The swollen tide of cryptocurrency mania appears to be receding, leaving perhaps the firmer ground of blockchain behind. But blockchain tides are also turning.

Executive Summary

Unblocked by the chain, smart ledgers are "the thing"—and their use by insurance clients is where the action is at, according to Professor Michael Mainelli, co-founder of Z/Yen, a commercial think-tank and venture firm. Specifically, Mainelli proposes that it's time for mainstream insurers to turn their attention from smart ledger pilots for insurance processing to opportunities to write classic cover for smart ledger ecosystems, including liability insurance, E&O, business interruption and more. He begins explaining how the benefits of eliminating the central third parties and speeds of one trillion transactions per second are bringing smart private ledgers to the fore, ahead of public blockchains. Then he describes the insurance business opportunity available to mainstream insurers and even a unique cyber-catastrophe cover from ILS market participants.

Blockchains are slow, expensive and dumb. People are successfully making them fast, inexpensive and smart. This has largely been achieved by returning to antecedents of cryptocurrency systems from the 1980s and 1990s, distributed databases and ledgers. The systems that are moving into commercial applications are far removed from the cryptocurrency world. Smart ledgers are “the thing.”

Smart ledgers are based on a combination of mutual distributed ledgers—aka, blockchain or multi-organizational databases with a super audit trail—with embedded programming and sensing, thus permitting semi-intelligent, autonomous transactions.

Smart ledgers are touted as a technology for fair play in a globalized world. Some implementations can work at speeds up to one trillion database transactions a day at a cost of millicents per transaction, with complex instructions embedded in the database itself. This compares with the few transactions per second and enormous energy cost of “public” blockchains, such as bitcoin or Ethereum. (Bitcoin approaches the energy consumption of the Netherlands or Switzerland at the moment.)

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