation ecosystem which is to oversee the blockchain network and how application decisions are done. They will test out this new governance body for the electronic product information. Marco anticipates that there probably won’t be one governance model for all use cases but different ones that fits best each use case. There are ongoing discussions on how best to achieve this.

The PharmaLedger blockchain platform

The PharmaLedger project’s main goal is to establish an ecosystem where everyone can use a blockchain platform without the need to reinvent every time they have an idea to utilise blockchain. However, at the same time Marco points out that they didn’t want one big fat blockchain network but something that is more flexible. They wanted a platform that could grow with time and that had the capability to replace, expand or adopt new technologies.

All use cases don’t all have the same requirements. They don’t all need payments or voting features and some may only need anchoring services.

To achieve this need of flexibility they developed an abstraction layer, called open DSU (dat sharing unit) that separates the blockchain applications from the blockchain and to have the capability to define blockchain networks and blockchain technology for each individual use cases. For example, a use case could choose to have a public, private or hybrid blockchain network.

Due to GDPR and capability issues data isn’t stored on the blockchain. The Open DSU, the abstraction layer, solve the interoperability issues between the different blockchains, applications and where the data ultimately resides. The abstraction layer also handles the questions around private keys and thus helps the application developers to focus on the business solution and not on the underlying technology.

From an identity standpoint the open DSU layer supports different identity systems and issuers. It ensures that the users and the organisations are in control of their identity and of their data and the application who is working with that data is also under their control.

Impact of COVID

COVID has demonstrated the importance of getting reliable information on a product, especially with regards to vaccines. The electronic product information helps to address that. There has been many instances of counterfeited personal protective equipment which can be addressed with ability to track the provenance of the materials.

The IoT use case for clinical trials helps to perform clinical trials without having to come to the hospital through the use of remote devices.

What COVID has provided is the opportunity for what Daniel calls as hyper collaboration where manufacturers joining forces to help fill demand.

Post 2022

The grant agreement with the IMI and EFPIA, which comes to its conclusion at the end of 2022, is to demonstrate the uses cases in a pre-production environment, to document it, to disseminate the information through research papers, conferences, hackathons, and webinars.

For Daniel, a real achievement would be to have one of these use cases in a productive state before the project ends and to have the functional governance set up an operational.

For Marco, the three years of PharmaLedger is really to lay down the foundation that will give birth to many new use cases.

Ep. 165 – Cross blockchain ecosystem collaboration – insights from Contour & MineHub

Sun, 27 Jun 2021 22:19:48 +0000

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. The result is that instead of it taking two to three days to issuing a letter of credit it can now take 20 to 30 minutes!

As Corda was built with the support of the whole banking and financial industry, using Corda for Contour was a no brainer as it helped establish trust between the banks and Contour.

The collaboration

For Arnoud there is sufficient ecosystem overlap in their respective markets to establish a close and valuable collaboration for the ecosystem. Customers today are already using multiple platforms for their data to flow in a manner that creates opportunities for them.

Connecting MineHub to Contour in a seamless manner makes it easier for the customer’s data to flow from one platform to the other thus delighting the customer.

For Carl:

The need to have customers in common.
Being able to work with a partner that shares a common mindset.

By sharing customers, the opportunities to delight customers by being able to share information increases exponentially.

The partnership will enable trades on MineHub to flow seamlessly into the Contour network, where a digital letter of credit can be created using API connectivity. MineHub digitises the supply chain by allowing miners to capture mineral digital contracts with buyers and streamline post-trade operations, including document flow, financing, ESG reporting and logistics.

Working together, MineHub and Contour will bring greater trust and transparency to fragmented metals and mining supply chains and trade finance processes, helping data flow across the world’s trade routes, connecting buyers, sellers and their banks.

Interoperability.

Corporates and banks shouldn’t be expected to join one platform and digitise all of their process. The key to interoperability is multi-platform participation. APIs provide the interconnection between the platforms and the data can move seamlessly between the two systems.

Data marketplaces

Arnoud is looking at creating a business model where the customers can monetize their data which currently they have difficulty in doing for different reasons such as regulatory and ones of competition. An opportunity would be for customers to aggregate their data with their competitors and monetize it in a way that they can start generating revenue from it.

For Carl, the opportunity is, if you have data that can be verified, if you have data that’s updated consistently, then you can have different finance and other business models. For example today, if a bank would lend money 90 days before shipment not knowing what the person did until it actually got in the container at the part. By having verifiable data in different milestones that opens up the opportunity for different types of financing from micro financing to dynamic risk financing for example.

_______________________________________________________________________________________________________

Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.

Check out r3.com to find out more.

Ep. 164 – Tokenisation of Assets and Potential Implications for Financial Markets – OECD Report

Sun, 13 Jun 2021 22:08:53 +0000

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 17^th 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 issued and to ensure that there is no second token that is issue on the back of the same asset.

Benefits, risks and challenges to the wide adoption of tokenisation

Source: OECD Report

Iota, states that there are a lot of purported benefits to tokenisation, since we are still in a phase of having more pilots than actual practical applications. The number one and the most important one in her view is the efficiency gains such as the transfer of value on the blockchain without the need of an intermediary.

Such kind of disintermediation, coupled with smart contract automation on the blockchain potentially reduces the cost of any transaction and speed of execution.

Blockchain allows for fractional ownership of assets which in the past may have been beyond the reach of the average retail investor. An example of this was when a $30m luxury Manhattan condo development was tokenised back in 2018. Such tokenisation results in a more inclusive investor environment which can increase liquidity to previously illiquid asset classes. SME private placements, venture capital funds, small investor funds which are currently some of the most illiquid asset classes can receive liquidity by tokenising these asset classes.

In addition, as with any DLT based applications there comes the benefit of increased transparency, immutability, security and auditability.

There are however a number of challenges that need to be addressed. There are questions concerning operational risks, the technical feasibility and scalability. Add to that the legacy cost of infrastructure and the need for potential interoperability in the tokenise markets there is still some way to go before the tokenised markets really take off.

The role of regulatory policies

Iota recognises that the possible lack of clarity in some parts of the world, particularly in the early stages of the development of this market, could have acted as a potential hurdle for the industry. However, since then there has been a phenomenal progress. For example the introduction of innovation hubs and sandboxes that cater for DLT based financial services and products. The FCA has a sandbox catering for DLT projects. In the context of the European commission proposal there is a section for specific DLT application based sandbox to receive a number of pilots within it.

The BIS innovation hub has delivered a number of pilots for DLT based applications in finance such as Project Helvetia.

Disintermediation & disruptive effects tokenisation

By using DLT, transactions can be enabled between participants without the need for a central trusted authority as trust can be distributed between the nodes of the network. No middleman is required to validate the transactions between two parties. Investors for example can actually acts as their own broker/dealers as the transactions are confirmed by the participants themselves. This removes the payment of feeds from the traditional financial markets that would have gone for brokerage or any other entity intermediary functions.

When building their report Iota believed that DLT could potentially disrupt the market making model. Market makers are here to provide liquidity to the market. If DLT was to bring disintermediation to this industry it could potentially remove some of the benefits provided by the market makers. For example, market makers play an essential role in smoothing out disequilibrium and swings in supply and demand during periods of volatility. Disintermediation of market makers could disrupt this kind of liquidity provision provided by market makers and their ability to smooth out volatility levels during periods of stress.

The greatest disintermediation, question comes at the post trade at the clearing and the settlement of the transaction. The post- trade multi-step process is simplified and the back-office administrative burden is lowered significantly as you don’t need the central securities depositories or the need for a clearing house. Because in theory the DLT will be acting as the clearing entity and as the counterparty for the completion of trades.

Trades will be settled and validated by the participants of the network instead of a central authority.

Central bank digital currency (CBDC) or stablecoins in tokenised securities

According to the OECD report, for settlement to be achieved in as near real-time as possible and for delivery to be confirmed, the securities transacted and the corresponding payments need to switch ownership simultaneously. This opens up the opportunity for central bank digital currency (CBDC) or for stablecoins.

With tokenised securities on the blockchain either type of coins would allow for delivery and near real time settlement to become a viable and feasible proposition. This will also allow of the removal of lengthy processing and fees that are used in the off chain environment.

The dilemma between using CBDCs and using private stablecoins affects the atomic settlement. CBDCs for example have less risks than stablecoins whether it’s in the form of credit risk, proper audit or a number of other issues.

_______________________________________________________________________________________________________

Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.

Check out r3.com to find out more.

Ep. 163 – Enabling an open mobility ecosystem – Insights from bloXmove

Sun, 06 Jun 2021 12:02:02 +0000

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 degrees of being autonomous.

Mobility is increasingly transforming from “I want to ride my car” to “I simply need to move within a city”. The cities of the future are increasingly constituted by many different modalities of transport: micro mobility scooter, walking, bicycle, public transport and other shared resources. This changes the paradigm of the product from a vehicle to mobility as a service where the customer needs the highest level of flexibility in mobility within a city as per their preferences and needs. This requires a clear collaboration between a number of parties where a customer can demonstrate a form of credential that is accepted seamlessly between all the parties. This is similar to a SIM card when it is being used in different countries on a roaming basis.

In this scenario a customer is only onboarded once, payment can be done in a seamless manner where in the backend all of the players can run the settlement between themselves.

To deliver on such a vision you would require a decentralised shared infrastructure. Whilst centralised platforms can develop an efficient system for the end user, Harry describes them as having the potential of being seriously dangerous and almost predatory. He gives the example of a centralised platform such as Uber that manages to take 20 to 25% of revenue from the operator. He believes that they can do that because their power is so imbalanced that the operator has no choice.

For Harry, decentralised platforms are the way that enables the participants to scale together, to have the network effect whilst keeping their customer relationships.

Governance & standards

Decentralised governance is always more difficult to focus and to bring to execution speed of a centralised platform. However, an efficient decentralised governance can be achieved by designing the governance around the common incentives. This ensures that all the participants are behaving around both their selfish own interest and those of the platform.

You have to start at identifying the key stakeholders and their incentives. You then try to find a set of incentives that all parties share in common. Harry makes references to the successes of co-operatives in aligning incentives between all of their participants. When incentives are well aligned between participants and competitors they can continue to compete between each other whilst still collaborate on many levels. The collaboration level does not interfere with their core incentives.

Most standards have a better chance of being successful if they are introduced by a neutral player, government or policy maker who help to define an open standard and an open API standard. For example, in the Netherlands there is an interesting initiative being done by the Dutch Blockchain coalition and the Ministry of Infrastructure which is precisely in going in that direction of defining open standards and open API standards.

bloXmove structure

The platform will be structured from the operational side as a cooperative. Operators are both customers and co-owners of the platform. As customers they pay transaction fees on revenue they make and as co-owners they get to keep a portion of that transaction fee. On a basic level this is the incentive design that is being used to structuring the governance

_______________________________________________________________________________________________________

Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.

Check out r3.com to find out more.

Ep. 162 – Komgo – rethinking blockchain in trade finance

Sun, 30 May 2021 19:54:40 +0000

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 office of the bank in a fully automated way.

Market

Market answers the challenge around how receivables data is being captured today which is mainly around email or over the phone. Market allows users to have a standard way of exchanging receivables data, reporting them and tracking them. It allows to send request to any counterparty using or not the platform thus increasing the access to liquidity of historical data.

Check

Check is a very simple client portal to accelerate and secure the exchange of documents between counterparties. Today everything is done via email which is unsecured. With Check you have a structured portal where you can the link to the counterparty to have them upload documents.

Trakk

Trakk is Komgo’s product that is using DLT as it allows users to mitigate cyber fraud. Trakk is the backbone of the Komgo platform as it supports Market, Check and Konsole.

Trakk allows users to register the proof of any document to create an immutable digital version of the document, with its authenticity easily verified by anyone. This can be done via an outlook plugin or via a widget on the users’ websites or straight onto Komgo. Using the widget you can drag and drop the document to confirm if it still has the consent of the user. Banks, traders, inspection companies can track what is done with a document if it has been changed or not, thus allows to strongly mitigates the risk of using a fraudulent document.

Komgo’s blockchain journey

Komgo started experimenting with blockchain back in 2016 to the point of creating a smart letter of credit. However, it was clear that the industry wasn’t ready to use it at scale. Souleima has a very strong focus on answering the industry’s challenge now instead of in 5 – 10 years. Based on the user feedback that they received on their smart letter of credit as not answering the needs of the industry, Souleima decided to stop using the smart letter of credit and instead to use blockchain where it is needed, where it adds value to the user and where users are willing to adopt it and pay for it.

Participants in the trade finance industry know that they have no choice than to transform the way they operate. Plenty of companies have been trying to do this over the past decades and have not managed to do it at scale. The hype around the blockchain technology that happened in the industry has been massively driven by the hope that this technology could solve all the problems in one year. As Souleima reminds us that bringing added value to the user is not about technology, it’s about allowing them to execute their business in a faster and more secure way and allowing them to do more business. To achieve that requires much more than just technology.

Komgo proved that you can use blockchain to provide end to end secure messaging and track document data registration. In the future they foresee some business cases that may involve additional blockchain features like token ownership and shared state machines. However, the time isn’t quite right in terms of readiness of the industry.

Barriers to using blockchain

When a company starts using a software, it needs to be vetted by security and IT departments. The first hurdles was that at the beginning no one had agreed to approve a blockchain based platform. This required time for experts to have a think about how they were going to assess blockchain technology in the B2B space. As they started to apply conventional ways of vetting platform this didn’t work as blockchain is a different way of building a tech stack.

As Komgo’s mission is to deliver a solution now, they couldn’t wait for all the experts to agree on setting up a new analysis framework.

On the user side, individuals who execute trade finance deals, they are accustomed to executing them the same way for the last decades. They are not accustomed to platforms, their default tool is email. When they get told by management to use the platform they need to start trusting your platform. Something that is difficult to achieve when too often blockchain is misunderstood as being Bitcoin.

To complicate matters as Souleima states there are as many standards as markets themselves. Some of the standards compete among themselves. To date there isn’t no industry standard.

Souleima’s advice to herself

Souleima was asked if she could advise herself for starting Komgo in 2021 what top tip would she share with her future self. First thing would be not to start with the technology. Always start with solving a business problem and getting the approval of the users. Engage the user straight from the beginning, create design flows that you can share with the user to get their approval. Only when you have understood that you solve a business problem for the user that you can start building the technical solution. If blockchain is the best way of solving the problem then use blockchain, if not don’t use it.

Ep. 161 – ClaimShare a use case in confidential computing

Sun, 23 May 2021 20:14:34 +0000

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. This allows insurers to detect double dipping fraud by matching data without revealing data between themselves.

R3’s Conclave platform enables the usage of Intel’s enclave for ClaimShare’s customers to be fully GDPR compliant as no exchange or storage of sensitive or private data of the end users happens on other insurance databases. Enclaves are the hardware chip where the private computation happens, whilst Conclave is R3’s platform that allows the easy usage of this confidential computing chip.

In addition to R3’s Conclave, ClaimShare also uses R3’s Enterprise Corda platform to know the identity of the insurers with whom public data claims is shared. However due to GDPR no client private or sensitive data is stored on the ledger. It is stored off chain which is where the confidential computing part comes into play.

ClaimShare use case

ClaimShare is a platform that is very efficient to match any type of claim and can also work cross claims. For example, a customer could travel to Spain with both a cell phone insurance and a travel insurance. If the phone is stolen then the customer could try to request a payout from both their travel insurance and their phone insurance. It is very hard for the insurers to know if double dipping occurred. These are examples of the type of $5 – $10 billion of double dipping that occurs on a yearly basis.

ClaimShare isn’t limited to one type of insurance as it does this cross-insurance policy type check as well. An example of how this could work is where you have one end user that goes to insurer A to submit their claim. The insurer will use their AI and machine learning (ML) on available public data to see if there is already a case of fraud. If the insurer detects no fraud it will proceed with the payout. What ClaimShare propose is for the insurer to perform one simple API check to the ClaimShare’s Corda public ledger, to see if similar claims have been submitted based on public information. No personal identifiable information is stored on that ledger. As this is the first payout made to that user there are no challenges made.

Now lets suppose the same person goes to a second insurer to request the same payout. The second insurers will also do its own due diligence using their AI and ML techniques and will most likely conclude that the payout can happen. However as the API will be triggered to ClaimShare’s public ledger it will detect a similar or a suspicious claim was done based on public information such as colour of the car, type of accident and date of accident.

If a match has been identified between two similar claims, this is when the confidential computing part is engaged. At this point the two insurers can access the private information regarding the user that they have such as full name, address and birthday. That private information is encrypted and is sent to the Conclave black box where it is decrypted and compared. No one can see what happens in the black box as it is done by machines. Once the comparison is complete an encrypted answer is sent back to the insurers. If the information was proven to be the same then a confirmed fraud message will be sent. If the information was not the same then a confirmation message is sent instructing for the payout to happen.

Confidential computing vs zero knowledge proof

Zero knowledge proof (ZKP) is effectively a technique which uses cryptographic algorithms so that various parties can verify the veracity of an item of information without sharing the data that compose it.

Chaim was asked how does confidential computing compare to ZKP. Chaim believes that from a scalability perspective enclaves are much more widely adopted and more scalable compared to ZKP techniques. Enclaves are hardware chips whilst ZKP is software. Hardware it usually easier to fix than software when problems arise, and the chips are easier to maintain.

Additionally Chain points out that the development experience required to use ZKP is much higher than with using R3’s Conclave where in a matter of two weeks you can set up a Conclave component and start matching private data.

___________________________________________________________________________________________

This episode is brought to you by our friends and sponsors at R3.

Privacy-enhancing techniques like Confidential Computing allow different parties to gain reliable insight from data without revealing the actual data to anyone, eliminating concerns around data privacy, lack of control over how data will be used, and – most importantly – fear of it getting into the wrong hands.

Conclave is a new privacy-enhancing platform from R3 that enables the development of solutions that deliver insight from shared data across multiple parties—without the underlying data ever being seen.

Discover how Conclave is powering applications – like Intellect EU’s ClaimShare – that mitigate fraud and deliver trusted collaboration in the insurance industry and beyond by visiting www.conclave.net.

Ep. 160 – NFTs an opportunity for the financial industry?

Sun, 16 May 2021 22:47:37 +0000

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

Who has the ownership rights in relation to a clip of a sports game for example. Because there are the participants that are being filmed? There are the broadcasters, there is the platform on which that clip lives. All of those may have a claim. And the answer to do they have a claim or don’t have a claim is generally written into commercial contracts, So the intellectual property is established and transferred by those commercial contracts. And it is not affected by the NFT. Because often those parties are not party to the creation of the NFT. So, the NFT will transfer a digital certification of the ownership of that piece of digital art, but it probably won’t transfer, intellectual property in the underlying, right.

Do NFTs represent an opportunity for the financial industry?

NFTs are mainly concerned with determining ownership of intangible property. The financial industry fundamentally deals with intangible property. So NFTs do represent an opportunity for the financial industry.

DeFi, decentralised finance, brings a number of benefits such as the ability of market participants to be able to deal not through intermediaries, the reduction in cost, the potential efficiency and the potential for democratisation. However, Charles indicates that the consumer protection question is still an open question.

NFT’s are for the insurance industry a method for both storing information in a safe, secure and manipulable way. They are also a way for engaging with customers who will potentially see these things as having a connection to the type of digital assets that they’ve got on their device.

Charles also believes that on a theoretical basis, if NFTs can provide some of the underlying risk that’s underwritten in policies by insurance companies it could mean that this opens up to a wider market for underwriting that risk. What is also required alongside it is information to enable participants in that market to make judgements about the risk that they should hold. For example, internet of things devices connect to blockchain can enable to manage risk on a real time basis.

Adding smart contracts to the occasion you have automation which with internet of things enables the automation of many more contracts.

Ep. 159 – AAIS’ OpenIDL joins the Linux Foundation

Sun, 02 May 2021 18:12:04 +0000

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 own membership, budget and it is overseen by its own governing board which makes it accountable to its membership. All of its activities are public facing and you do not have to be a member to download the code to use the code for any reason. All the code is under an Apache license.

Hyperledger is the enterprise blockchain, open source community that builds the software that is behind products like Hyperledger Fabric, Hyperledger Besu, Hyperledger Sawtooth, Hyperledger Indy an Hyperledger Aries. These technologies are for organisations and consortia to build their own distributed ledger systems.

Last year they realised two things:

how the governance of permissioned blockchain networks could be enhanced by what the Linux Foundation learned about how open source communities work
because of the pandemic the Linux Foundation launched the Linux Foundation Public Health which Brian is its general manager for blockchain healthcare and identity initiatives

OpenIDL & Linux Foundation

In August 2018 the AAIS launched the Open Insurance Data Link known as OpenIDL with the stated purpose of creating a solution for the insurance industry to solve a problem on data security, privacy and transparency on how data was used. However as they started working on OpenIDL and building out that solutions by working collaboratively with insurance carries, regulators and data providers they realised that this solution could serve many industries in addition to insurance.

OpenIDL was launched with the initial use case of regulatory reporting to demonstrate the technology itself and the solution it provides. The created solution is one where the carriers can keep their data private in their own data centre, what OpenIDL calls a harmonised data store. It is a data repository according to a standard that merges all of the regulatory reporting requirements that a carrier might face.

Using the blockchain technology to write a hash of what’s in that data store on chain that proves to the regulators that the carriers by they have met the regulatory requirement to have it available to answer questions. Through a web interface, regulators would ask questions and regulators could opt in to answer that question where OpenIDL creates a report in which data is anonymised and aggregated and made available to the regulator’s without ever having to transfer the data. This met the needs of the regulators and the needs of the carriers who didn’t have to transfer any data to anyone.

A partnership with the Linux Foundation enables OpenIDL to access a wide range of talent to continue develop the platform not just for the PNC insurance industry but for their partners such as ones in the fire protection and automotive industry to name a few.

OpenIDL is now a project of the Linux Foundation and the governance of the network is moving from AAIS to the Linux Foundation as well.

OpenIDL partners

Chainyard is an infrastructure partner helping OpenIDL with the technology platform and ensuring that it is easily installed and maintained in multiple cloud environments.

OpenIDL has had a long relationship with MOBI (Insureblocks podcast with their CEO, Chris Ballinger). MOBI is interested in data standards and technology platform that support the exchange of automotive information. The insurance industry has a number of auto products that would benefit from a relationship with MOBI.

KatRisk provide catastrophe modelling software with an expertise in flood whilst RMS have a broader platform looking at other types of types of risks such as hurricanes and wind losses. OpenIDL has been working with KatRisk and RMS on a working group focused on floods in the United States. The objective of that group is to gain access to better information, better flood models, better policy and claims data in order to provide a better solution for flood risk and perhaps partner with the federal government to create a new programme that would provide better coverage across the United States.

Whilst KatRisk and RMS are competitors they see value in both competing and adding value on top of the OpenIDL network.

Governance learning for OpenIDL from open source

When looking at the permission blockchain space, it became evident that a lot of blockchain initiatives didn’t make it past the pilot was inevitably a lot of them are put together with a company at the centre of that network. This would cause the other participants to question whether this was a truly distributed network and how different is it to a company saying “we’ve got a central database just trust us”.

Brain reflects on the similarities between the blockchain space and the open source software space from 20 years ago where there was the rise of open source foundation as a home for open source projects as a counter to single vendor hosted open source projects. It was thanks to the Apache Software Foundation, the Python Foundation and the Linux Foundation that so many these open source projects came to become the default standard in their industries.

What is core to the open source movement is the “do-ocacy” principle: “Open source projects adopting the “do-ocracy” governance model tend to forgo formal and elaborate governance conventions and instead insist that “decisions are made by those who do the work.” In other words: In a do-ocracy, members gain authority by making the most consistent contributions.” Source: The Open Source Way.

Having the do-ocracy principle along the transparency principle is core to the open source movement. These principles along with the members of a blockchain consortium providing the financial support for “air traffic control” also apply to management of a permissioned blockchain network.

With regards to governance, Brian looks to ICANN (Internet Corporation for Assigned Names and Numbers) is responsible for coordinating the maintenance and procedures of the global domain name system on the internet. They do their work via a set of contractual relationships they have with domain name registrars around the world. Thus by applying a mixture of technical governance and human governance you have a process to bind nodes on a permissioned blockchain network in an open and transparent manner.

________________________________________________________________________________________

This episode is brought to you by Chainyard, an IT People Company.

In this hyper-competitive environment, businesses need to modernize today more than ever. Chainyard is a digital transformation specialist, and a technology partner that can help you modify your existing business processes, culture and customer experiences to meet the changing business and market requirements.

Chainyard is an Infrastructure Member of The Linux Foundation openIDL project and can help you develop a strategy to benefit from this novel blockchain centric, open source project. Our services span advisory, engineering, and operations helping you to have a single trusted partner in your digital transformation journey.

Check out chainyard.com to learn more about Chainyard.

Ep. 158 – Deep Dive on Plastic Bank’s Blockchain

Sun, 25 Apr 2021 17:23:48 +0000

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 team in helping them build their Hyperledger Fabric blockchain platform, on the IBM LinuxONE Servers on IBM Cloud.

When a plastic collector registers on the Plastic Bank they agree to be part of a traceable supply chain. So, for example when the collector receives their rewards for collecting the plastic onto their digital wallet this provides an element of traceability back to the client. This level of traceability is important for transforming recycling plastic into social plastic that goes into the products of Plastic Bank’s customers such as Henkel and SCJohnson.

From the client side they get a full audit trail of a transaction. They get proof that it’s real people, real plastic. They get access to a special GPS mapping system that shows the location, the distance from the shoreline with the accurate information that verify that it was ocean bound plastic from a registered collector. In addition, Plastic Bank has a team that performs internal audits to make sure there’s no user error or fraud.

Tokens

On this technology stack they also deployed their own token system which has a fractional energy cost which is equivalent to 1/10 the cost of an email. The Plastic Bank token reward programme has one token equivalent to one US cent, which they use as an asset backed stable coin. This has ensured a smooth acceptance of the tokens, backed by a stable coin on a very secure environment, by all the digital payment providers to telecom partners.

Shaun describes the token as a reward for being part of an ethical transparent supply chain. A reward for making the supply chain ethical, making it traceable, and ensuring that recycling can be a livelihood programme. Plastic Bank is able to incentivize behavioural changes by adding a tokenized bonus programme or premium programme on top of the existing market rate of plastic.

When working with local merchants to accept tokens they offer their collectors with either $1 in cash or $2 worth of rice. They can provide subsidised goods in exchange as another outlet to redeem their tokens.

Plans for the next 12 months

On the 31^st of March, Henkel and the Plastic Bank opened their first three plastic waste collection centres in Cairo. In addition to this first step on the African continent, Plastic Bank invested a lot of time and effort to standardise their platform to turn into a turnkey franchise style system of how they set up, how they train, and how they audit for that Plastic Bank can expand into many other countries 10 times faster than today.

The aim is for them to put that foundational groundwork so that they can grow exponentially next year and add another billion bottles of collected plastic.

Ep. 157 – SLAFKA – Safeguarding Nuclear Material with Blockchain

Sun, 18 Apr 2021 14:31:33 +0000

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
Related to a deep geological repository
Type Code 10, EU regulation 2004 known as the Commission Regulation (Euratom) No 302/2005 of 8 February 2005 on the application of Euratom safeguards agreements with the IAEA which are based on the nuclear non proliferation treaty

They did not test the security side of things as they wanted to focus on transactions.

Hyperledger Fabric

As Hyperledger Fabric permits different roles for different members and different access in terms of read and write restrictions, this aligned well with the confidentiality aspects related to nuclear material.

In SLAFKA the chain code allows them to build access controls. For example, in a domestic shipment it would check whether the peer proposing it is within a list of approved holders. Holders of nuclear materials or nodes that have the permission to transact that particular batch of nuclear material. There are a number of different confidentiality rules that come with nuclear materials. A nuclear operator for example, such as a nuclear plant can see its own inventory on SLAFKA, but can’t see the inventory of another nuclear operator. The regulator has full access whilst the IAEA has its own range of access controls at an international level.

Next steps for SLAFKA

SLAFKA is a first step that will not be commercialised as it is for demonstration purposes only. SLAFKA is open and transparent to demonstrate and educate different stakeholders within the nuclear fuel cycle on the usage of DLT.

DLT is a disruptive technology, however SLAFKA has to demonstrate that it isn’t going to mess with certainty that nuclear material is not misused or diverted for nefarious purposes. That it isn’t going to mess with the governance structure, the international treaties, the requirements and obligations that are currently established.

Next Steps for SLAFKA:

Test further safeguard transactions in addition to the one related to Code 10 but ones under the “Additional Protocol”.
A system of Nuclear Cooperation Agreement (NCA) which are bilateral trade agreements between states, usually a prerequisite before they can trade in nuclear material. And those agreements will also have specific reporting requirements, and to share information specific to the trade of that nuclear material or technologies. Countries like the United States, Canada or Australia can have nuclear cooperation agreements upwards of 20 – 30 different types of agreements. Being able to have that information in a more efficient ledger would be one area to test.
Transport security
Export controls

Exploring expanding SLAFKA beyond nuclear to the chemical. There are a lot of similarities in international treaties when it comes to non-proliferation. The Chemical Weapons Convention is for disarmament of a category of mass destruction. Under that agreement states have to fully disarm and of course, there are a number of reporting requirements that dwarf the nuclear material space.

The Stimson Centre has a proposal for which they hope to receive funding for them to work with the Organisation for the Prohibition of Chemical Weapons on that. There they are looking at what’s called scheduled chemicals under the CWC (Chemical Weapons Convention), specific chemical that have to be reported in terms of their international trade.

Throughout this process, Cindy hopes to be able to provide a comparison, of their different types of DLT prototypes to show the different lessons that they can learn from them when it comes to not just nuclear, but also chemical non-proliferation, hopefully, also biological non-proliferation, and then she hopes to also getting into small arms and light weapons, and so on and so forth.

Ep. 156 – Rebalance Earth – Blockchain & Climate Change

Sun, 11 Apr 2021 20:34:30 +0000

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 concentrations “at a level that would prevent dangerous anthropogenic interference with the climate system”.

Emissions trading, as set out in Article 17 of the Kyoto Protocol, allows countries that have emission units to spare – emissions permitted them but not “used” – to sell this excess capacity to countries that are over their targets. Thus, a new commodity was created in the form of emission reductions or removals. Since carbon dioxide is the principal greenhouse gas, people speak simply of trading in carbon. Carbon is now tracked and traded like any other commodity. This is known as the “carbon market.”

Unfortunately the resulting carbon markets were murky, lacked transparency and were full of middlemen whose only objective were to enrich themselves.

Why blockchain?

Carbon Credits and the voluntary carbon offset works with certification bodies such as The Gold Standard and Verra. What are these bodies essentially do is provide trust. Rebalance Earth believes that by opening up its science model of how keystone species like the African Forest Elephants perform carbon sequestration services and demonstrating how its uses a network of sensors to act as what is called in the blockchain world, Oracles (trusted sources of truth) they can build trust with their partners and customers through a transparent and traceable platform.

With regards to the science behind the model of the African Forest Elephant you can read the paper by Fabio Berzaghi and colleagues in Nature Geoscience entitled “Carbon stocks in central African forests enhanced by elephant disturbance“. This paper provided Ralph Chami and his colleagues the science to build their valuation model that an African Forest Elephant provides $1.75m of carbon offsets and carbon sequestration in their 60 years lifespan.

Walid recognises that from an MVP they don’t necessarily need a blockchain. However when looking at a 5 – 20 years timeline a blockchain platform makes a lot more sense. In the future the science model can be uploaded onto the blockchain platform for national governments around the world to upload their keystone species onto the Rebalance Earth platform as long as they follow the guidelines of the science model. This will enable Rebalance Earth to rapidly scale in a distributed manner and allow nation states to value their natural capital and generated revenue from them. For example Indonesia could generate revenue by uploading the orangutang onto Rebalance Earth. Carbon offsetting buyers will thus be able to have a mixed portfolio of keystone species around the world.

Mixing blockchain along with AI and IoT

For Rebalance Earth to be successful it needs a platform that provides trust, transparency and traceability. Blockchain can provide such a platform but Oracles, trusted sources of data are required. Having IoT (internet of things) sensors that provide imagery, videos, acoustic and DNA data is critical to be able to prove that individual elephants are alive. The the elephants clients have hired out for their carbon sequestration services are alive and in their natural habitat. Using a wide range of sensors requires a sophisticated AI (artificial intelligence) to be able to combine all these different sources of data to distinguish a unique elephant.

What does success look like?

For Rebalance Earth, success is having a platform that achieves the following goals:

Help change the narrative of how local communities see keystone species not just like a nuisance but as an asset. Where conservationism becomes a profitable experience. Where that keystone species is raising their living standards
From a government perspective is about promoting good governance, where money can’t end up in some minister’s bank account and a number of new Mercedes. Everything is traceable. But crucially it’s about making them rich countries in terms of their natural assets. Not one where natural assets like oil, gas or ores are extracted but where natural assets are protected and regenerated.
From a buyers perspective it’s about bringing nature closer to them. You can name and see, hear your elephant. It’s about bringing trust that your Carbon dollars are being used for carbon for social good in building schools and health facility.
From a nature perspective is rewilding, regenerating keystone species

What can you do?

Rebalance Earth is an initiative that has attracted 60 volunteers from around the world. 95% of them have never met! Three principles bind them together:

Be Human
Have Love
Give Hope

Recognising the enormous challenge and requests for support the initiative, Rebalance Earth has launched the Guardian Platform.

Ep. 155 – Digital Euro – Insights from ABI

Sun, 04 Apr 2021 13:40:57 +0000

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 22^nd 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 that the information related to the individual is exchanged on a need to know basis. So only the two banks involved in a transaction will have access to the information.

ABI’s 10 considerations for a CBDC

The Italian banks experience in the Spunta project gave them the necessary competences and understanding of what could be possible with CBDCs. ABI has prepared 10 considerations for a CBDC which can be summarised into three main concepts:

The digital euro must be functionally different from an electronic payment instrument in order to complement and not to compete with commercial bank money.
In order to be complimentary and not competing with electronic payment instruments, in the same way that as today, banknotes and coins as well as the different payment instruments are providing an array of choices of choices to the customers and are not competing, it would be useful to start by defining potential synergies with existing payment instruments. A Digital Euro built on DLT, thanks to the programmability could allow banks to deliver and propose new service.
In terms of accessibility and ease of use, since all citizens have the right to access the physical euro, they must have immediate perception and awareness that they are using a digital euro.

ABI’s prepared 10 considerations for a CBDC (source ABI):

Monetary stability and a full respect of the European regulatory framework must be taken into account as a priority.
Italian banks are already working on a distributed ledger infrastructure thanks to the Spunta DLT project. They want to be part of the change that comes from such an important innovation like digital currency.
In the financial environment, a programmable digital money represents an innovation that’s able to profoundly modify the way we conceive currency and exchange. This transformation can potentially deliver a great added value in terms of efficiency for both operational and support processes. This is the reason why it is so important to dedicate attention and energies to develop, quickly and in collaboration with the entire ecosystem, new instruments able to primarily support the development of the Euro area.
It is necessary that digital money deserves the maximum trust from the public. To this extent, it is essential that the highest standards of regulatory framework, security and supervision are fully respected.
Thanks to the key role played by the Central Bank, a CBDC represents the instruments that, more than others, can satisfy the innovation needs in alignment with the current framework of rules, existing instruments and interoperability with the analogical world. At the same time, an instrument like this may reduce the attractiveness of analogue tools issued by private or (in the fully decentralized implementation) non identifiable actors, due to a higher inherent risk.
To deliver at its maximum the potential of transformation of such kinds of tools, it is of absolute interest for the possibility, currently under consideration, to issue a retail European CBDC, that can represent an innovation of cash. Thanks to the role of banks, it is possible to identify technical solutions and an operational framework able to preserve the current characteristics of cash, while adding several typical benefits of the digital world (already satisfied by digital payment instruments), such as the ability not to lose money and, in this period where sanitary risk is under the spotlight, to operate contactless.
Analysing every detail, it would be possible to define how to distribute, store and exchange digital money in a way that enables banks to combine customer needs, together with the ability to ensure that the monetary policy is transmitted to the real economy and compliance to the regulatory framework. For sure, in each of these objectives, The banks role is crucial.
A key success factor for the adoption of CBDC is to reach a frictionless user experience, ensuring, at the same time, full interoperability between digital and analogical worlds and a complete circularity among all ecosystem actors.
According the technological choices that will be taken, a particular attention to the protection of personal data of our citizens is required (privacy).
Thinking to the future that awaits us, the availability of a CBDC will enable several very interesting use cases: to foster peer to-peer value transmission, supporting money exchange between person and machine and in a machine-to-machine scenario; to facilitate cross-border transactions settlement, reducing interest rate, exchange and counterparty risks; to promote, thanks to the programmability of this instrument, the automatic execution of payments when predefined situations arise, reducing administrative processes.

Learnings from Spunta

ABI gained three key findings from their work with Spunta:

Distributed ledger technology implies distributed governance
Straight from the beginning it is important to work in a collaborative manner
If DLT is a disruptive technology we need to accept and embrace the disruption

In their view the design of a Digital Euro requires careful reflection on the adequacy of traditional governance models that have been applied for infrastructure projects led by the ECB and the Euro.

The digital euro will deeply affect customers, payments, services, processes, and ICT solutions of the payment service providers in Europe.

From this perspective, the banking sector and other providers of retail payments are in the best position to assess potential effects of architectural options on the end users and to quickly evaluate the feasibility on actual payment services. The Italian banking sector would like to share their experience and expertise gained over the last few years with Spunta in particular the infrastructure itself and the distributed governance aspects that proved to be key determinants on the project success. They believe that the set of experiments based on coopetition principles brings great benefit to the market, particularly in the context of distributed paradigms.

Four possible use cases

ABI, along with 18 banks, has spent the last two months developing four possible uses cases to understand the impact of a programmable digital Euro:

Simply Home with Reply
Safe Return with Fabrick
Culture Pass with NTT Data
Pay & Split with PWC

Simply Home

Performance of multiple payments expected at the time of purchasing a property through the granting of a mortgage. The execution of payments (to the seller, to the agency, to the notary, to the seller’s bank to pay off a previous mortgage, etc.) through the enabled functionality of making a single transaction divided into multiple payments will simplify and automate the management of transactions towards the various actors involved in the process of buying and selling a property. The distinctive feature of this use case lies in the maximum exploitation of the digital euro as a central bank liability as well as in the combination of two feature of programmability the execution of multiple payments in a single transaction and the possibility of limiting the expandability.

Safe Return

The process of returning a purchase made through an e-commerce. Thanks to the implementation in a distributed ledger of instructions that are binding and executable only on the occurrence of predetermined conditions (so-called Smart contract), it is possible to make the process of returning purchased goods more reliable and consumer-friendly. At the time of delivery of the returned goods by the client, the sum of money can be blocked and kept in an escrow account, which only releases it after confirmation or rejection of the return.

Culture Pass

Culture Pass is related to the bonuses provided by the Government to support some kind of expenses: the development of this case will lead to the creation of specific smart contracts linked to the Digital Euro, which will allow to encode the logic and purpose of expendability of these tokens, making it possible to use the bonus only in compliance with the terms and conditions indicated by the issuing entity. In addition, a simplified prototype linked to the management of sums to minors (pocket money) will be developed, in order to limit the usability only to the categories of purchases allowed by law.

Pay & Split

Execution of payments for products on consignment. The case provides for the transparent management of the execution of payments for products on consignment in the so-called short supply chains, using the functionality of “split transaction” (atomic and instantaneous transactions). At the time of purchase, a single transaction is divided so that payment is directed to the seller of the product and to the various producers making up the supply chain.

___________________________________________________________________________________________

This episode is brought to you by our friends and sponsors at R3, one of the pioneers in the Spunta collaboration to provide a faster, more efficient and more transparent way of reconciling interbank transactions.

Visit R3.com to find out how Corda, R3’s enterprise blockchain platform has been adopted as the platform of choice by Spunta and for other innovative blockchain projects across multiple industries including insurance, trade finance, supply chain and capital markets.

Ep. 154 – Trust your supplier by ChainYard

Sun, 28 Mar 2021 16:26:37 +0000

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 months and is used by tens of thousands of users worldwide.

Trust Your Supplier’s underlying architecture, is designed to be interconnected with other networks. It enables to be the identity layer for networks of networks. Whilst TYP is built on Hyperledger Fabric they could theoretically roll out on other blockchain flavours.

Value proposition

From a buyer perspective the procurement officer has a reduced administrative burden thanks to a single version of the truth concerning his/her suppliers. In the past information on suppliers would come from disparate sources scattered around their architecture. This reduced administrative burden, reduces cycle time and in turn reduces costs.

From a supplier perspective their benefits are twofold. (1) Similarly, to the buyer side they get a reduced administrative burden as they don’t have to share the same information repeatedly to their customers. They have one profile with all the information pertinent to that profile published on the blockchain. (2) The second benefit is that as they’re on this digital marketplace they can be discovered and gain new business opportunities.

Third parties like D&B, EcoVadis and others validate supplier records, help fill in missing information and perform watch-list screenings while banks validate account information and financial health. D&B reports are aggregated into the application where supplier sovereign information is accessible along the ones from EcoVadis and other authoritative sources providing a one snapshot on that supplier.

Governance

Vodafone, Anheuser-Busch InBev, Cisco, GlaxoSmithKline, Lenovo, Nokia and Schneider Electric are some of the early participants on Trust Your Supplier. Each of these leading organisations have seeded the TYS network with their supplier base. They have been offered a seat on the board of governors and access to the network at no cost. In return they onboard their suppliers and help inform the direction of new product features and provide guidance in how to evolve the network in the appropriate way.

COVID19 and Trust Your Supplier

In March 2020 there was a recognition that PPE was in short supply from masks, gloves, ventilators and other medical equipment. There was a growing need, particularly for health care organisations to find providers of PPE equipment from a reliable source. TYP partnered with a number of trusted suppliers and health care organisations to provide that trusted source of PPEs.

Ep. 153 – RiskStream Collaborative’s Canopy 3.0 launch – a multi-ledger approach

Sun, 21 Mar 2021 18:35:42 +0000

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 data model (ie. a centralised one), which makes them difficult to reconcile with a decentralized or distributed data model. These are issues that Canopy 2.0 couldn’t quite addressed which Canopy 3.0 would.

Canopy 3.0 – Multi-ledger

Chris’ vision with Canopy 3.0 was to make it the universal sharing layer for carriers, brokers and reinsurers to transact. With a large number of Insurtechs requesting different blockchain protocols to integrate with, Canopy 3.0 was built with a multi-ledger approach to act as a hub for Insurtechs and also to enable future capability to build tokenisation incentives. Supported blockchain protocols are Corda, Hyperledger Fabric, Ethereum and Quorum.

With Canopy 3.0, RiskStream Collaborative has taken the approach of not having any data stored directly on the blockchain but instead of having hashes linking to it off chain.

Canopy 3.0 benefits

Under Canopy 2.0, it wasn’t easy setting a node. Members of RiskStream Collaborative had different levels of technology capabilities, but on average it would take 2 weeks to set up a node on Canopy 2.0. Having 40 – 50 insurers on RiskStream Collaborative, the support and resource requirements to set them all up with a node and integrate them would be quite high.

With Canopy 3.0 they can perform what they call a “rapid node setup”. Members only need to go to a website and within half a dozen clicks they can choose their cloud service provider and the flavour of the blockchain they wish to have. This is considerably faster than the previous 2 weeks it would take on Canopy 2.0.

This setup creates a lot flexibility for insurtechs and small carriers, who may not have the technical staff, especially as they also get a safe environment for them to perform tests before going into a production environment.

The increased speed for deployment and the way Canopy 3.0 was architected enables insurers to operate on Canopy 3.0 at a lower cost. The DLT stack uses a growing amount of open source technology and it comes with a certain amount of prebuilt modules.

Canopy 3.0 has partnered with Guidewire to facilitate carrier back office integration with Guidewire version 10.

Plans for 2021

Chris’ number one goal is to have their first notice of loss application on Canopy 3.0 in production. In addition he hopes that a number of third parties will build on canopy 3.0 and take advantage of the sandbox environment they have developed for them to build applications on top of.

_______________________________________________________________________________________________________

Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.

Check out r3.com to find out more.

Ep. 152 – Blockchain insurance innovation – insights from Tata Consultancy Services

Sun, 14 Mar 2021 22:47:01 +0000

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. Over the last 5 – 6 years there have been a lot of PoCs and progress but he personally believes that a lot of potential still lies unactualized. Pratap reminds us that blockchain is a difficult technology and it’s still in its early days.

He points that if you track B3i: In September 2019, B3i released catastrophe excess of loss placement. In September 2020 they released catastrophe excess of loss technical accounting. Pratap predicts that in 2021 they will release claims. With the launch of claims you will have all three pieces of the puzzle and will be able to prove business value.

Private and public blockchains

From August 2015 to about September 2017, Pratap didn’t believe there was an opportunity for public blockchains in the insurance space. However, that changed in September 2017. Pratap believes there is a role for public blockchain with regards to identity, risk and data exposure. For example, he believes that SSI (Self Sovereign Identity) is the best model for KYC. Additionally exposure data as an attribute of an SSI is a natural means for managing that exposure data.

The Baseline Protocol is an approach to using the public Mainnet as a common frame of reference between different systems, including traditional corporate systems of record, any kind of database or state machine, and even different blockchains or DLTs.

This is important for business that wants to utilise the immutability properties of blockchain technology. It lays a foundation for working directly with the widely available public Ethereum network in a manner that is enterprise friendly.

Pratap recognises that whilst the Basesline protocol is very interesting it isn’t going to become a dominant architecture due to the technical constraints of public blockchains.

Cyber risk modelling

In April 2018, Pratap published an article entitled “Improving the quality of cyber underwriting” that was well received by the market. Unfortunately as there wasn’t any privacy protected blockchain solution available at that time, the solution didn’t take off.

Now that B3i blockchain is available having cyber insurance solution on a blockchain is back on the agenda. Products like TCS Ignio, which is installed within an enterprise IT infrastructure, gathers the IT footprint of that enterprise through an inside out manner. This inside outer data is used to fit into standard cyber risk models. In 2018 the dominant approach for cyber insurance solution was the outside in approach. However, by using blockchain you can use a inside out approach in a secure and privacy protecting manner. You can also pool and share claims and loss data.

Cyber security

Pratap brings up the example of deepfakes whether it’s the one of Obama or the most recent one on TikTok with Tom Cruise:

These deep fakes have the potential to create some big losses and Pratap is surprised this hasn’t yet happened. SSI has the potential to help validate the person within a video or if you are speaking to the person you should be speaking to. This is important for it could help staff within a large company to validate that it is the CEO of their company who is instructing them to make a wire transfer for example.

Pratap discusses such kind of mechanisms and others in his video:

Blockchain’s role in sustainability and in reducing modern slavery

Pratap and his wife wrote two papers last year regarding using AI and blockchain to reduce modern slavery: “Reducing Modern Slavery Using AI and Blockchain”. In the paper they discuss the use of Microsoft AI, SSI technology and Ethereum baseline to reducing modern slavery globally. Their paper has garnered interest with both Swedish and UK retailers.

_______________________________________________________________________________________________________

Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.

Check out r3.com to find out more.

Ep. 151 – How to Design your own Token System

Sun, 07 Mar 2021 19:38:27 +0000

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?

Design thinking and engineering design for token systems

Design thinking became popular in the startup world in the 90s. It helps to strategically plan concepts for any new technology, products or service. The process ranges from problem definition, ideation, solution-focused strategies, modelling, prototyping, testing and evaluating including iterative feedback loops thereof.

In the case of token systems, design thinking approaches, the technology being blockchain allows for interactions to happen on a socio economic level. It also allows for the move away from individual products and services to collectively shared dynamic socio economic systems.

In March 2018, Trent McConaghy, co-founder of Ocean Protocol, coined the terms token engineering and explained his thinking in a blog post entitled “Towards a Practice of Token Engineering”. Which he describes as: “the theory, practice and tools to analyze, design, and verify tokenized ecosystems.“

Trent also defined “Engineering is about rigorous analysis, design, and verification of systems; all assisted by tools that reconcile theory with practice. Engineering is also a discipline of responsibility: being ethically and professionally accountable to the machines that you build”.

For Shermin, engineering always requires the ethical part. Part of the challenges of the early websites is that the engineering ethics of building websites didn’t exist. When websites failed they simply pivoted. Token engineering forces us to think in more robust and responsible ways and it can sit at the intersection of design thinking when creating new token systems.

Technical engineering.

Token systems either have an infrastructure token or an application token.

Infrastructure token are tokens that steer blockchain networks. Bitcoin is an infrastructure token which is used to incentivize participants in the network to contribute to the security of the network. Similarly, Ether is the infrastructure token on the Ethereum network. Infrastructure tokens are used in Web 3 networks that have a native currency to incentivize network behaviour and contribution.

When designing an infrastructure token you have to balance the needs for security, scalability and privacy.

Application tokens on the Ethereum network allow the creation of simple smart contracts on an application level. These application tokens can represent a myriad of different applications such as an asset back currency, a piece of art, fractional ownership of a real estate, a reputation token on a social network and a number of other applications.

When designing an application token you have to balance the needs for infrastructure, interoperability and standards.

Legal engineering

We’ve had securities for hundreds of years. As a society we know how to issue securities, manage securities and manage the issue of fraud and security. Essentially, we have built the mechanisms to prevent fraud, to protect investors and to create a safe ecosystem where we avoid the kind of stock market crash we had in the 1930s.

If we were to tokenising the New York Stock Exchange for example we would need to answer the following questions:

How to do it in a legally compliant manner?
Are new laws or a regulatory environment required to encompass the use of a new technology solution?

Legal engineering, whilst is complex in itself, is only focused on the legal aspect. Tokenisation of existing businesses, networks and institutions predominantly requires legal engineers, which refers to making the tokenization of existing assets, access rights and voting rights legally compliant within relevant local legislation. In this case legal engineering refers to the tokenisation of traditional governance models where smart contracts replace many of the existing human, paper and client server based operations.

Economic engineering

Economic engineering is used when designing “complex token systems”. What contributes to the complexity of a token system is:

how big is the network. The higher the number of individual or autonomous actors are in the network the higher the level of complexity.
Number of interactions
Number of types of tokens you have in a token economy, such as a multi-token economy

Tokens are there to they steer collective action towards a common purpose. The main question that need to be answered in such design process are:

Goal of the token system
Number of different types of tokens – single vs multi-token economy
Purpose of the token
Properties of the token including their transferability and fungibility

The economic engineering aspect of creating decentralised autonomous organisations where you have a number of autonomous actors from different backgrounds you need to have behavioural economics, ecological economics, micro and macro economics. You need network scientists and people of different skill sets.

Ethical engineering

In building effective token systems, you need people with an economics background, network science background, cyber and physical systems background for the economics part, but in the end, these token systems, are about the socio-economic coexistence of people in social network which has many ethical questions.

The question of transparency versus privacy. There is a trade-off between what should be public and what should be private
Power structures. If a token system incentivize network actors with a network token, it needs to ensure that it doesn’t favour a set of network actors over others

Ep. 150 – Bringing innovation into the Polish Financial Sector with the Blockchain Sandbox

Sun, 28 Feb 2021 14:01:22 +0000

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.

The Financial Supervisory Authority of Poland acts as a regulator to the financial sectors and reviews solutions built within the sandbox which gives participants some certainty as to whether they can introduce them into the market.

There is an obvious motivation coming from the founding members of blockchain sandbox, to leverage the best of breed blockchain protocol that is being used for businesses in order to provide a safe environment for startups and companies incubated through the sandbox to give them the best tools that are using blockchain as the core infrastructure.

The platform is based on Hyperledger Fabric. Each company that is incubated in the sandbox has access to a simulation of a real world network with a number of organisations where they can develop their applications within. They can also test the overall governance of a decentralised network, test their business solutions’ performance, privacy and confidentiality.

In addition, they will receive advisory services provided by the founding members from a legal, technological and regulatory perspective.

Benefits in joining the blockchain sandbox

Dorota listed out the benefits in joining the blockchain sandbox:

Isolated controlled environment
Latest technologies
Access to development resources
Regulatory support
Marketing and promotional support of startups and businesses to reach customers and investors

Maciek, listed out the benefits from an iterative process:

Qualification stage: each applying member is interviewed by the founding members where the use case is analysed
Onboarding process: the company receives an access to their instance of the sandbox where they receive all the tools they will need for the incubation process
Ongoing process: this is where they receive the advisory support from the founding members
Evaluation process: this is where they get the biggest benefit as it is the moment when their application is verified by institutions and organisations which act within a regulated market

Applying to the sandbox

Dorota stated that they are hoping to attract innovative solutions from non-profits, startups, and big and small companies. Participants don’t necessarily have to come from Poland as they’re open to receiving ones from companies around the world.

Participation in the sandbox is free of charge and no fees are incurred when using the platform. Applications can join by going to https://www.sandboxblockchain.pl/en/ and complete the application form which will be reviewed by the sandbox team. Selected candidates will be invited to join the interviewing process.

Ep. 149 – Innovation and blockchain in the insurance industry – insights from MSG

Sun, 21 Feb 2021 20:43:40 +0000

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 decisions when it doesn’t go for obvious business cases. He thinks that’s equally true for blockchain. Blockchain can bring great benefits and large saving potential but there’s still some resistance to it. He queries whether the reason blockchain isn’t being fully adopted in the insurance industry is because the industry is doing well enough that it doesn’t need to improve its efficiency.

There is also the case of finding the right top managers within an insurer who has the willingness to take strong decisions.

Bernhard believes blockchain can be a key technology to set up cross industry collaborations. Therefore, he believes that insurance has to collaborate with other industries. Otherwise, he thinks there’s a risk that they are pushed to the second row, and that they lose access to their consumers.

Best practices when evaluating innovative technologies

Bernhard explains how in the past they would receive an RFP, they answered the RFP, they presented their product and if the product was liked it was purchased.

Now he believes that the way of collaboration for new solutions and leveraging new innovative technologies has changed. The whole approach to innovation, open innovation and collaboration in new ecosystems has all changed.

Bernhard believes that now entities need to collaborate at the idea generation, join forces in a co-innovation space where you perform join design thinking sessions and jointly work on the solution. That’s the key to success, to take new fields and leverage digital technologies like blockchain for creating new products and collaborating with customers, partners and subject matter experts from within your industry and outside your industry.

MSG partnered with B3i to create an innovation laboratory for reinsurance solutions

As B3i has a growing community of insurers, MSG believed there was a potential to work with them to understand their needs and work jointly to leverage digital technologies in an innovative environment. MSG comes into the partnership with their reinsurance products and primary insurance products whilst B3i comes with their DLT consortium. They want to connect these two worlds and work jointly on new innovative solutions.

They’ve recently sent out invitations to the market to join MSG and B3i and work jointly on new innovative business ideas, leveraging MSGs products and B3i’s fluidity platform and B3i’s Corda based technology.

Initially working with B3i wasn’t something that MSG had envisioned as their product managers and architects felt that B3i had the potential to disrupt MSG and remove the need for the FS-RI products if everything moved onto blockchain.

However, when they looked at it more closely they realised that if this was to happen it would be much later in the future and in the meantime, there exists many opportunities for the two entities to collaborate together.

It turns out that B3i also initially saw MSG as competitors but both parties now see each other as partners who want to collaborate together to improve the industry.

Changes coming to the insurance industry

Bernhard believes insurance as a service has a great potential. He believes that cross industry platforms that foster cross industry collaboration is the way forward and blockchain is a great technology to support this.

He foresees that we will see more insurance companies partner up with companies from other industries whether it is with Marco Polo or Contour that can expand their products by bundling together insurance to the end customers.

To sum it up Bernhard thinks there is a great potential to bundle insurance as a service in all kinds of cross industry platforms.

Fostering cross industry learnings & remaining relevant

Insurers have to get out of their silos and collaborate with other industries if they still want to main customer relations. They need to understand what is happening in other markets, understand the risk and identify the kind of risk coverage services they can offer. To achieve this you need an ecosystem point of view that is customer centric.

Bernhard reminds us that everybody needs risk transfer but not necessarily from an insurance company. With so much capital in the market, it’s normal that non-traditional risk carriers want to get into that market.

MSGs’ innovation experiences

Bernhard recognises the challenges for a corporate like MSG to successfully perform innovation because of its own corporate culture. As a corporate’s innovation is often stifled by compliance, reporting figures, IT security and other requirements, MSG wanted to have a startup mentality and culture. To reach that objective they took people from the corporate, created an innovation space for them and removed some of the corporate pains by giving them increased freedoms and independence.

Members of the team that work in the innovation lab have some skin in the game and is willing to participate in a risk reward model.

More importantly Bernhard believes that innovation needs to have top management attention and as finance, accounting or controlling, innovation needs to become a corporate discipline in itself.

Figuring out the right approach to installing an innovation culture within a corporate can be a tricky exercise. The Insureblocks team has built over 6 startups and help build 2 innovation labs within large corporates. If you’d like to have a conversation on how to install an innovation culture or innovation lab within your corporate please don’t hesitate to reach out to us on info@insureblocks.com or via Linkedin.

Ep. 148 – Challenges and opportunities of blockchain in the insurance industry – insights from IBM

Sun, 14 Feb 2021 16:25:42 +0000

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. Blockchain provides some opportunities to either streamline the process to speed up your interactions with the customer and get more conversation, and to connect more risk data to the process and new customers that you couldn’t have easily reached out to before.

With the ever increasing number of blockchain business networks from trade networks, supply chain networks and others, insurers can’t take an approach of selling them insurance. They have to engage them in the early days of their development not to sell them policies but instead to understand the kind of data streams they can now access to better inform their policies and their risk advice.

Best practices when evaluating new innovating technologies

First of Mark advises companies need to understand what the technology can and cannot do. For example, in the case of blockchain they need to understand the value a distributed ledger can bring and what can and can’t be done from a security and an optimization standpoint.

Second you need to understand what’s the business problem you’re trying to solve. Not all business problems can be solved by blockchain. Business problems that are particularly well suited for blockchain are those where there is a large network of players that have complexities in their relationships such as in information exchange between them. These are complexities that blockchain can take out along with a number of costs.

Third tackling those challenges from a consortium perspective has its challenge. Building for example a network of 40 insurers for subrogation, reinsurance, or proof of insurance can take a very long time and once there they tend to move quite slowly.

What Mark feels is more effective is having two or three insurance players who are equally motivated to improve a shared process between themselves. The point being that the issue trying to be resolved only involves a few players instead of a larger number.

The biggest problem Mark points out in blockchain initiatives is on “do we have the value convened correctly?” It’s a lot easier doing that with a few players than with a network of 40. Mark gives us the example of TradeLens which didn’t go to the industry to create a network of 40 shipping companies. IBM instead worked with Maersk, the dominant player in the industry, to work out the challenges of that industry.

Insurers collaborating with other industry led blockchain initiatives

There exists large opportunities for insurers to collaborate with other industry led blockchain initiatives whether that’s in supply chain, pharmaceutical or any other industry. The key though is not about taking a selling traditional insurance products approach.

The key is to look at how to extract data from those chains in order to build a different risk value proposition based on that data. It’s about using that data to more effectively resolve claims in a speedy manner.

The opportunity is participating in these things and developing new risk propositions over time and taking advantage of the data that exists in those change. Insurers can extract value of a chain that’s already connected to risk, use that to inform a claims process, an underwriting process and inform both the servicing and advice being provided.

Ep. 147 – Challenges of adopting blockchain from a governance and risk standpoint

Sun, 07 Feb 2021 20:25:10 +0000

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, how is trust maintained and what is the shared understanding of good governance. With good collaborative governance you can avoid a lot of the pitfalls that usually come out later.

There are a number of design principles that need to be looked at when building a governance structure. Need to include a node to an agnostic party. In the case of the MOBI consortium that was down to MIT. Another design principle is who gets to vote and what happens under special circumstances. For example, what happens when one voting firm acquires another voting firm do they get a majority?

Consortiums, set up as a for profit company or not for profit?

According to Tom there are two points that comes to mind when looking at the implications of a profit versus not for profit consortium:

Membership in the governance body. In a for profit consortium there could be a need or desire to restrict the membership or set up different classes of membership with different authorities and voting rights.
Intellectual property. Intellectual property rights may be easier to be managed in a for profit entity that was created by investment from stakeholders.

Ecosystems as a form of competitive advantage

Supplier excellence leads to competitive advantage. Firms who do this well are known to be good at what they do as it means that their up and downstream suppliers are faster, better, less expensive, etc, with the firm reaping the benefits of that operational excellence.

Denise explains that there are some schools of thought that believe that pods of ecosystems can become more competitive than other po ds. That’s because members within a blockchain ecosystem have access to new customers and have the ability to monetize stranded assets.

What makes a good governance?

Enterprises that have done a good job in implementing effective governance are the ones that have been very clear in expressing what Denise calls, WIFM (What’s in it for me). Every player within an ecosystem needs to be able to get something out of it. It needs to be transparent and there are mechanisms in place to hold entities accountable.

Is blockchain a plug and play technology?

In Tom’s opinion whilst blockchain has clearly improved and matured over the years it hasn’t reached a level equal to a plug and play technology. Blockchain platforms such as Hedera Hashgraph, Hyperledger Fabric, Ethereum, Corda, EOSIO and others now have large development communities as part of their ecosystem with many tools for implementing solutions. These are big steps forward.

Now there are a number of companies such as IBM, T-Systems, Amazon, Microsoft and many more offering blockchain as a service which helps organisations jumpstart blockchain implementation.

But blockchain is a complicated technology to implement as an enterprise grade software system. A blockchain that implements a business model usually depends on a range of external components such as external data storage, resources like oracles and notaries. Architectures can get pretty complicated and smart contracts too. However, once these complexities are ironed out and put under the hood future blockchain implements can adopt those learnings and build on that baseline.

Main risks associated with blockchain platform

For Tom, the categories of risk are the same as for other IT systems but they all have a blockchain flavour. These include:

Technology risk – risk that something could go wrong with the platform that affects the organization’s ability to function. This can be due to a programming error or an implantation error.
Cybersecurity risk – risk that a cyber-attack on a blockchain could disrupt an organization’s operations.
Liability risk – risk associated with the liabilities of distributed peer-to-peer data sharing and processing.
Data privacy risk – risk that personal data protected by law or regulation, protected health information, proprietary corporate data, or other sensitive data could be compromised.
Compliance risk – risk that a blockchain-enabled operation could violate compliance requirements (e.g., anti-money laundering in cross-border payments)

Tom believes there needs to be more maturity and understanding the risks. There needs to be a formal way to manage the risk at the enterprise level and to add blockchain risks to the enterprise risk register. The problem is that many companies don’t have an enterprise risk register that identifies the main risks categorises and what to do about them.

Tom would advise companies to identify the perils specifically associated with blockchain. To map them into the above categories. They then should ask themselves the following questions:

What is the likelihood and impact of those perils?
What if they happened?
What impact would it have financially or otherwise?
What is the chance of it happening?

One way to mitigate those risks is considering risk transfer through insurance including general liability policies, directors’ and officers’ policies, and cyber policies.

Ep. 146 – Self-Sovereign Identity and IoT – insights from the Sovrin Foundation

Sun, 31 Jan 2021 22:10:18 +0000

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 21^st 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. That’s partly because security is hard. IoT devices have a number of constraints:

Actual device in terms of their CPU and/or microcontrollers and their ability to deal with cryptography
Power constraints
Lack of a trusted execution environment or secure element that allows the device to store keys in a secure manner

On the 1^st of January 2020, Forbes reported that the state of California IoT Security Law came into effect mandated that all IoT devices sold in the state must also have “reasonable cybersecurity measures” embedded.

Another point that Michael highlighted in the podcast is the one regarding AI bias. This is a challenge that traditional insurers models are going to run into according to Michael. There has been an increase in statistic models and AI based systems for measuring different things. The problem that many of those algorithms that run statistical models or AIs are bias. There algorithms are completely opaque and there is no open source as they’re often considered as their organisation’s competitive advantage or secret sauce.

Self-Sovereign Identity and IoT white paper

In August 2020, the Sovrin Foundation published their Self-Sovereign Identity and IoT white paper.

The paper had two objectives:

To make the SSI community aware of the opportunity that exists in the IoT space
To make the IoT community aware of the potential and the possibilities that SSI, the DIDs and the credentials bring in addressing some of the security challenges that exist in IoT

The white paper uses three personas — Jamie, Bob, and Bessie the Cow —to provide a basic introduction to SSI and IoT, explore practical challenges in context, and describe how SSI in IoT can meet these challenges.

+SSI-in-IoT-whitepaper_Sovrin-design
+

Persona – Jamie – machine to person

Jamie is a 55-year-old male who has Type 1 diabetes since childhood and has recently been diagnosed with early onset dementia. In recent years, he has been using a glucose meter implanted under his skin. The glucose meter connects to an App on his phone to keep a record of his glucose levels. Jamie has been sharing this data with his endocrinologist.

His challenges and his partner’s challenges are ensuring he gets his regular dose of insulin and the risk of him wandering away because of his dementia / Alzheimer.

With the use of decentralised identifiers and verifiable credentials, it is possible for his partner, Anne, to share delegated authorization to different people to have access to this information, such as access to the glucose meter. The other option, which is at a conceptual level, is to have inserts in Jamie’s shoes which can provide GPS location of where he is. These inserts can recognize Jamie by his gait and can even track Jamie’s physical location. This of course provides very personal information on Jamie.

Anne, being Jamie’s legal guardian can share delegate access to rescue services, both the location information coming from the insert, and potentially the glucose levels information. The aim is that this could lead to a faster and safe recovery of Jamie before he goes into an insulin shock.

Persona – Bob – machine to machine

Bob is a facilities manager in a financial office who is responsible for the infrastructure and keeping the bank’s staff, financial resources, confidential information and proprietary data safe. He has a lot of devices from heating, ventilation, security systems, network access for WIFI access points, area access and CCTV. It’s very labour intensive to set up, provision devices and to set them up on the network.

SSI along with DIDs and credentials provide the ability to automate to manage credentials for each of those devices whether is to replace them or revoke them for example.

DIDs and credentials provide Bob with a global means to establish the identity of IoT devices, people, and organisations. This enables him to standardise the management of both Machine To Machine interactions (e.g. CCTV cameras uploading their footage to a server) and Machine to Person interactions (e.g. doorways controlling entering and exiting of restricted areas).

The use of DIDs and VC’s in the asset management platform and wider IT ecosystem will increase security by ensuring all IoT devices are able to definitively self-identify and authenticate.

Persona – Bessie the cow – digital twins

Bessie is a Black Angus cow being raised by a rancher (keeper). The keeper (in contrast to the owner) of Bessie is required to keep records about Bessie, from birth to death. The tracking of cattle, and other farm animals, throughout their lives is a critical element in ensuring safety of the food supply chain. This was starkly proven during the foot-and-mouth outbreak occurred in 2007 in the UK when millions of animals were culled.

Today animals have a passport when they are born that tracks all of the animals’ movements. The challenge is that this comes as a physical piece of paper which creates a number of issues from being tampered, modified, and lost.

SSI brings the following elements to Bessie the cow and its ecosystem:

Eliminates paper
Managing multiple stakeholders

SSI brings an element of data quality issue when eliminating paper. Instead of having someone having to write information on a piece of paper or having to rekey something you can avoid spelling mistakes, typos and transcription errors by introducing SSI.

From a multiple stakeholders perspective, there have been issues or instances of where the person who has the cow on their property, along with the cow’s passport decides to sell the cow even if they don’t own it. SSi cryptographic credentials helps to introduce the notion of guardianship and delegation concept to avoid such type of problems.

Business value coming out of SSI solutions

SSI solutions bring two type of business values:

Operational savings through reductions of liability and mitigation of risk. Another example are savings around data quality issues.
When you start to have high confidence, high assurance, high trust around the interaction that you’re having, it starts to open the door for whole new business, different business models, new products and services to be created.

About the Sovrin Foundation and its work on IoT

The Sovrin Network- Making Self-Sovereign Identity a Reality from Sovrin Foundation on Vimeo.

The Sovrin Foundation is a 501 (c)(4) nonprofit organization established to administer the Governance Framework governing the Sovrin Network, a public service utility enabling self-sovereign identity on the internet. The Sovrin Foundation is an independent organization that is responsible for ensuring the Sovrin identity system is public and globally accessible.

Sovrin works alongside Decentralised Identity Foundation, and Trust Over IP Foundation to raise the profile of SSI in the IoT space.

Ep. 145 – Parametric insurance revisited – insights from Arbol

Sun, 24 Jan 2021 22:46:07 +0000

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, traceability and immutability nature of it makes it very valuable for the customer and for reinsurance capital.

A third reason for why blockchain, is with regards to smart contracts that can manage large programmes such as automated payments.

About Arbol & dClimate

Arbol is an insurtech platform for parametric coverage. Arbol connects users such as businesses and farms that are affected by external risks like weather and climate risks to capital that is looking for diversification. Arbol uses big data, smart contracts and machine learning for pricing and AI as an underwriter.

Arbol has the vision of bringing in non-traditional capital into new markets. Parametric insurance is a great bridge between the traditional finance world, which is used to things like derivatives, which are essentially payments based on data, and the insurance world.

Arbol’s products serve a range of industries including agriculture, energy, maritime, leisure, and a host of other bespoke risks.

dClimate is a transparent, decentralised marketplace where climate data, forecasts and models are standardized, monetized and distributed. It is governed by a governance token on the blockchain side. Similarly to how Amazon took AWS from an internal use to an external facing product, dClimate will be easily accessible to entities via a simple API.

Chainlink and Arbol

Insureblocks recently had Sergey Nazarov, founder of Chainlink who spoke highly of Arbol. Sid mentioned that Chainlink plays a key role in their ecosystem as early on they realised how difficult it is to access outside data sets into a blockchain in a stable manner. As Arbol builds up dClimate, Chainlink is going to be an integral part of its infrastructure in terms of reaching out to all the different data sets and validating them.

Growth areas for parametric insurance

Sid identified a number of growth areas such as in the renewable space where hedging for cloud cover and wind speed as the proliferation of solar and wind capacity continues to grow. In the hospitality sector from hedging vacations based on rainfall events.

Finally a third one is in the agricultural space where farm level sensor based coverage can help to cover farmers in a more direct way.

Ep. 144 – A new approach to blockchain – Ping An’s Insights

Sun, 17 Jan 2021 19:02:08 +0000

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. Participants can cross validate their data with other participants’ data without actually know the specifics of the data.

This approach can facilitate federated learning activities.

PingAn uses a form of zero knowledge proof, also known as ZKP called 3D ZKP. Frank believes that today’s ZKP is extremely difficult to use and can take a lot of time to prepare. PingAn’s 3D ZKP enables business to create business rules by creating arithmetic equations. This approach ensures that 3D ZKP is significantly more efficient than traditional ZKP. It facilitates the manner in which you can validate your data with other people’s data through a business logic defined by an arithmetic equation.

For companies to collaborate onto the PingAn’s blockchain platform they need to upload their encrypted data. For this to happen two levels must be adhered to. You need a common encryption standard for encrypting the data onto the blockchain.

Most ZKP and multi party computation support the Pedersen Commitment. If you can standardise that commitment you can build different protocols and APIs on top of the encryption technology

+3D Zero Knowledge Protocol - English v1.0
+

Trade finance use case

In a hypothetical example a shoe factory receives a purchase order of $100,000 for 1,000 shoes at $100 a pair of shoes. The factory needs capital to be able to manufacture the shoes. They need capital to buy the shoes materials and pay for their workers. The factory takes the purchase order to a bank to receive finance on back of the purchase order.

The bank, however needs to be able to confirm that the purchase order is real. The bank can access the data on the blockchain that carries information from the logistics provider from the customs on shoes that have been already been shipped. As the data is fully encrypted by each of those participants the bank can’t access the data itself but they can cross validate their own data with the data owned by other participants on the blockchain such as custom officials, logistics company, insurance company and others. They can validate the number of shoes that have been shipped, the price of the shoes and so on.

The more check points the bank can access onto the blockchain the more they can increase the confidence over the data they have and the more they can reduce the financial risk involved in the trade.

Plans for 2021

Opportunity for linking more data to their existing platforms. To create an ecosystem of inter connected data, along with the creation of numerous APIs to leverage the data of multiple blockchains.

The next big play in Frank’s point of view isn’t about the traditional blockchain use case but about federated learning, where Frank believes there are more opportunities.

Ep. 143 – UN World Food Programme on the blockchain

Sun, 10 Jan 2021 16:55:52 +0000

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, a custodian wallet is created on behalf of the beneficiary. Transactions are done electronically using digital vouchers where the vouchers are transferred from the beneficiary’s wallet to the merchant’s wallet. A parallel settlement process then takes place where the vouchers the merchants received are paid out in cash. This process reduces transaction fees by up to 98%.

Gustav recognises that at the beginning they could have used a simple database to deliver the building blocks voucher programme. However, blockchain has enabled them to bring on other organisations such as the UN Women. Blockchain has also enabled to create a lot of trust between the WFP and its vendors in Jordan who do not need to invoice the WFP anymore as they trust the information provided to them by Building Blocks.

Gustav shared three key learnings gathered with Building Blocs;

You need a champion to take corporate innovation forward
Create the right kind of ecosystem and the right environment for innovative ideas to percolate. This may include having the right mentors and a steering committee
Availability of funding to support the project

Insureblocks ran in 2018 a campaign to collect funds in support of the WFP by recognising the blockchain work they did with Building Blocks:

Working with UN Women for cash transfers in refugee camps with blockchain

UN Women pay women in refugee camps for the work they do there. Traditionally this was done by cash, where cash was transported to refugee camps which can be risky. UN Women and WFP collaborated together to leverage Building Blocks to facilitate the transfer of cash to women in the Za’atari and Azraq refugee camps in Jordan.

UN Women uses the blockchain system to transact vouchers as a proxy for the Jordanian Dinar. The way it works is that a woman goes into a supermarket, authenticates herself with an iris scan which enables her to access her UN Women digital cash wallet in order to receive cash from the supermarket tills.

The Atrium

The Atrium, an interagency platform for blockchain technology, built on blockchain, designed to support learning, collaboration and conversation amongst the UN community.

The Atrium was created two years by Gustav along with Christina Lomazzo and Ariana Fowler who also appeared on Insureblocks in Utilising blockchain at UNICEF. It was created as the three co-founders realised there was a lot of replication between different blockchain initiatives within the UN. The initial idea was how they can support the sharing of intellectual property, the sharing of ideas between UN agencies and thus reduce replication and increase collaboration.

Since the launch of the prototype in mid 2019 UN staff members can come learn about blockchain and develop their own smart contracts. They can use a private permissioned network within WFP and UNICEF to test out ideas

WFP Innovation Accelerator Programme

The WFP Innovation Accelerator Programme was launched in 2015 to pilot new solutions and scale promising innovations to disrupt hunger.

In just five years, they have evaluated over 6,100 applications, supported more than 100 projects around the world, with 14 innovations scaling up to reach 3.5 million people. In 2020, they were one of 10 organizations worldwide to be named in Fast Company’s 2020 awards: “Best Workplace for Innovators” and “Innovation Team of the Year.”

A number of exciting applications have come up from he WFP Innovation Accelerator Programme such as:

H2 Grow is an innovation under the World Food Programme (WFP) Innovation Accelerator’s Scale-Up Enablement programme, recently brought together a global group of hydroponics experts in a 3-day research event to discuss hydroponics in the humanitarian and development context.
Share the Meal is an app from the United Nations World Food Programme that enables people to “share their meals” with children in need.

Ep. 142 – Smart COVID data on the blockchain – insights from HealthTrends.ai

Sun, 03 Jan 2021 21:09:29 +0000

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, health equity and academics.

The role blockchain and smart contracts play

Susan views HealthTrends.ai as a bridge, since they use both legacy and blockchain parts in their solution. They currently hash the data onto the Ethereum public blockchain via smart contract which allows them to detect any changes to data published onto the blockchain.

They presently use Ethereum but Susan stresses that they are blockchain agnostic and could publish the data to any public or private blockchain. They’re now building a Chainlink node to afford certain data access within the smart contract environment.

Data standardisation challenges

As previously mentioned each state publishes the data in their own manner which in turn creates data standardisation challenges.

The states are collecting medical records from a variety of sources which could be electronically generated, could be phoned in, and or faxed in. This creates data nightmare scenarios for the people who are collecting and parsing it back out.

HealthTrends.ai takes the available published data and puts it up on the Ethereum public blockchain in a standard form.

Launching a Chainlink node

Source: HealthTrends.ai

HealthTrends.ai is in the process of launching a Chainlink node. By launching their own official Chainlink oracle node, HealthTrends.ai will be able to broadcast state certified, authoritative COVID-19 data from their Coronavirus API onto many of the leading blockchain platforms like Ethereum, empowering a wide range of new smart contract applications to emerge for Life, P&C, and Health insurance, automatic rebalancing of supply chains, asset management and financial risk tools, and more.

They chose Chainlink because they’re the most widely used oracle solution in the market.

Plans for 2021

Susan shared some of the exciting projects they have in the works from an accelerator, a test environment, some AI and ML work, working on search tools and they’re constantly refining their smart contracts.

They’re expecting to expand their node to a solution that involves zero knowledge proof (ZKP).

Recognising the growth in parametric insurance, Susan is keen to explore if there’s a low level parametric insurance that could happen in a pandemic. For example, if there are deaths at a certain level or shutdown orders at a certain level that could trigger business interruption insurance at a certain level. In a smart contract market you could test this hypothesis.

Ep. 141 – How can blockchain and insurance be good bedfellows? – Insights from AXA

Sun, 27 Dec 2020 22:24:28 +0000

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 24^th 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 to track a container of rice through an audit trail and a system of signatures. This has some level of use even without a token. However, if you were to tokenise the container of rice you could for example add instant payment to transfer the value of the container of rice. In addition, the value received for that container of rice could be used as a collateral for a loan. Tokens open up new possibilities in terms of financial services. That is why for Laurent, the most revolutionary use cases out of blockchain are the ones that includes tokens in public blockchains.

B3i’s work that focuses on streamlining money streams between insurers and reinsurers is confidential information and thus shouldn’t happen on public blockchains. Most of the work that insurers do on blockchain is related to B3i or Risk Stream Collaborative that requires scalability and speed which public blockchain isn’t quite right for them.

However, Laurent, believes that when use cases come out that involves the retail customer there will be a need to evaluate tokens and public blockchains.

Mistake 2: Add blockchain but leave the rest unchanged

Laurent reminds us that blockchain is not magic and when you consider using it you have to ask yourself the question of do you want to plug into it or do you wish to replace your existing system with it. Whether it is blockchain or the cloud when it came out, disruptive technologies have a range of problems regards compliance, security and other issues.

As insurance works in a regulated industry Laurent believes that it is best to plug blockchain into an existing system rather than starting fresh with blockchain.

With regards to the point of not just connecting to legacy technology but to legacy culture, Laurent believes that legacy culture can help to stress test ideas. Additionally, if your idea is fact based and there is a culture of change management within your incumbent then legacy culture will not prevent you from doing the right project.

Mistake 3: Ignoring the most obvious opportunities

The insurance industry should appreciate that the most immediate opportunities are not related to how crypto can support insurance but how insurance can support crypto. The cryptocurrency sector is a multi-billion dollar industry where a number of insurance products can be designed from insurance of wallets to insurance of custodians to insurance of smart contracts and many other opportunities.

Decentralised insurance might the future of insurance or it might not be. Initiatives like the ones from Nexus Mutual, regarding decentralised insurance, provide the insurance industry with some great learnings.

With regards to what role regulators can play, Laurent believes that regulators can help institutional investors better understand the crypto space which can ultimately help the retail sector to get active in that space too.

Mistake 4: Refuse cryptocurrencies their status of financial assets

According to Laurent, institutional investors are now seeing Bitcoin as the equivalent of digital gold. The Financial Times reports “2020: The year Bitcoin went institutional”. Institutional investors know that Bitcoin is an asset, not only to store value, but also to increase the return of a portfolio for the same level of risk. In a difficult year like 2020 which has been plagued with quantitative easing, the pandemic high levels of state debt, having crypto assets within an institutional investor’s portfolio can help protect that portfolio’s value. That is why companies like Fidelity have launched Fidelity Digital Assets to provide crypto services to institutions.

Insurers aren’t yet investing in crypto currencies yet but Laurent isn’t ruling out the fact that it could happen in the future.

Mistake 5: Assume you can catch up later

Laurent believes that siting on the sidelines regarding blockchain is a dangerous game: “if you say, Okay, I’m on the sideline, and I’m going to be the first follower, because I don’t want to be the first one, the pioneer, and then have the problems of the pioneer and so on. At some point, you may realise that you’re not the first follower at all, you are one of the last followers.”

Blockchain solutions have the potential to be very disruptive, which means if you sit on the sideline for too long blockchain may have completly changed your value chain and disintermediated you.

Thus, it is important for incumbents to be constantly testing out new solutions so if a paradigm shift happens in the value chain you will have something to offer.

Blockchain opportunities in insurance

There are a number of blockchain opportunities within insurance. Laurent names the following ones:

New insurance opportunities: insuring the crypto world
New investment opportunity: hedge against fiat fall
Reshaping insurance and finance
Process opportunity: more timestamping in insurance processes

Opportunity 1: New insurance opportunities: insuring the crypto world

The problem and advantage of cryptocurrencies is the lack of a central party. It can be a problem because if your money gets stolen in the crypto world there isn’t a bank to go to, to help you resolve the problem and reimburse you your money. What cryptocurrencies need is security. This is provided by solutions such as experienced custodians and hardware wallets to name a few. However, you can’t rule out the fact that at some point somebody may be able to steal your cryptocurrencies. This is where insurance can become interesting because it could provide a complimentary layer of protection that security solutions cannot bring but that insurers can bring.

Insurers can insure investors cryptocurrencies to the dollar value of that cryptocurrency no matter what happens to their wallet.

Opportunity 2: New investment opportunity: hedge against fiat fall

The COVID pandemic has put states in very high levels of debts with increased usage of quantitative easing. The expected post-COVID economic recession combined with sharp quantitative easing might lead to episodes of hyperinflation, potentially boosted by investor defiance towards sovereign and corporate debt.

As we increasingly live in a digital world so does the risk of cyber attacks. When you look at all those risks together then you could foresee a potentially very difficult economic situation. Hedging against a fiat fall with investment in Bitcoin could be a useful store of value in the future.

Opportunity 3: Reshaping insurance and finance

The idea that insurance can only be provided by insurers is more and more disputed by new technology and digital disrupters. Traditional barriers to entry to the insurance sector are falling: actuarial expertise is challenged by new armies of data scientists, claims management is becoming useless with parametric insurance and IoT, public smart contracts eliminate the need to trust a big financial brand on the promise of a future payment, capital can be accumulated through liquidity pools and regulation is becoming irrelevant and powerless to regulate decentralized protocols and money flows. Under this new context, the insurance sector has to reinvent itself, disrupt itself before being disrupted, and find new areas where it can bring value.

A number of new entrants have entered in sectors that insurers could have played a role. For example being an oracle (Chainlink), being a custodian (BitGo), insuring exchanges (Binance’s SAFU), inventing distributed insurance protocols (Etherisc), creating decentralized liquidity pools (Uniswap), insuring DeFi / hedging in DeFi (Nexus Mutual).

Insurers should start researching in all of those sectors to determine which ones they should explore investing in.

Opportunity 5: Process opportunity: more timestamping in insurance processes

In insurance processes like a claims process or an underwriting process there are tools that assigns tasks to individuals that don’t always require a signature for that task. This creates scenarios were you’re not 100% sure whether someone has done or not done the task and if they were authorised to do it. This isn’t always exposed to the retail customer.

The opportunity with blockchain is to have audit trails with signatures that are completely exposed to customers. For example, a car crash claims process can have the necessary audit trails from the moment the claims process was started all the way to the payment with all steps being time stamped, provable and digitally signed.