R3 Makes Blockchain Adoption Gains Within Insurance Industry
Whilst insurers have been extremely competitive, the industry has been cooperating their efforts for adopting blockchain technologies. The three major insurance consortia B3i, RiskBlock Alliance and Insurwave all share the same goal of improving efficiency and cutting down the costs. And it is R3 the winner as all three consortia are building their products on top of R3's Corda platform.
B3i was initially launched in 2016 by five of the biggest Europe-based insurers (Aegon, Allianz, Munich Re, Swiss Re and Zurich) with the goal to improve efficiency across the value chain. A year later, B3i added 23 new members including AIG and AIA. Just recently, the consortium announced that it is transitioning into an independent company incorporated in Switzerland in order to “streamline the development, testing and commercialization of blockchain solutions”. B3i was initially building their prototype on Hyperledger’s Fabric contributed by Digital Asset and IBM but decided to switch to R3’s Corda.
The RiskBlock Alliance was launched earlier last year by Pennsylvania-based risk and insurance group The Institutes with the goal to lower industry transaction costs while increasing the speed and security of data transfers. In early 2018, 18 new companies including Liberty Mutual, Marsh, Nationwide and USAA joined the consortium. RiskBlock announced last week that it will build its first use cases on R3's Corda platform. RiskBlock initially experimented with a private version of Ethereum but eventually changed course because of the lack of privacy caused by data segregation. Patrick Schmid, VP of RiskBlock, said that they narrowed down their choices to Corda and Digital Asset but Corda came on top.
Guardtime and EY also jointly developed a blockchain marine insurance platform Insurwave, which is already used by many marine insurance leaders such as Willis Towers Watson, XL Catlin, MS Amlin and ACORD.
Insurance Blockchain Products Built on R3's Corda
|wdt_ID||Consortium||Founded by||Notable members||Product|
|1||B3i||Aegon, Allianz, Munich Re, Swiss Re, Zurich||Allianz, Zurich, Aegon, AIG||Prototype for property cat XoL reinsurance contracts|
|2||RiskBlock Alliance||The Institutes||Liberty Mutual, Marsh, Nationwide, USAA||Proof of insurance, subrogation and parametric insurance|
|3||Insurwave||Guardtime and EY||Willis Towers Watson, XL Catlin, MS Amlin, ACORD||Platform for marine insurance|
Maersk, the largest container shipping company, started using the platform in May. Insurwave is built on the Corda as well.
|| INFORMATION CONTROL
R3’s Corda seems to be the choice for insurance consortia and for a good reason. Corda was designed with the the financial industry in mind intending to let participants control what information they share with others. Markus Tradt, CTO of B3i, said "What we really liked about the Corda design is that they share information only on a transaction level between parties, so they are not putting transactions into blocks and sharing transactions with parties that are not involved, and this was very important to us. It’s crucial for us that transaction information is private between counterparties" Another reason is interoperability. All insurance solutions built on Corda will be able to interoperate seamlessly.
Blockstream Rolls Out Ethereum Competitor
Blockstream, one of the largest contributors of funding for Bitcoin Core, released a feature called Issued Assets, which allows the creation of tokenized assets on the Liquid sidechain. Since its inception in 2014, Blockstream has raised more than $150Mn from AXA, Digital Garage, Horizons Ventures and more than 20 other entities (see table). Earlier in March, Blockstream launched the Liquid sidechain release candidate for participating exchanges.
While there are some similarities, the Liquid Network is structurally different from the Lightning Network because it was built to specifically address the particular needs of exchanges (see table). All Liquid transactions are pegged via a sidechain to the Bitcoin blockchain. Whereas most of the cryptocurrencies are secured by Proof of Work, Liquid blockchain is secured by a federation of functionaries, typically exchanges or other large trading parties.
Just like on other public blockchains, Liquid transactions are viewable by everyone in the network. However, similarly to Zcash, Liquid also supports confidential transactions (CTs), which hides transaction amounts from everyone but the involved parties. Blockstream says that CTs minimize the risk of blockchain analysis, which has become a lucrative business (Diar, 9 April). Liquid enhances privacy and speed at the expense of being a permissioned network and having to trust the functionaries.
Liquid initially only supported bitcoin but now, it is also rolling out the support for other digital assets like tokenized fiat, crypto assets or attested assets. Confidential transactions will hide both the amount and asset type from outside parties. After the digital assets fulfill their purpose, the issuers can easily destroy them. The introduction of digital assets on Liquid allows simple swaps of different assets in a single transaction without the need of a third party.
Main Blockstream Developments
|wdt_ID||-||Lightning Network||Liquid Network|
|1||Primary users||Individuals||Exchanges and financial institutions|
|2||Development||Lightning Labs, Acinq, Blockstream||Blockstream|
|3||Purpose||near-instant transfers of small or micropayments||transfers of large amounts between exchanges and financial institutions|
|4||Technology||Second layer||Pegged sidechain|
|6||Bound by channel capacity||Yes||No|
|7||Parties must be online||Yes||No|
|8||Support of token issuance||No||Yes|
|| POSITIVE TRADE-OFFS?
The creation of tokenized assets will enable many new use cases, which were traditionally executed on Ethereum such as ICOs, digital collectibles (NFTs), reward points, and stablecoins. As opposed to Ethereum or other smart contract platforms, Liquid will have no native traded coin. Moreover, Liquid will also be cheaper, faster and more private but at the expense of being permissioned. The Liquid Network will be transitioning to production in the next few weeks.
M&A Grows to $46Bn Within Payments Industry in 2018
It could be the surge of interest in Bitcoin and its potential utility as a threat. It could be cheap lending. It could be a number of strategic opportunities. But one thing for sure is that the payments industry is now gearing up their power with mergers and acquisitions hitting $46Bn in the first half of 2018, versus the $32.9Bn for all of 2017 according to the Financial Times sourcing data from Dealogic.
It's PayPal, however, who is leading the way plunging $2.2Bn in Swedish iZettle alone. The company has also backed Hyperwallet, a mobile application that looks to ease payment friction globally. And this highlights the direction of the various payment solutions that the industry is eying - consumer facing protocols on mobile devices. The strategic outlook then seems to be banking on ease of use for consumer spending, rather than the core features of cryptocurrencies such as Bitcoin.
2Q18: Bitcoin Transactions, Value Half Versus First Quarter
Source: Blockchain.com, Diar Calc.
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