Decentralized Risk Platform GRE to Bring Risk Trading to the Masses
Place/Date: Hong Kong - May 21st, 2018 at 11:26 pm UTC · 6 min read
Source: Global Risk Exchange
The platform will bring risk trading to the forefront of exchange by addressing multiple inherent problems in today’s risk management industry.
The future is full of uncertainties. We cannot predict what will happen in the coming days, months, and years. The obvious solution to this problem is active management of risk in the forms of insurance for general public and derivative products for institutions to mitigate the effects of unforeseen circumstances.
With a global gross transaction volume of 4.8 trillion USD in 2017, the risk management industry is growing by the day. GRE is a blockchain based platform that banks on the power of decentralization and brings this industry into the future with streamlined, instant risk transfer at the touch of a button.
Current Problems in the Industry
The risk management industry is currently characterized by issues that make it very tedious and expensive to participate, and has a high barrier to enter:
- High Channel Costs: The existing value chains of insurance and derivative market are plagued by intermediaries who charge a significant amount for their services, making premium or risk hedging costs very expensive.
- Centralized Product Design: Insurances and derivative products are designed on similar terms, which makes them easier for mass distribution, but making people with different risks profiles hard to meet personalized needs. The homogenous risk management products fail to deliver their full potential this way.
- User Data Privacy: In traditional insurance market, insured are required to submit various kinds of personal documents and information, which is stored on centralized server and is exposed to information misuse and theft.
- Opaque OTC Derivative Market: OTC derivative market’s risk pricing relies on internal calculation of financial institutions, leading to distorted risk measurements and subsequently, low-value pricing for consumers.
- Tedious Claiming Processing: A insurance claim made by a consumer often takes a lot of time since the insurer relies on a traditional, time consuming process of verification and then a slow monetary transfer through banks.
GRE’s Solution to the Risk Market
GRE, as a blockchain-based platform, intends on revolutionizing how the risk management market currently works. By offering services that are efficient, more personalized, and fast claiming process, the decentralized risk marketplace gives consumers what benefit they have been deprived of for so long:
- Risk contract buyer and seller connect and transact directly via GRE. Low risk trading cost by eliminating the intermediaries, using direct order matching process similar to a stock exchange but in a decentralized way.
- Customized products lines as each risk is designed according to its own dynamics and is unique. This ensures maximum risk coverage to the diverse group of buyers.
- Data protection thanks to blockchain’s decentralization and security makes all data encrypted and near impossible to hack into.
- Instant Claims as smart contracts integrated into all risks contracts, a claim is automatically checked and if granted, the smart contract gives instant token payout to the claimant directly.
Paul Qi, Actuarial Representative of GRE, says:
“The system works by requiring insured’s premiums and insurer’s capacity remain on-chain, rather than premiums going into insurers’ pockets straightaway. Instead, premiums capacity are locked in the smart contracts from which any claims can be immediately paid out.”
The business model caters to short-term, relatively small premium products in the property and casualty side of the industry. But it also opens such customer segments to insurers, which previously would not have been able to offer these products at an affordable rate.
GRE: Roles and Stakeholders
In the GRE ecosystem, there are 5 roles, namely contract designer, insured, insurer, GRE platform and block producers:
- Contract Designer – The role of the contract designer is to provide insurance expertise to GRE, which can be any individual or institution with actuarial capability. Contract designer will be rewarded a portion of the transaction fees derived from their own risk management contract based on its transaction volume.
- The Insured – This group of users in the GRE ecosystem are the individuals and institutions in the real world who want to buy risk management contracts to hedge their risks. They shift their own risks away to others who are willing to take them at the cost of premiums and will be compensated when that risk actually happens.
- Insurer – Insurer in GRE ecosystem can be real-world insurance companies, reinsurers and ILS(Insurance Linked Securities) investors. They accept the risks transferred by the insured, assume the risks passed on by the insured, and pay the corresponding claims when the risks occur. They provide their insurance capacity to GRE platform and are rewarded with a portion of transaction fees for providing insurance capacity and liquidity to the system.
- GRE Platform – The GRE Foundation is an independent body, which will: Support the technical development of the GRE blockchain platform, selecting and introducing major partners and actively developing the GRE community. The GRE Foundation will be responsible for community development, incentives design, legal affairs and compliance, will be responsible for the design of the smart contract, allow community developers to submit the code changes and bugs, and will establish a fair and reasonable evaluation mechanism.
- Block Producers / Witnesses – In the GRE platform, the block producer / witness’s job is to collect all risk transactions within a period of time, package the transaction into the block, sign the block with private key and broadcast to the whole network. They will also report the result of all risk events occurring within a block time according to oracles, and pack those results into the block, sign and broadcast to the entire network.
RISK Token for Trading
The GRE platform utilizes an utility token for all transactions, called the RISK. GRE intends to generate 10 billion RISK tokens in total, with 40% (4 billion) tokens to be distributed to users via private and public token sale in the future.
With the token, any user on the platform can buy, sell, develop or trade a risk or venture into a secondary market of risks. Through smart contracts, the RISK tokens of buyers and sellers will be locked digitally and depending on the risk outcome (time period ends or a successful claim is settled), the platform will automatically release the tokens to the intended recipient.