Corporations Are Increasingly Adopting Crypto

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Are we really that early? The volatile price market cycles gives the impression of an unmatured industry. Despite gaining an exponential global awareness in the last few years, crypto has ways to go before mainstream and corporate acceptance. The future is bright though; corporations are increasingly adopting crypto.

Blockchain as a technology has been evolving consistently since 2014. With Ethereum as a pioneer, thousands of new protocols have emerged with multiple use cases, one more efficient than the other. We are witnessing how our future as a society is unfolding with this new structure. Many big players are actively hiring for “crypto” positions & looking for ways to tap into the space.

Blockdata released in late 2021 a research of how many of the top 100 public companies in the world are using blockchain technology. The results were surprising to many:

From just two companies — PayPal and Walt Disney — engaging in blockchain in 2014, blockchain technology adoption has grown exponentially: 81 of the Top 100 Public Companies are currently using blockchain technology.

From a user perspective, we are also growing fast. Crypto.com research team found that the global crypto user base increased by 178% in 2021, with crypto users totaling almost 300 million. This number is expected to break one billion by the end of 2022.

Moreover, Deloitte’s paper “The Rise of Using Cryptocurrency in Business” concludes that crypto provides access to completely new demographic groups, something that should be attractive to businesses. In fact, data shows that up to 40% of customers who pay with crypto are new customers of companies, and their purchase amounts are twice those of credit card users. Another big insight from the report is that crypto users often represent a more cutting-edge clientele that values transparency in their transactions overall.

Once again, the decision to use crypto for operations requires a different way of thinking from that behind the use of crypto for investments (mindset that scares a big part of the population).

Of the 81 companies mentioned before, most are interested in permissioned chains or blockchain frameworks like Hyperledger Fabric that allows them to build customized, private solutions that might be used only for internal operations (employee utilization). Rather than an open, permission-less system like most DeFi protocols, they’re building a scalable and secure platform that supports private transactions and confidential contracts.

Even if those solutions are not ideal for decentralization maxis, the TradFi transition to web3 should be a gradual, multi-year process, due to the complexity involved in most business transition plans. It’s a much bigger decision than just adopting a new form of payment. Integrating crypto calls for a broad rethinking of fundamental strategic questions.

As Eden Block founder Lior Messika stated, web3 will be the place where all decentralized systems will learn to interact with each other, building on the security and value (network effects) of a broader ecosystem. As it will be multilayered and multifaceted, the internet will develop a new feature: Value-Exchange (rather than simply information exchange). Companies will adapt or they will be replaced.

Source: Messari’s article What is Web3?

Leveraging blockchain in traditional industries

we are certain that the insurance industry has a large space for growth. Crypto as a technology presents a series of characteristics inherent to insurance fundamentals: transparency, immutability, traceability, integrity, security, simplicity and quick access to information. This definitely rings a bell on areas such as claims, fraud detection, identity recognition, pricing & auto transactions/payments via smart contracts. Beyond the operational level, it can also make insurance globally accessible to the underserved people thus enabling financial inclusion on scale.

IBM points out several ways that the blockchain can add value to the insurance industry, allowing for the following services to become available, or more efficient:

  • Smart contracts for insurance policies and faster claim processing;
  • Payment verification — which will enable financial transactions such as claims collections or pay-outs to be faster, more accurate and auditable;
  • Compliance — enabling insurers to reduce regulatory oversights and the associated costs.
  • Increased trust — Cryptography in blockchain ensures that transactions are secure, authenticated and verifiable, ensuring customer privacy.

Back in 2020 Lemonade was already combining distributed ledger technology with AI to offer insurance for renters & homeowners at the most competitive prices in the market. They recently announced their first crypto experiment in web3 to attend agricultural microinsurance in Africa. Again, the introduction of crypto to a company’s operations can be done incrementally. We will get there eventually.

The journey from web2 to web3: An insurance case

Day By Day is an Australian based business that is reimagining insurtech with DeFi and NFTs.

Founded in 2018, the company created a platform that allows you to easily register your insured assets and valuables via its mobile app. Designed to be a simple way to manage documents and insurance claims, the company announced in February that it was joining the Algorand ecosystem to build a DAO (Decentralized Autonomous Organization).

They are converting their web2 insurance asset management platform and asset registry mobile app into a fully functional decentralized insurance marketplace that will connect insurers and buyers (P2P) to provide cover for real world assets. This transition will offer their existing user base an easy opportunity to engage with web3 as they will be able to place their registered assets on the marketplace.

Conclusion from 0xTokenGrapher

The expansion of the traditional insurance industry directly propels the expansion of the DeFi insurance industry. Although I am bullish on the exponential development of DeFi insurance, my personal favorite reason to be excited about its future is that it will teach society to learn about the concept of hedging.

With crypto, we are able to create and exchange values we previously could not. Once web3 is used by the masses, deep liquidity will be important for the lossless exchange of value and insurance will play a big part in hedging the downside of our day-to-day interactions.

I am of the opinion that much of the liquidity and hedging mechanisms that exist today in DeFi will be abstracted away from the user interaction level and will become part of the internet stack. Once society adopts the concepts today common to the crypto community, the potential value-at-risk will be greatly superior than that of today.

Insurance will not only inherently protect the value of our interactions, but it will also be a big component in bringing people to crypto.

Check out 0xTokenGrapher and the rest of the Verso Finance team here.

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