There have been many doubts about the viability of bit coins as currency for the financial
services world, but the technology that powers
bit coins, known as blockchain technology, is
likely to become a valuable tool for insurers
and others looking for trusted partners in the
exchange of data.
“We look at blockchain as a technology that
allows the establishment of trust in the digital
world,” says Angus Champion de Crespigny,
senior manager in the financial services IT
advisory practice with EY.
In its most basic form—bit coin—
blockchain technology is a distributive ledger stored
across many different computers, according to
de Crespigny. People can trust in who owns or
controls certain tokens and consequently who
is allowed to send those tokens.
Taking it a step further, instead of tokens,
companies can attach documents or code and
when you are in an environment where documents or codes can be tracked in a distributive
fashion across many parties, everyone can see what state the
documentation is in.
“Essentially, what you can do is a cloud or a distribut-ed-computing environment that no one party has control over,”
says de Crespigny. “Think of it as cloud without an owner or a
server without a server. That’s why we like to call it a distributive
infrastructure. It is moving your infrastructure outside a controlled environment where you oversee it into a network which
enforces those controls and makes everyone behave under those
controls so everyone can trust the controls.”
There are a couple of models for blockchain, according to
Kaenan Hertz, executive director for innovation, fintech, and
strategic insights at EY. One is an open model; the second is a
system where organizations create closed eco-systems.
The technology itself is what has provided that level of security. Hertz compares blockchain to an older technology, PGP
encryption. And points out that if you think of it in those terms,
each time people connect they have to make sure the data is
encrypted and done in a way where it becomes authentic.
“You identify and authenticate both parties and the informa-
The New Tech in Town
Blockchain technology grew out of bit coins and insurers may find this new
technology can create trusted data partners.
The blockchain technology itself makes sure anyone partaking in the system can only behave in predefined ways, points
out de Crespigny. In the bit coin protocol, it makes sure people
can’t send tokens they haven’t received. The network enforces
If someone in the insurance space were to create an insurance contract that executed when something happened and
triggered a payout, the network will only execute that code
when it receives a signal, adds de Crespigny.
“Everyone who is a part of that network will make sure that
the code only executes when that happens,” he says. “When
someone notices someone is trying to execute the code even
though the event has not occurred, it will be rejected by the
network and will not be processed. Basically, everyone checks
each other’s work.”
Ease of Use vs. Security
The problems with adoption of blockchain technology at this
point is people are trying to understand how it works rather
than what it does, explains de Crespigny.
“What it does is provide a trusted environment. People can
trust in the environment without having to trust the partici-