Danish Red Cross sponsors $3 million blockchain-based volcano disaster bond.

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The Danish Red Cross, in collaboration with other humanitarian partners, has floated a catastrophe bond to fund volcanic eruption disasters.

The Danish Red Cross has funded a disaster bond aimed at supplying aid in the wake of a volcanic eruption, signalling a further extension in cryptocurrency and blockchain use for humanitarian causes.

According to CIR Magazine, the disaster bond, also known as a cat bond, has the support of private companies and other charitable organisations, with donors such as Solidum Partners and Plenum Investments involved in the initiative.

According to CIR Magazine, the disaster bond, also known as a cat bond, has the support of private companies and other charitable organisations, with donors such as Solidum Partners and Plenum Investments involved in the initiative.

The cat bond seeks to collect funds for humanitarian aid and expedite its release in the wake of a devastating volcanic eruption by using blockchain technologies created by Replexus, an insurance liability securitization firm.

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The blockchain-based cat bond will raise approximately $3 million and will concentrate on 10 active volcanoes around the world. The chosen volcanoes, according to the study, pose major humanitarian threats to the over 700,000 people who live within a 60-mile radius of each volcanic peak.

Popocatépetl in Mexico and Nevado del Ruiz in Colombia are among the ten active volcanoes protected by the cat bond. Merapi and Raung in Indonesia, as well as Fuego in Guatemala and Villa Rica in Chile, are among the others. The insurance fund also covers Cameroon’s Mt. Cameroon and Ecuador’s Pichincha, Cotopaxi, and Tungurahua.

Commenting on the project, Replexus CEO Cedric Edmonds said:

“The volcano CAT bond will be placed on an insurance-linked securities blockchain, making the transaction particularly cost-effective for the aid agency and enabling secondary market trading among ILS investors.”

Indeed, Mitiga Solutions, a multi-hazard risk control firm, created a simulation framework to aid in the allocation of the funds. To assess the risk profile of vulnerable populations living near volcanoes, the device analyses the height of the ash plume produced by the eruption event as well as wind direction.

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When the ash plume reaches a certain height and the prevailing winds are blowing in the direction of these cities, Mitiga’s mechanism will automatically allow a payout from the cat bond. Replexus has also developed a permissioned blockchain for dematerializing bonds, with the system claiming to decrease transaction costs by up to $400,000 per bond issuance.

As part of their corporate social responsibilities, cryptocurrency and blockchain companies aim to play prominent roles in delivering humanitarian assistance amid natural and man-made disasters. Cointelegraph recently announced that cryptocurrency firms donated funds to benefit people impacted by the Texas winter storm earlier this year.

The American Cancer Society and crypto charity group The Giving Block joined in January to establish the first cryptocurrency cancer fund.

 

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