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Big Insurers Are Uniting Behind R3's Blockchain Tech

R3 has scored another win in the insurance sector, giving the startup a wide lead over other distributed ledger technology (DLT) providers in the sector.

Revealed exclusively to CoinDesk, the RiskBlock Alliance, whose members include such insurance heavyweights as Chubb, Marsh and Liberty Mutual, has decided to build its first set of use cases using R3’s Corda platform.

The news comes soon after B3i, the European reinsurance consortium, decided to switch from Hyperledger Fabric to Corda. With the addition of RiskBlock, R3 now counts all the major insurance blockchain consortia as Corda users, including the Insurwave marine insurance platform created by EY and Maersk as well as regional initiatives in India and Italy.  

RiskBlock was officially launched in mid-2017 by The Institutes, an insurance research and education network, but the team behind the DLT consortium has spent at least two years testing enterprise blockchain solutions. Earlier this year, RiskBlock narrowed down its choices to a short list: Quorum (developed by JPMorgan Chase), Hyperledger Fabric, Corda, and Digital Asset.

“We went through an intense and laborious process and finally narrowed it down to two, which were Corda and Digital Asset,” Patrick Schmid, a vice president at RiskBlock, told CoinDesk, adding:

“It was a close race – and we haven’t worked out all the details yet – but we have decided on Corda and we are moving in that direction.”

RiskBlock was a founding member of the Ethereum Enterprise Alliance and much of the early work, including several proofs-of-concept, was done on a private version of ethereum, the world’s second-largest blockchain. However, the insurance consortium started to change course this year as it received input from member firms and also some of its potential partners.

Privacy – or, rather, the lack thereof in a system forked from a public network – was the dealbreaker for these companies, according to Schmid.

“What we learned from testing ethereum was that our members found huge value in the smart contracts, and found huge value in blockchain-enabled technology. But they were a little bit concerned about data segregation,” he said.

“Even with a private variant of ethereum, their concern really was around data being stored, even if it’s encrypted and hashed, on every node in the system.”

The new RiskBlock applications are proofs of insurance (with the goal of weeding out uninsured motorists); more efficient forms of data sharing when a policyholder first notifies an insurer it will be filing a claim; subrogation (think of when your auto insurance carrier pays you after an accident and then pursues the other driver’s carrier for reimbursement), with a focus on blockchain-based net settlement; and parametric insurance, which is paid out automatically when a triggering event such as a natural catastrophe occurs.

In terms of a timeline, Schmid said, “Everything is in progress now. We anticipate that we’ll have POI and First Notice of Loss fully complete and ready for member testing before the end of summer.”

Insurance and interoperability

Landing RiskBlock is another important validation for R3’s technology at a time when the bank-owned startup is rumored to be struggling financially. The company is set to release the commercial version of its enterprise software next week.

“Over the last few months we have seen several insurers migrate to Corda due to its enhanced privacy and scalability; information is shared on a bi-lateral or multi-lateral basis, meaning parties that are not involved in the transaction will not see it,” said Ryan Rugg, global head of insurance at R3.

“Corda gives insurers the ability to integrate and secure disparate data sources, whilst simultaneously ensuring transparency across an interconnected network of clients, brokers, insurers and other third parties,” he added.

In a sense, B3i’s switch from Hyperledger to Corda made fellow insurance consortium RiskBlock more likely to settle on the R3 platform as well, all else equal.

That’s because, according to Schmid, the potential to “make interoperability an immediate thing” was a big factor in the platform selection process at RiskBlock.

“One of the major catalysts for us to narrow our selection process down to ranking Corda at the top was that it’s potentially also going to be leveraged by European reinsurers in the B3i initiative and by the InsurWave initiative – and some other smaller initiatives,” he said.

B3i, founded by insurance giants Allianz, Aegon and Swiss Re, and supported by AIG and AIA, gave similar reasons as RiskBlock in explaining its switch from Hyperledger Fabric to Corda.

After re-evaluating our criteria around data privacy, developer productivity and interoperability we concluded that Corda is a perfect fit for our insurance use cases and also for our future strategy for an insurance business network,” Markus Tradt, CTO at B3i, told CoinDesk.

Tradt said B3i’s vision goes far beyond single-purpose blockchain deployments for a specific use case and that his consortium is working with partners and third parties for application developments.

Hence, “interoperability is crucial for us,” he said, “To that end, we are actively pursuing collaboration or partnerships with other platforms and initiatives.”

Puzzle pieces image via Shutterstock.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Sberbank Buys Commercial Bonds Issued Over Blockchain Platform

Russian bank Sberbank CIB and telecoms firm MTS have conducted what they say is the country’s first commercial bond transaction made using blockchain.

MTS announced Tuesday that it had placed commercial bonds of 750 million rubles ($12.11 million), with the primary buyer being Sberbank, using a proprietary blockchain platform provided by the National Settlement Depository (NSD) and based on Hyperledger Fabric 1.1.

The bonds issued have a maturity of 182 days with an annual coupon rate of 6.8 percent and were placed on OTC market, according to a press release. The transaction used the “delivery versus payment” (DVP) method of settlement and was compliant with Russian legislation, it adds.

Andrey Kamensky, VP of finance, investments and M&A at MTS, commented that the successful blockchain transaction was carried out through “the entire settlement chain, from security placement and cash receipt to fulfillment of all obligations to the investor.”

Kamensky added:

“MTS intends to continue employing blockchain-based solutions, primarily in financial markets, due to [the technology’s] clear advantages in increasing transaction transparency and the participants’ confidence, while substantially reducing transaction costs.”

As reported by CoinDesk, the NSD, the central depository for Russia’s largest securities exchange group, announced trials of its Hyperledger-based commercial bond trading platform in October 2017. At the time, Raiffeisenbank Russia had already tested the system with the purchase of $10 million-worth of bonds in a mobile phone network.

According to Eddi Astanin, chairman of the board at NSD: “The pioneering transaction with Sberbank and MTS confirmed blockchain’s status as an efficient industrial technology providing confidentiality and speed during securities settlement.”

Sberbank image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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IBM Evolution: Big Blue Is Finally Getting Serious About Cryptocurrency

It wasn’t long ago that your average enterprise wouldn’t even mention bitcoin, ethereum, or any number of cryptocurrencies in public.

Instead of using the cryptographically secure tokens to streamline workflows – or even talking about doing so – some of the most recognizable enterprises in blockchain have largely confined themselves to uses of blockchain as a new decentralized database, absent any digital assets.

Slowly however, over the past several years that has started to change. Executives at large corporations have shown themselves to be increasingly willing to take public stances both for (and against) what is now a $300 billion token market.

But if 2017 was the year that companies began talking about crypto, it wasn’t until recently that enterprises have been willing to publicly use cryptocurrencies in both early-stage prototypes and live applications.

Now, it would seem the floodgates are prepared to open, with the $140 billion IBM revealing to CoinDesk that it has been meeting with executives from commodities trading platforms, large corporations, and perhaps most importantly, central banks, to explore how cryptocurrencies can help save them money and generate revenue.

“We’re seeing tons of demand for digital asset issuance across the board,” said IBM’s new head of blockchain development Jesse Lund, who was hired from Wells Fargo earlier this year to help develop the computer giant’s cryptocurrency strategy.

At the moment, that work is largely being pursued using the public Stellar platform, and its native cryptocurrency, the lumen (XLM), an partnership made public last October.

But in interview, Lund said IBM is interested in expanding the business applications of cryptocurrencies in a number of ways.

Lund told CoinDesk:

“What’s happening is there’s this emergence of a new segment that could actually be one of the biggest segments, that is a permissioned but public blockchain network typology.”

The central bank ‘big toe’

There’s perhaps no better symbol of this convergence than IBM’s early work with central banks.

Over the past year, Lund says he’s met with 20 central banks exploring the potential benefits of issuing their own fiat cryptocurrency on a blockchain.

Specifically, he described the “most durable digital asset” as one that is “issued by a central bank that represents a claim on fiat deposits in the real world,” but still maintains “some semblance of monetary policy.”

Though he wouldn’t reveal the names of most of the central banks with which he’s meeting, he described them as largely comprised of banks from the G20, an international forum with members including China, Russia, the U.S. and the EU.

Lund further described the central banks as “clients in some capacity.” Based on these conversations, he said he expects the first central banks to issue a fiat currency on a blockchain will be “the smaller ones” with a high concentration of interest in Asia and North America.

However, “the most inspiring of the visions of the central banks I’ve talked to has been Sweden’s Riksbank,” said Lund.

In December 2017, the Riksbank published a white paper detailing its interest in moving Sweden’s cash supply to a digital platform, though it didn’t mention blockchain specifically.

Still, Lund expects to see decentralized cryptocurrency converge with central banks some time soon.

“I expect that we’ll see — sometime this year — a central bank at least putting its big toe in the water to issue a digital denomination of their fiat currency into the wild,” said Lund. “Probably in a controlled format.”

Beyond currency

But IBM’s work with assets issued on a blockchain goes beyond central bank-sanctioned cryptocurrency.

By using the same technology that is allowing an increasing number of startups to raise capital on the Stellar platform, IBM is exploring a wide range of other tokens.

Lund breaks down the demand IBM is seeing into three main kinds of tokens: securities tokens that give owners a stake in the issuing company, utility tokens that give users access to a service such as phone minutes and commodities tokens that represent precious metals and other physical assets.

“We’re actually seeing a move toward the issuance of tokens that have a higher velocity that represent, for example, a claim on a portion of gold bullion sitting in a vault somewhere,” he said.

Beyond the obvious potential interest in this work from commodities exchanges, Lund said IBM is being approached by retail companies, beverage providers and energy companies looking to tokenize various aspects of their business offerings.

A fourth category of companies Lund said is approaching IBM are startups looking to raise capital, though he admits these opportunities have proved less enticing.

“We’re less inclined to do those, we like to see more maturity in the clients that we work with,” Lund added.

Beyond Stellar

So far, IBM’s work with cryptocurrencies has been largely confined to the Stellar network and its native lumen cryptocurrency, which it has used largely in cross-border payments trials.

The company itself is running nine Stellar nodes that help confirm those transactions based in locations around the world, such as Australia, Brazil, Hong Kong and the U.S. However, going forward, IBM is open to working with any number of blockchains.

The most serious of that work appears to be with the Sovrin Foundation that contributed the original codebase of Hyperledger Indy, and is now preparing to issue a crypto asset in an ICO.

While Lund didn’t reveal details about that work, he indicated there is an early-stage partnership forming with the non-profit organization. More news, he said, is expected shortly.

From there, IBM’s work with cryptocurrencies even further converges on its work with permissioned blockchains.

In Janauary, IBM Research published a detailed white paper that described their work to apply a transaction model used by bitcoin into Hyperledger Fabric’s underlying chaincode.

Designed for purely experimental purposes to help compare transaction through-puts in the permissioned blockchain to those on public ledgers, the “Fabric Coin” effort resulted in improvements that were included in the Hyperledger Fabric 1.1 released earlier this month.

In this way, Lund expects to see further business opportunties between public and private blockchains continue to develop.

He concluded:

“We’re going to see a lot more convergence between those two ends of the spectrum. The bitcoin and cryptocurrency space that has been hands-off for enterprises and the private, country club blockchain space that is on the other side.”

IBM image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.