By Matt Derrick
November 2, 2019
There are few industries that fall in and out of love with the latest fad faster than the tech world. WeWork’s tailspin is the latest in a long line of examples. In some people’s minds, blockchain technology fits this same pattern.
There are a gazillion news stories talking about blockchain. With all that noise, many will think blockchain is just “talk.” Others think of blockchain and hear “Bitcoin.” And while Bitcoin, created by Satoshi Nakamoto, was the first example of the blockchain concept gaining acceptance, it has become something separate and distinct from the blockchain ecosystem. I won’t delve into Bitcoin, Ethereum and the many other cryptocurrencies here. That could take an entire publication to delve into, not to mention the many industry conferences. I will only ask for your patience with this topic, as it gets very deep, very fast, and it is hard to discuss without a little technical complexity.
So is blockchain just hype? No. The analogy is often made, rightly so, that blockchain technology is similar to the internet in the late 80s and early 90s. If you were in certain academic circles, you may have been familiar with ARPANET and NSFNET—but most people weren’t. It wasn’t until Mosaic kicked off the browser wars that the internet crossed over into the mainstream. And even then, trying to predict what would become Google, Amazon, or Facebook would have been farcical. Remember when everyone thought Netscape and AOL would dominate the internet? That’s roughly analogous to where blockchain is today. But make no mistake—the potential is just as enormous.
So what is blockchain, and why should you care?
Put simply, a blockchain is a what is sounds like—a chain of data blocks. The chain is a decentralized ledger of transactions or data—notably one that doesn’t require a third party, such as a bank or government institution, to agree on or control the data. Instead, that agreement is handled by the participants in a blockchain network. How you view that statement, in itself, probably determines how you view decentralized applications (DApps, in tech parlance) and cryptocurrencies. Decentralization also means that there is no single point of failure. So, if someone tries to take formalized control and manipulate the data or cryptocurrency for their own means, they would have to capture more than 51% of the computing power in the network—highly unlikely when there are hundreds or thousands of nodes maintaining copies of the blockchain at any one time.
Two other key blockchain concepts have implications for insurance. The first is that data in a blockchain is immutable—meaning, once data has been written to a block, it is time-stamped and locked in place in computationally to ensure that they cannot be changed. Secondly, while the data is encrypted, it is transparent, so everyone can see every transaction. Both of these concepts have important implications for insurance—if data is placed on a blockchain, it cannot be changed, and it is transparent. So, if you have a model that is built on parsing through large amounts of information (underwriting, anyone?) that need high degrees of trust, having that information instantly searchable and transparent could dramatically speed things up. In a world of exploding data creation, being about to sift through, and trust what the data shows, will be king. And with underwriting time being one of the largest inhibitors to policy placement, improvements in that could hold vast potential.
Please note, for those crypto lovers out there, I’m not diving into the various consensus protocols, Layer 2 tech, and more—maybe we’ll have a crypto meetup at TRANSFORM for that. The purpose of this TechTonic article isn’t to go deep on the tech. I just want to convey it’s very early and may be many years until blockchain breaks through beyond cryptocurrencies in ways that impact our business.
But, make no mistake, that day is coming. Those who are familiar with and ready for the Mosaic of blockchain—a consumer-focused breakout solution—will be best positioned to ride that next wave as it impacts all segments of your business.
As always, drop me an email and let me know what you think and what you’d like to hear more about.
Yours in tech,
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