Problems)and)Opportuni2es)for) Bitcoin)and)Blockchain ... · Problems)and)Opportuni2es)for)...

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Problems and Opportuni2es for Bitcoin and Blockchain Technologies in the Insurance Industry Daniel R. Robles, PE, MIB The Ingenesist Project and Coengineers, PLLC SeaFle, WA Na#onal Society of Professional Engineers Fintech Task Force

Transcript of Problems)and)Opportuni2es)for) Bitcoin)and)Blockchain ... · Problems)and)Opportuni2es)for)...

Page 1: Problems)and)Opportuni2es)for) Bitcoin)and)Blockchain ... · Problems)and)Opportuni2es)for) Bitcoin)and)Blockchain)Technologies) in)the)Insurance)Industry)) Daniel)R.)Robles,)PE,)MIB))

Problems  and  Opportuni2es  for  Bitcoin  and  Blockchain  Technologies  

in  the  Insurance  Industry    

Daniel  R.  Robles,  PE,  MIB    The  Ingenesist  Project  and  Coengineers,  PLLC  

SeaFle,  WA  

Na#onal  Society  of    Professional  Engineers    Fintech  Task  Force    

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Our  Story  Begins  Here  

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CRMS  Financial  Product  Employee  Distribu2on  

Legal  Strategy  

Enterprise  Data  Systems  

Corpora2ons  Banks  

Insurance  Government  Ins2tu2ons  Schools  Hospitals  Banks  

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Alice’s  Enterprises    

Bob’s  Business  

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Alice’s  Enterprises    

Bob’s  Business  

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Centraliza2on:  Combine  Databases  

Mergers  Acquisi2ons  Partnerships  Efficiency  Market  Cap  

Monopoly  Oligarchy  Obfusca2on  Too  Big  to  Fail  Control  

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Decentraliza+on:  Everyone  shares  the  same  database  

This  is  the  problem  that  Blockchain  Solves  

No:  Controls  Security  Authority  Consensus  

YES:  Faster  Cheaper  Easier  Fairer  

ALSO:  Lying,  Chea2ng,  Stealing  

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Let’s  summarize  the  problems  and  opportuni+es  that  lay  before  us:  

• How  different  to  insure  a  decentralized  business?  • Isn’t  the  insurance  industry  a  huge  database?  • If  you  take  the  human  out,  What  regula2ons  needed?  What’s  not,  What’s  interfering?      

•   Finally,  how  do  real  world  interac2on  change?            

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1.  Can  I  iden2fy  the  risk  exposure?  

2.  What  is  the  probability  that  the  peril  will  get  me?  

3.  If  it  does  get  me,  what  are  the  consequences?  

Engineers  are  Risk  Managers  

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Blockchain  Is  Like  A  U2lity  

Bitcoin   bitcoin   Killer  App  

So[ware  as  a  U2lity?  

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1.  The  Byzan2ne  General’s  Dilemma    

2.  The  Secret  Handshake  

3.  The  Time  Keeper    

Bitcoin  is  a  3-­‐Trick  Pony  

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1.  Vote  on  the  vote  2.  Metcalff’s  law;  value  of  the  network  is  propor2onal  to  square  of  the  nodes  3.  Rules:  100%  consensus  otherwise  retreat  

 1st  Trick:  The  Byzan+ne  General’s  Dilemma  

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Comparing  this  to  our  three  ques+ons:  1.  Yes,  we  can  iden2fy  the  risk  exposure      2.  Yes,  we  can  calculate  the  probability  of  failure    

3.  Yes,  we  know  the  consequences  of  failure  

Yes,  the  first  trick  is  insurable,  so  far  so  good!!  

Connec#ons  =  n(n-­‐1)/2  

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Byzan2ne  Fault  Tolerant  Systems  

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2nd  Trick:  The  Secret  Handshake  

(mul2-­‐key  Cryptography)  

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Comparing  this  to  our  three  ques+ons:  

1.  Yes,  we  can  see  the  risk  exposure  2.  Yes,  we  can  calculate  the  probability  of  failure    3.    Yes,  the  consequences  of  failure  can  be  

determined.        

Therefore,  trick  #2  is  also  insurable.        Things  are  looking  up!    

Probability  of  failure  =    (possible  answers)^n  

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3rd  Trick:  The  Time  Keeper  

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1. Combina2on  for  each  vault  stored  in  the  prior  vault  

2. Each  combina2on  can  only  be  used  once  3. No  two  vaults  can  be  open  at  the  same  2me.      

Consider  an  Infinite  Series  of  Bank  Vaults  

RULES  

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Here  is  Where  the  Coin  Comes  In  

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Comparing  this  to  our  three  ques+ons:  

1.  Yes,  we  can  see  the  risk  exposure      

2.  Yes,  we  can  calculate  the  probability  of  failure    

3.    Yes,  the  consequences  of  failure  can  be  determined.        

Therefore,  trick  #3  is  also  insurable.        Wow,  this  is  one  Clever  Pony!!    

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…Well,  actually  this  is  where  the  problems  start…  

What  exactly  are  bitcoins?  

Are  they  money?  

Are  they  property?  

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According  to  Uniform  Commercial  Code,  Title  9,  The  Defini2on  Of  Money:  

"Money"  means  a  medium  of  exchange  currently  authorized  or  adopted  by  a  domes#c  or  foreign  government”.  

RM  ques2ons:  • No,  Bitcoin  is  not  money  • What’s  the  probability  that  gov’t  will  decentralize  monetary  policy?  • What  are  the  consequences  if  they  did?  

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Is  it  Property?  

•  Discreet  units  or  made  of  inseperable  parts  •  Title  to  the  property  travels  with  the  property  •  Transac2ons  are  traceable  

Actually:  •  Bitcoin  divisible  into  many  parts  •  Title  to  bitcoin  does  not  travel  with  bitcoin  •  Bitcoin  are  anonymous  

Assump2ons:  

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Let’s  take  a  look  at  where  we  are  

Insurable?  

Byzan2ne  Fault  Tolerant   !  

Mul2-­‐key  Cryptography   !  

Blockchain  Engine   !  

Bitcoin  as  Money   X  

Bitcoin  as  Property   X  

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Hold  Keys  as  Proxy  for  Property  

(Use  Trick  #2)  

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Grounded  between  digital  and  real  assets  

(Use  Trick  #1)  

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! Byzan2ne  Fault  Tolerant  

! Cryptographic  by  nature  

! PE  Stamp  Acts    Timekeeper  

! Codified  in  Law  

! Independent  of  UCC  

! Establish  Title  to  Property  

(Use  Trick  #3)  

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Insurable?   Bitcoin   PE’s    

Byzan2ne  Fault  Tolerance   !   !  

Mul2-­‐key  Cryptography   !   !  

Blockchain  Engine   !   !  

Proxy  for  Money   X   !  

Proxy  for  Property   X   !  

Now,  let’s  take  a  look  at  where  we  are  

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E&I  Blockchain  

Bitcoin  1.0  was  an  experiment  Bitcoin  2.0  Banking  (ground  fault  dilemma)  

Proposal:  To  bring  the  engineering  profession  into  close  alliance  with  the  insutance  industry  to  develop  a  secure  decentralized  blockchain  where  virtual  assets  actually  represent  physical  assets.  

Develop  adjudicated  smart  contract  structures  for  infrastructure,  i.e.,  Least  Common  Denominator  upon  which  everything  depends  

Develop  means  to  assure  that  the  right  adjudicator  is  signing  the  right  contracts.    

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Daniel  R.  Robles,  PE,  MIB    The  Ingenesist  Project  and  Coengineers,  PLLC  

[email protected]  (425)  361-­‐8499  SeaFle,  WA  

Na#onal  Society  of  Professional  Engineers    FinTech  Task  Force  

The Ingenesist Project

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