Data provider Chainlink will provide decentralized weather data for insurance startup Arbol, according to a blog shared with CoinDesk.
Arbol provides crop insurance for small to medium sized farmers or enterprises. Smart contracts pay out claims to subscribers when a preset value – such as the average monthly temperature or rainfall – turns out different than the contract specifies, the firm said.
Called parametric insurance, the financial derivative is often used in agriculture to hedge against future events, such as a bad harvest. Other firms, notably CME Group, also offer weather derivatives that require middlemen.
Arbol insurance, on the other hand, self-executes using a mix of smart contracts and Chainlink data – no hold ups on payments.
“Users are able to create derivatives on the blockchain that pay out based on weather outcomes. This allows weather-exposed entities like farmers to hedge their weather risk,” Arbol said in the blog.
The startup launched out of stealth in April 2020 and raised $2 million in a 2019 seed round, according to Crunchbase.
Chainlink pipes data from the National Oceanic and Atmospheric Administration (NOAA) and other sources, the blog states.
Tamper-resistant data is necessary for parametric insurance products that don’t require middlemen, Arbol Founder and CEO Siddhartha Jha told CoinDesk in a phone interview.
Arbol’s application is built on Ethereum smart contracts and also secures data via the Interplanetary File System (IPFS), according to a recent Arbol blog. The firm currently operates in the United States, Cambodia and Costa Rica.
Chainlink first presented decentralized data networks, known as oracles, as agnostic reporters for insurance companies up to four years ago, Chainlink founder Sergey Nazarov said in a telephone interview.