Blockchain – Beyond Bitcoin (Part 5) Investments and Insurance
How will Blockchain will shake up Investments and Insurance?
In this post I focus on two industries that will feel the Blockchain as a force for change.
Investments
Traditional Investments include Stocks, Bonds, Commodities, Property, Currency, Derivatives. Financial services firms innovated by introducing such items as Funds, Mobile Apps, Wrap Accounts etc. These were supposed to be places where you could manage all your investments. The downside is inflexibility, lack of features and charges!
Outside Wrap accounts and Investment funds; Stocks, Bonds and Derivatives continue to need to be purchased through a stock broker but now here comes the Blockchain….
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The Blockchain provides so many possibilities.
Commodities and Currency
Digital asset platforms such as Uphold let you buy gold, platinum, silver as well as most of the worlds major currencies. You no longer need to buy physical assets. You can have an app on your phone that lets you switch your investments at will.
The 21st Century Gold Standard
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New Possibilities..
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Digital Equity and Bonds
A company no longer needs to use the Stock market to raise Equity or Debt capital. Companies can now effectively issue stock using platforms such as BnkToTheFuture or as an ICO. BnkToTheFuture operates in a very similar way to traditional Stock Markets but its open to more investors, not just via a broker. Whats new is that Investors can invest in Blockchain based stocks and bonds via ICOs or subsequently by buying digital Assets.
Investment Portfolios
- As Blockchain based digital assets and digital cash mature and grows in size they will become more stable in value. They will be more useful as a store of value as we see less volatility in price.
Currently the value of Bitcoin, and other digital assets are much more volatile than investing in established Stock Markets such as the FTSE as the follwing graphs shows. - For investors Blockchain based digital assets and digital cash also offer a chance to diversify their portfolio from traditional economies.
Multi Asset Investment Platform
With the host of new opportunities to invest, at the moment, you need to be a bit of a computer whiz just keep track of your investments. Platforms for managing your investments are developing and when these mature it will be as easy for people to manage their complete investment portfolio through Blochchain based assets. It’s entirely possible that digital tokens, (like Tether) will develop which are linked to other assets such as Gold, Euro, or even Stock Market Indices or Investment funds. These would be no different than the concept either of the gold standard in the past or more recently investment funds which mirror the performance of an underlying basket of stocks.
The only question mark is how will regulation step up to the plate on this one?
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Portfolio Management Tools
Xapo and Jaxx are multi asset platforms but are mainly wallets for storing digital cash.
Uphold takes it to the next level with the sheer volume of currencies and commodities available.
The platforms I most admire have a vision of one day being the go-to place for storing all your digital assets.
- ICONOMI is an online based tool based on the Ethereum Blockchain which also aims to be a multi asset platform for investment.
One to Watch
- Exodus is my favourite. As more coins are integrated into Exodus you could have a complete investment platform which would allow you to manage all your investments in one place, at very low cost. The Exodus team are also very helpful and welcoming to new people to the space.
Disclaimer – the above is not investment advice, do your own risk assessment before investing in any Blockchain based assets.
Insurance
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- Public facing consumer Insurance comes in two forms; life Insurance, and Insurance not related to Life (i.e. Car, Home, etc …). These are mass market price sensitive products.
- Commercial Insurance, which is less visible to the public, accounts for a significant portion of the Insurance Industry; including everything from Ships, Office Buildings and Oil Rigs to Footballers feet.
The Internet Era…
Sales
In the 90s and 00’s the internet transformed the high volume, price sensitive consumer market. Car and Home Insurance is now sold on-line. Sites search all the Insurance providers and give you the best deal. Life Insurance can also be purchased in this way and there is generally no need to get a specialised quote from a company unless you have a very unique condition or history.
The high volume mass market generally allows insurance companies to put people into boxes (e.g. male/female, good driver/bad driver) and charge them a suitable price for their risk of claiming.
More specialised Commercial Insurance has not seen such a change in the Internet era and is generally still sold on a face to face basis, with experts setting the details of the cover manually on a case by case basis.
Claims
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The Blockchain Era…
The Sales and Claims process as it stands can be unnecessarily slow. Lots of paperwork, people on phones, approvals, authorisations. There is no good reason why this has not been automated to a greater extent so that a customer could apply on-line, get their details automatically synced to a database and an acceptance letter automatically generated and posted. Even low complexity claims settled and paid quicker.
Opportunity for Traditional Companies
The exisitng system could have, and should have evolved and modernised but in most cases it has not. Having everything stored on a Blockchain (policy details, claim details etc) would not be a huge advantage over a well evolved traditional IT system however reality is that in many company's these details are still often stored in paper files, disparate databases. Blockchain offers an opportunity to upgrade out of date systems.
Companies could continue to do everything under the same governance structures, regulations etc. Just faster and much cheaper!
Sales
For the mass market Insurance, the Blockchain offers an opportunity for traditional insurance companies to integrate the whole sales process and streamline it end to end. Polices details entered automatically, approval given, policy issued. MI would be instantly available to drive business decisions and customer details would be stored efficiently and securely for later reference. This could happen on private Blockchain or a public encrypted one.
Claims
Some aspects of the claims process could also be automated. For example using Oracles, factual based claims could be automatically accessed (e.g. has a flight been delayed) and low value, non complex claims could automatically be handled.
Here come the visionaries
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Universal Basic Insurance
@dantheman in How does Universal Basic Insurance compare to Universal Basic Income? describes a way of sharing risk among a society using Blockchains. This is an interesting idea.
Insurance Clubs
Another idea is that of a Blockchain based Mutual Insurance model. These mutual clubs have existed for 100’s of years and the Blockchain now offers a vehicle for anyone to set-up such a club using smart contracts with risks shared among a group. https://teambrella.com and have https://bitpark.net/ have developed versions of this idea which takes the Insurance Company out of Insurance.
Taking Insurance Companies of Insurance
![](https://steemitimages.com/640x0/http://i.imgsafe.org/ae28b6f67b.jpg)
I will watch Teambrella closely, but I wouldnt discount the need and value for Insurance Companies to be involved even if the contract is managed on a Blockchain. We can learn lessons from history.
The Challenges
Insurance can be a complex business which plays out over many years. Existing Insurance companies are regulated and have to hold an amount of capital so they can fulfil their obligations, even years after events. There are consumer protection obligations, data protection obligations, legal obligations. These are all there to provide a level of protection to consumers.
Insurance is complex because it involves not only paying out claims but also settling disputes, investing money and planning for the future.
- Money paid into a Blockchain app would need to be invested, held to cover future claims etc.
- In many countries there are data protection and data storage regulations. Theses will need to evolve to allow for data stored on Blockchains.
- One of the most tricky aspects of Insurance is dealing with complex claims.
There are legal considerations, expert judgement etc. which can cause claims to be dragged out for many years and may cost millions of dollars. How would these be settled?
Lessons from history
- In the UK in the 1960’s Emil Savundra ignored the Insurance Industry and went into the Insurance business ignoring all the ramifications and obligations that went with it. If you have a few minutes watch this Trial by Television to see what happened.
I have no doubt that, with the use of Oracles and specialist professional adjudicators, Insurance will adapt to Blochchain but it will also need the participation of the Insurance Industry. I am sure that we will also see a few Emil Savundras in the early days of Blockchain based Insurance.
Conclusion
Blockchain offers:
![](https://steemitimages.com/640x0/http://i.imgsafe.org/ae8440674b.jpg)
- A rich new platform for investing and managing portfolios. This could change the way investments are managed and transacted for both individuals and retail business.
- A new way for managing and enforcing Insurance contracts, particularly for high volume Life, Motor and Home Insurance, as well as low complexity Travel and Health Insurance.
Thank you for reading this. I write on Steemit about Blockchain, Cryptocurrency, Science and lots of random topics.
Other Posts in this series
Blockchain – Beyond Bitcoin
Blockchain - Beyond Bitcoin (Part 2)
Blockchain – Beyond Bitcoin (Part 3) Banking
Blockchain – Beyond Bitcoin (Part 4) Trade / Ecommerce
Image Credits, images have mainly been sourced from https://pixabay.com.
Just scanning back through the prior posts: these are so good they could be used as slides for presentations.
Wow... upvoted, resteemed and followed! I will have to go back and read the first ones. I'm super excited about Iconomi as well. Since the price stayed so low after the ICO I'm still stocking up on that one! I also hadn't heard of Exodus, so thanks for sharing that. Great looking app, now if they just add some more coins and tokens to their platform soon! This is a great read for the bitcoin noobs and for anyone who has been in the space for awhile.
Thanks for your encouraging comments @framealife. Stay tuned there is lots more to come!
Exodus is a wonderful project. The guys running it, JP and Daniel, have a clear vision for what they are trying to achieve. They have fairly clear targets and high standards for what they will allow into the Exodus app and I think this will make the app very usable, stable and reliable. The are very focused on UX. Its apps like this that will bridge the gap and make Blockchain accessible to anyone. This project could gather momentum very fast and its one to watch. What I like about it though is that It's not a coin and plans on plugging into other digital Blockchain Assets. In a sense they are digital asset agnostic. They are now just a store of digital value but as far as I know they intend for their app to become a form of peer to peer digital exchange.
I dont know a lot about Iconomi. I will definitely do more reading about them. My impression at the moment is that Iconomi is more of a digital asset fund which is quite specific aiming to allow you to invest in lots of things in a digital market place. It's not as agnostic as Exodus. Exodus has not tied itself to any one digital currency and is quite flexible and will be able to adapt to the evolving Blockchain landscape. I worry that Iconomi will just not be flexible enough to change or offer the assets of competitors which will emerge. I am very interested to learn more about them.
I have also written a post about the multitude of digital currencies Do we need 709 Digital Currencies?. I focused on Digital Cash but I also wanted to revisit this post and do one on Digital Assets, which Iconomi would feature. What opportunities exist for these Assets and what would drive their long term valuations.
I don't think that we need 709, and most of them are garbage. However, I do like the appcoins and think they serve a purpose. Even if you could technically do everything with say Bitcoin, Ethereum or only a handful, I think there will always be alts and apps. It serves 2 purposes: 1. testing new ways of doing things that you wouldn't implement on the main chain. 2. from a branding perspective, it just works to have a token that is only used by you and for your platform. There are arguments against both of those ideas. All I can say is we live in a very interesting time, and most of the world doesn't even recognize it yet.
As for Iconomi, they do create their own fund that can be accessed by those who participated in the crowdsale. They also are going to create their own fund that the public can buy into. The neat thing is, if you hold the ICN token, you rake a % of the fees they charge on the trading, deposits/withdrawals, etc. So you can keep building up your stock of ICN and have your own revenue stream of Ethereum paid to you weekly from just holding that token. Another awesome element to Iconomi is that anyone can create their own fund and have people invest into it. You can copy Iconomi's fund, other users funds, or pick your own investments to add to your fund. And the most important part of their platform is the ability for investors to buy into the funds with bank transfers and credit cards. It's hard to get people to invest into holding different cryptos and ICOs when to them it's difficult to even set up and purchase Bitcoin and Ethereum to trade for those. So it will bridge the general public to crypto and also supply a few different revenue streams.
I definitely liked what I saw with Exodus, but it seems it's just a management platform that links you to shapeshift to trade. I like it, I like the visuals and it appears easy to use. I will definitely try it out since I downloaded it. I must say though that I hold BTC and Eth, but I don't hold Dash, LTC or Doge, so I'll hold off until they offer more options. I hope they add Factom, because I still hold a lot of Factom, and that wallet is a pain to use. I'd love to be able to just add my Factom pvt key to Exodus and trade it from there.
Thanks for your insight!
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Bitcoin is also the perfect portfolio asset: no correlation to stocks, bonds, or real estate, and (thus far) high average returns:
https://news.bitcoin.com/bitcoin-ideal-portfolio-asset/
The more stable the price becomes the better an investment as part of a balanced portfolio. Volatility kills making it part of a portfolio of assets for most investors. It has little correlation to other key economic drivers so it may work out as a good hedge to traditional investments.
I think long term it will be traded more and more as a store of value and less and less as a pump and dump stock. 2016 has been a very stable year for Bitcoin. What will 2017 bring????
Look at this beautiful collapse in volatility:
https://btcvol.info/
Vol can surely spike at any point in the future, but it has been collapsing since about 2014.
Very interesting. It's definately on a good path. If you include any of the traditional investments in that graph gold, euro etc the volatility of bitcoin is even less for periods. There are still spikes though but I hope it won't be long until it has a consistent stable price. That would be encouraging for more widespread adoption.
Definitely agree, lower volatility will spur greater adoption and greater adoption could spur lower volatility...