Chainlink to Provide Decentralized Weather Data for Arbol’s Crop Derivatives on Ethereum
Chainlink has partnered with Arbol, a crop insurance startup, to enable farmers to hedge against weather risks based on Ethereum’s smart contract infrastructure. Arbol will leverage Chainlink’s decentralized data feed to keep its fundamentals up to date such that the farmers are settled in time and at the prevailing market prices.
Arbol’s smart contract ecosystem will feature derivatives whose underlying will be weather patterns. Chainlink, therefore, plays a vital role given its oracle network will be the one providing decentralized weather data from the National Oceanic and Atmospheric Administration (NOAA), amongst others. The blog announcement by Arbol reads,
“This ensures that not only is the smart contract itself tamper-resistant and immutable (thanks to the Ethereum blockchain), but the inputs that trigger the smart contracts are equally secure and reliable thanks to Chainlink.”
A Better Alternative to Traditional Insurance?
Arbol argues that its derivative-based crop insurance product proposes a greater value than the current ecosystems. Some challenges posed include inefficiencies in claim payouts as well as a lack of niche products for players along the food supply chain. Given such shortcomings, the startup, which made a debut in 2019, is now convinced that decentralization works much better in farming risk management.
For starters, the weather derivative products are not as binding as traditional contracts, which in most cases favor insurance firms. With decentralization, any farmer can predict weather outcomes and take safe positions based on market availability. In addition to this, interested stakeholders from all over the world can also finance the Ethereum-built ecosystem.
Last but not least is the ability to settle based on pre-coded parametric as opposed to human subjected processes. This will allow farmers to get their ‘insurance’ faster than they would have from a centralized financial institution.
“The ability to settle immediately upon receipt of Chainlink data allows businesses and farmers to recover immediately. Thus, they now have the working capital to, for example, purchase seeds or resume operations rapidly, as opposed to waiting months of delay to settle.”