Mike Wise is President of Blockchain Wisedom and Founder of the IoT Sandbox Corp., leveraging hands-on experience driving successes in the development of internet & e-commerce, along with the maturation of social technologies and now the emerging Blockchain and Web3 technologies. Mike was interviewed by Michael Fiedel, Co-Founder at InsurTech Ohio and Co-Founder at PolicyFly, Inc.
Mike, can you give us a simplified definition of blockchain and share a practical use case for insurance?
“I'll go right to the use case because that's the easiest way to understand it. The use case I love the most is when you buy an airplane ticket, you buy it online. As you're putting in your information, you’ll see that checkbox at the bottom of the form that says, ‘Do you want to insure your trip?’ Consider all of that information: your personal information, the airline, the flight, the times, etc. to be a block of data in Blockchain that would then get encrypted. Without going into all the technical details, that means that there will be a hash of that block of data.
Let's say, Mike, you're the person in this block, and I'm the next person in the sequence buying the next ticket. The same thing happens, and my choice of whether I ensure that trip is recorded as well. The difference is what forms the chain. The hash of your block is added to the block of data in my block before a new hash is made of my block. So, if anything were to be changed in your block of data, the hash would go red. It's not exactly what happens, but think of it that way.
Imagine when you put in your password twice, and you fat-finger one of the passwords. The system goes red; it flags you that there's a problem here. That's what would happen if somebody tried to change the data in your block. It would throw that hash into red, which would then throw my block into red, and right down the chain. That architecture is a simple explanation of blockchain.”
What are some of the key capabilities and values of blockchain that you believe the industry needs to better understand and appreciate?
“The first key characteristic of blockchain is decentralized architecture. So, I just talked about the encryption method. The next phase of decentralization is putting all that data on multiple nodes and servers. You have this decentralized architecture where the data is resident on many different servers at the same time, which makes it even further tamper-proof or evident. That’s important because now you can have trust in the data that you just cannot have in Web2 architecture. It opens up a whole new way of thinking about and designing products. Of course, it's also secure and hacker proof, so that's a big deal as well from a cybersecurity standpoint. We want to make sure we call that out. Lastly, it’s the programmability of blockchain - think about it in the Web2 terms as stored procedures.
For example, in that plane ticket example, if we select yes to ensure our trip, the system then has that answer in the code and can have a call out to the main database of all the flights. If a flight is canceled, it automatically flags the choice we made, which allows us to automatically get paid whatever our terms and conditions of the policy are. That changes the way you file claims. I no longer have to file a claim if my trip is canceled. A claims adjuster doesn't have to look at it. It's a much more seamless process.
Here's another great example. Captive insurance is all about programming. Certain conditions allow people to enter the captive. If that’s put on a blockchain format, it's called a decentralized autonomous organization. You can program many of those nuances like the governance into the blockchain. Nexus Mutual is a good example of a company that’s currently doing this.
The other key thing that people need to know about is the global aspect of blockchain. If you think of farmers, weavers, merchants, artists, etc. in emerging markets, they can now transact business without having bank accounts. They can do it right from their phones. That’s a huge game-changer when it comes to the world around us. This isn’t just in insurance, and it's certainly not just in the US.
For example, the Italian Banking Association launched SPUNTA, which is a blockchain-based reconciliation protocol. That's the Italian Banking Association solving interbank swaps with new technology, and they're not going back. It's awesome. California has put all of its auto titles on blockchain to make them more accessible, transferable and easier to manage. Agritech is a great new startup that uses the IoT (Internet of Things), AI and blockchain to solve the puzzle of crop insurance and payments based on the data.
There's intercompany payments. Generali did a big piece on intercompany payments from France, Italy and other countries. Then there’s subrogation between Allstate and State Farm. That's a use case that’s out there as well. The companies internally can use digital assets and currencies to make payments to themselves. They don't need to use fiat and banks, so they can run better, faster and cheaper.”
What is Web3, and what impacts do you foresee as the industry grasps the opportunity to harness it?
“Web3 is a new term that’s the combination of blockchain, AI and IoT. We've talked a lot about blockchain and the benefits and architecture. People typically know about AI and IoT. The Internet of Things is the data collection layer. Think smart watches, sensors on supply chain packages, door-bell cameras, etc. Internet of Things, as one leg of Web3, enables a digital-first mentality or experience, so the data that's coming is trustworthy and secure. It's not going to be changed because it's in a Web3 environment.
We've talked about the security of blockchain. So, AI is the second leg of Web3 that enables all kinds of new services and capabilities within products. There's a company called Indem, for example, that uses a GenAI tool on insurance websites to answer questions that people have when they visit the website. It's an AI-based chatbot that’s trained on all the data associated with that company and product. There's another company called Attestiv that uses AI to do fraud detection. Everybody knows 10 or more percent of all insurance claims are fraudulent. Artificial Intelligence helps detect fraud in images and documents. Blockchain is a programmable business, so the combination of AI, IoT and Blockchain is Web3.”
Can you give us an introduction into Web5 and help us understand where this future is going?
“Web5 is in the future. The thing to remember is there's always something next, and the smartest people on the planet right now are looking at Web5, which is Web2 plus Web3. It's going to be, pun intended, a quantum leap versus what we have now. It's going to feature a lot of the same usability that we currently have today from Web2. The data is going to be secured using Web3 architecture, but it will be dominated by quantum computing. Quantum is exponentially more powerful than our current chip-based traditional computing. Most people say it's about five to 10 years away. I tell people that two years ago, people said it was 10 to 20 years away. What we're seeing is the impact of GenAI making things move faster.
The smartest cryptographers at MIT right now are working on quantum-proof cryptography or quantum resistance. This generates the term post-quantum resistance, and that's a term I want everyone to start making a mental note of. When quantum computing gets in the hands of bad actors, notably hackers and nation states, that will be a game-changing situation. The idea is that quantum-based attacks will easily break through our current cybersecurity and cryptography protocols. That's a little sneak preview of Web5. The exhortation is that we need to get ready for Web5 now, and the way to do that is to swim in the deep end of Web3.”
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