Decentralized Autonomous Risk Transfer on the Blockchain

Lecture Series FS21, UZH Blockchain Center - Lecture Series

Speakers: Prof. Dr. Alexander Braun & Niklas Häusle (University of St. Gallen)

The rise of blockchain technology enables a fully automated decentralized autonomous risk transfer. We first explain the functionality and operating principles of this new method of risk transfer. We also provide an overview of the corresponding institutional arrangement and its challenges. At least two major challenges can be identified: ensuring the quality of the product and attaining a critical network size. A feasible solution for these problems is the usage of system-specific tokens, which are used as a form of digital collateralization. We explain how these theoretical concepts can be translated into practice and demonstrate the economic potential of the idea. While flight delay risk is already handled through decentralized autonomous risk transfer, the biggest benefits can be realized by decentralizing crop and hurricane insurance, including a seamless transfer of the risk to capital markets