Insureblocks is a dedicated weekly podcast on blockchain, smart contracts and distributed ledger technology (DLT) in the insurance industry. Hosted by Walid Al Saqqaf, this podcast will invite expert speakers from incumbents to the most promising start-ups in London, New York, Zurich and around the world. Insureblocks is the best way to not only understand the basics of blockchain but to also hear about proof of concepts, what insurance companies have done, their learnings and the end results. Whether you are new to or an expert on blockchain and would like to understand the impact it will have on the insurance industry, this is the podcast you'll want to tune into.
Ep. 178 – SDX – SIX’s regulated digital asset exchange platform
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 (...
Ep. 177 – Why decentralised finance matters and the policy implications? – OECD Report
Iota Nassr is a policy analyst at the OECD within the financial markets division. She currently manages the FinTech experts group of the OECD Committee on Financial Markets, leading the analysis around anything that has to do with digitalization of finance. The OECD Report “Why decentralised finance matters and the policy implications” is product of the committee’s expert group composed of representatives of the 38 OECD members coming from Central Banks, Ministry of Finance and other financial authorities.
What is blockchain?
Iota’s definition of blockchain hasn’t changed much since her previous podcast on Insureblocks on “Tokenisation of Assets and Potential Implications for Financial Markets – OECD Report” on the 13th of June 2021. She still sees blockchain and DLT, more broadly, as a way to record, share information and to exchange value in a decentralised manner without the need for trusted central authorities or intermediaries.
However now she believes the emphasis is now more on the programmable nature of decentralised distributed ledger technologies and the level of disintermediation involved in the different networks and structures that we observe in the market.
Why this report?
The Summer of 2020, also known as the DeFi summer caught the attention of the OECD. This was due to the exponential growth they were observing and the level of participation of retail investors in what is a very highly volatile market that is devoid of the traditional safeguards that are in place for investors and consumers in traditional financial markets.
The feedback loops they have observed between DeFi and mainstream crypto such as Bitcoin, Ether ,the main stable coins along with the recycling of profits between the two kinds of environments, made it increasingly critical for the OECD to have a look at this space.
The final reason for analysing this market was the growing institutionalisation of crypto assets, which may be increasing risks of interconnectedness between decentralised and traditional finance. This report’s objectives is to like into DeFi models to understand the risks, opportunities and implications for traditional finance.
What is Defi?
DeFi, decentralised finance, claims to replicate what is known as traditional finance in a decentralised way in an open way through applications built on Ethereum and increasingly on other blockchains.
There are two possible misconceptions around DeFi. The first is that not all DLT based financial applications are DeFi. So the fact that a financial application is built on the blockchain does not make it by default part of DeFi. The second misconception has to do with self proclaimed DeFi applications that may not be truly decentralised. The degree of decentralisation varies from one project to another.
The report defines three key defining features:
* Non-custodial: The protocols and the applications have a non-custodial nature. There is no central authority or other intermediary gains access to or control over participants’ digital assets; instead, participants manage their private keys, and therefore their digital assets, directly.
* Self-governed and community-driven: Most DeFi protocols are open-source and allow the community to review and further develop the code underlying the protocols. This happens through the use of governance tokens.
* Composable: Existing components of DeFi networks (i.e. digital assets, smart contracts, protocols and applications built on top of the...
Ep. 176 – Etherisc’s flight delay blockchain insurance in production
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.
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 Atla...
Ep. 175 – Coadjute – blockchain platform launch & mortgage stablecoins
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.
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.
Ep. 174 – R3 Product Vision: Market Trends & Needs and R3’s Long-Term Product Investment
Todd McDonald is the co-founder & Chief Strategy Officer at R3. In this podcast we discuss R3’s Product Vision and their views on market trends, market needs and R3’s long term product investment.
What is blockchain?
Blockchain is a way for multiple participants to join a network and update the state of that network without having to trust someone to coordinate amongst them. For businesses, Todd sees blockchain as a way to connect with more customers and more businesses without having to worry as much around the trust factor.
Three market trends
Back in September of this year Todd presented at CordaCon a presentation entitled “R3 Product Vision: Market Trends, Market Needs and R3’s Long-Term Product Investment.”In it he started by analysing three market trends:
* “Everything is an asset”,
* “push-pull of (de)centralisation”
* “Plan ahead for regulation”.
Everything is an asset
Blockchain has the ability to create digital scarcity. Essentially anything that you can prove ownership of can become an asset. Assets can be digitally mobile such as NFTs and/or they can be used as collateral for a loan.
A digital asset of course can be the digital manifestation or representation of a real physical asset but equally it could also by a pure digital asset. Pure digital assets, such as the purchase of digital property in the Metaverse, have recently seen a bit of an explosive growth. Republic Realm purchased a $4.3 million 24x24 digital piece of land, whilst Metaverse Group in November made a $2.43 million purchase of parcels in Decentraland.
Push-Pull of (de)centralisation
Blockchains are custody and software. They’re the ability to custody digital assets in the software layer without having the need of human beings. Todd shared with us that some of the biggest investors in this space so far have been existing intermediaries. Financial market infrastructure is heavily investing in distributed systems and blockchain.
He then explains what he sees as the different facets of the decentralisation journey:
* You need critical mass and become successful. There needs to be a journey to attract people to a network and distribute the roles of that network. Potentially over time the network can become more distributed to decentralised. What is interesting about the crypto side is that with tokenomics all participants can be incentivised from day one onto a decentralised network
* Progressive decentralisation a term coined by Jesse Walden, from Andreesen Horowitz, talks about starting out within a bootstrap minimum viable ecosystem, ie. quite centralised, which as it grows can progress into a decentralised one
Plan ahead for regulation
Once regulation starts it pretty much only increases. This comment isn’t specifically related to crypto regulation but more on financial services. There is an increasing amount of regulatory imperatives such as open banking, GDPR, and Central Securities Depository Regulation (CSDR).
Modernising market infrastructure
SIX digital exchange became live on the 18th of November 2021, when SIX, launched a CHF 150 million ($162 million) tokenised digital bond ...
Ep. 173 – Obscuro: a secret spell over DeFi
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 a href="https://www.coindesk.com/tech/2021/05/10/why-ethereums-miner-extractab...
Breath of fresh air
Walid is knowledgeable and gives good insight into a new and promising technology. For anyone who is interested in the insurance industry and is looking for good content then this podcast is for you.
Great podcast series with really interesting people, subject matter experts and influencers. Good quality recording and relaxed delivery. The diversity episode was one of my favourites. Highly recommend it
Always insightful, realistic and pitched at the right level for all to understand.