Blockchain as the future of social security — Intro

Published in

Asure Network

5 min readAug 22, 2018

How can social security systems be implemented on the Blockchain and take advantage of it? The Asure Foundation brings the mechanics of the German statutory pension system onto the Blockchain to research the advantages for social security systems.

This is the first of a five-part series in which we share our experiences made while developing the Asure dApp. It features a technical feasibility study of the German statutory pension system implemented on the Ethereum blockchain and the Asure protocol / platform.

Why social security systems?

At Asure, we investigate and research insurance solutions and social security systems on the blockchain. Social security systems ensure greater security and stability within countries. It offers prosperity and a good standard of living. We’re focusing on pension systems as they have a very high impact and because there is a global need for them, especially in developing countries. Our goal is to provide access to fair social security systems worldwide to improve people’s lives.

For more information, you can also have a look at our article “Blockchain powered pay-as-you-go social security systems by asure.io”.

Why on Blockchain?

The blockchain is one of the most innovative and globally changing technologies that have come to life in recent years. It is behind digital currency networks such as Bitcoin, Ethereum and many others, and it has the power to dramatically change the way we trade values in the future.

The blockchain technology offers the benefits of traceability and cost-effectiveness. Put simply, a blockchain can be used to track the movement of goods, their origin, quantity and so forth. This brings about a new level of transparency to Asure ecosystems — simplifying processes such as ownership transfer and payments.

In addition to transparency, there are also advantages in reducing or avoiding unnecessary costs for IT infrastructure and reducing the costs for internal and external financial transactions, financial reporting and administration.

All transactions are cryptographically coupled and forgery-proof, which can lead to much saver social security systems.

Statutory German pension system

Before we go deep into the rabbit’s hole, we wanted to investigate how the statutory German pension system works on the blockchain. The German pension system has a 125-year history and played an important role in German industrialization. As we are based in Germany, it was reasonable that we would use the German system as a model.

The scheme is based on the pay-as-you-go (or redistributive) model. All employees and employers pay a percentage of salaries into this system. Funds paid in by employees and companies are not saved (or invested) but are used to pay current pension obligations.

German pay-as-you-go (PAYG) pension system

The amount paid to retirees is based on average salaries. The German pension insurance agency publishes the value of each year’s contribution (remuneration point). This is then multiplied the number of years contributed and the percentage of the average salary earned during the person’s lifetime.

In our opinion, pay-as-you-go-based systems are particularly suitable for implementation on the blockchain, since no funds have to be invested in the capital market. Instead, the available funds are only redistributed.

Challenges

There are many questions about social security systems and insurance on the blockchain. In this feasibility study, we examine the most common challenges to implement the German pension system on the Ethereum Blockchain to investigate all weaknesses and blockchain challenges on this foundation and feasibility in an effort to develop global pension models and protocols that make our vision come true.

Why on the blockchain?
How can new or existing social security systems be gradually migrated?
How can blockchain-based social systems be reformed?
How is it determined who can carry out reforms?
To what extent are social systems implemented on the blockchain?
For example, are only the pension points managed with the help of the blockchain or are contributions also paid in a cryptocurrency?
If so, what currency? Is a stable coin used? For example, would euro states accept a stablecoin that couples to a FIAT currency other than the euro?
Which oracles are needed and who provides them?
How are identities and claims managed?
Which data should be stored in the blockchain and which not?
What must be taken into account with regard to data protection?
How does a blockchain based solution scale? As of 2018, Ethereum can process 15 transactions per second. German pension insurance, for example, has 53.8 million insured persons and 20.9 million pensioners which would require many more transactions per second.

We will talk much more about some of these challanges in the following articles.

Asure dApp

The Asure dApp will become the reference implementation for dApps using the Asure protocol and platform. It will feature

a technical feasibility study of the german statutory pension system implemented on the Ethereum blockchain and the Asure protocol / platform.
a complete wallet implementation.
an overview and management of your insurance policies.
an insurance store to find and buy insurance policies.
…

Please try out the Asure dApp which runs currently on the Ethereum Rinkeby testnet. https://dapp.asure.io

The following two videos give you a quick demostration on how pension deposits and payouts work rigth now.

Asure dApp — Pension deposit

Asure dApp — Pension payout

Upcoming articles

SmartContracts
The second article will all be around the current design of the smart contracts that make up the pension system proof of concept. We will talk about the current shortcomings and how we might improve the system in the future. Also we will discuss the tools used to develop and to test the smart contracts.
UI/UX
Usability plays an important role in modern application development. In the second article we will take a look at the UI/UX of our Asure dApp. The Asure dApp is a mobile only web application and is used to manage your pension policy including deposits and payouts.
To showcase the possibilities of our upcoming Asure protocol and protocol we also included more features than just the pension system. To improve the usability, the Asure dApp also features a functional wallet implementation.
Integration
In the third article we will take a look at how we build, test, and deploy the Asure dApp and the corresponding smart contracts. The dApp is hosted on Github Pages and on IPFS. The smart contracts are currently deployed to the public Rinkeby Ethereum testnet.
Scalability
Last but not least, we introduce the reader into the scaling needs that a potential pension system on blockchain would require and how they could be solved with recent layer one and layer two scaling solutions for Ethereum. eventually.

We appreciate your support and are always open to any ideas or suggestions that you may like to make regarding of Asure project.