The platform backed by Algorand is expected to be launched in early 2023.
According to Algorand’s announcement on December 13, this is the first time a European Union member state will use blockchain technology for banking and insurance guarantees.
What is a banking and insurance guarantee
A bank guarantee is when a lending institution promises to cover a loss if a borrower defaults on a loan. It is an alternative to providing a guarantee or deposit. An insurance guarantee is similar, but it is offered by an insurance company rather than a bank.
Why it is ideal
According to Algorand, blockchain technology is ideal for the “digital collateral” platform because of its fast, efficient, low-cost and scalable data transactions, as well as its ability to provide protection against fraud.
Part of the recovery and resilience plan
The digital guarantees platform, which will be backed by blockchain, is being developed by the Research Centre for Technologies, Innovation and Finance of the Catholic University of Milan (CETIF) and is part of Italy’s National Recovery and Resilience Plan, an initiative aimed at stimulating Italy’s economic recovery after the COVID-19 crisis.
Federico Rajola, a professor at CETIF, pointed out that they chose Algorand for its “unparalleled level of innovation” among digital accounting technologies, its license-free and its “leadership in sustainability”, while adding:
“Our goal is to help Italy not only recover from the economic impact of Covid-19, but also to excel through innovation and leadership. We believe that these platforms can and will contribute drastically to the competitive sustainability of the country for the benefit of all.”
A significant upgrade
As a reminder, since September Algorand has increased its transaction speed, processing capacity and cross-functionality with a major protocol upgrade. The Level-1 blockchain implemented state proofs on its core network, allowing communication – without the need for trust – between different blockchain protocols.
The upgrade increased Algorand’s processing speed from 1,200 to 6,000 transactions per second.