It’s worth noting that the factor triage approach doesn’t cover whether the technology will be successful, only whether the technology will work for a particular circumstance and a particular problem.
Factor One: Identification
Q: Do you need to be 100% sure of who you are transacting with?
Undiscovered fraud typically involves having some inability to recognize participants. These may be entities representing themselves as another entity or hiding the fact a particular entity was involved.
For example, a classic insurance fraud occurs where a broker purchases one vehicle insurance contract from an insurer but resells it to multiple consumers. When insurance needs to be claimed, the broker manages all communications between the claimant and insurer but uses the name of the person that the insurance contract identifies, rather than the claimant.
Proving counterparty identity in a transaction is therefore an activity facing renewed enthusiasm from internal risk officers as well as external regulators.
The BlockChain solves this problem by the insurer signing a Smart Contract on the Chain which uses the BlockChain identity of the consumer themselves. This can be extended by identification of the insured object being recognized by the BlockChain itself.
This record allows the customer, the broker and the insurer to have shared records of the insurance contract.
When the customer wants to make a claim, the insurer can validate them and their insured property against the BlockChain, removing the ability of the broker to make claims on behalf of different contracts.
Factor 2: Reflecting Ownership of Assets
Q: Does an asset need an owner (or other stakeholders) and do multiple, untrusted external entities need to know who that owner is?
As transactions typically require the guarantee of value exchange, then assurance of the authority of value ownership/management is required to execute that transaction to minimize fraud.
For example, when purchasing a property, absolute proof of ownership is required before that property can be transferred to another entity.
The property itself also needs to be identifiable as an asset. This is currently done in the UK through a complex set of documents managed by a government agency, the land registry, and expensive solicitors to check the property ownership among other things.
In a BlockChain world however, the house ownership would be represented as a digital asset. The owner would be ‘signed’ as owner of that asset so anyone could prove unequivocally that an entity owns the asset.
This removes the need for a third party to ‘own the records’ of ownership and removes the need for a different third party (the solicitor) to prove the identification of all parties involved.
Factor 3: Multiple Transaction Sources
Q: Does your Use Case require transactions from multiple sources?
There may be entities wanting to create financial transactions from different source systems or individuals that need to be resolved into the same ledger.
If an organization is offering a payment solution, something akin to ApplePay, then there are many organizations that need to transact using the same system.
The BlockChain uses its identification mechanism to recognize individual transactions and update asset ownership records accordingly. This way a network of transactions is easily reflected in the BlockChain.