1. Cryptoventures – Spring 2017
Logo
BeneChain
Cryptoventures – Spring 2017
Team 5
Wes Day, Amar Jain, Jimmy Kozlow, Trey Lundgren

2. Table of Contents Cover Page Table of Contents
Problem Statement & Market Size
Existing State Process
Future State Process
Implementation of Blockchain Technology
Advantages of Using Blockchain
Implementation & Rollout
Business Model & Monetization
Financial Model
Risk Analysis
Competitive Analysis
Future Opportunities
Timeline & Next Steps

3. Improper Payment Rate - By State
Quantifying waste, fraud, and error in the US government Unemployment Insurance System
Unemployment Insurance (UI) has the fifth highest rate of improper payments among all government departments
Improper Payment Rate - By State
In 2015:
$3.5B in improper payments || 10.7% of UI Benefits
Causes of improper payments include:
Payments to claimant continue after individuals have returned to work
Failure or claimant to register for reemployment services
Failure of employers to timely or correctly report on worker separation
Inaccurate calculation of benefits based on wages earned prior to unemployment
Source:

4. Existing Process – Unemployment Insurance is administered at the state level1
Federal Unemployment Benefit Fund
Administered by States
Manual Processes
High Admin Costs
ER Report
ER Report
EE Report
EE Report
2 Weeks
Time Delay 4
Employee Hired at Co. 2, Benefits stop 2
Employee Terminated Co. 1
Both parties report
EE Report
Fees 3
Benefits Start, Job Search

5. Future State - Blockchain based solution reduces admin needs and increases visibility across stakeholders
Federal and state funds managed on private blockchain 1
ER Report
ER Report
EE Report
EE Report 4
Employee Hired at Co. 2, Benefits stop 2
Employee Terminated Co. 1
Automated
EE Report 3
Benefits Start, Job Search – “Fedcoin” for benefit funding

6. How will blockchain technology be implemented?
Permissioned Blockchain, Ethereum Protocol
Termination Report 1 4
Ex-Employer
New Employer
Employer files termination report (see contents below) to register change in employment status.
New employer confirms that employee has been rehired.
Validation
New Employee Report 2
Claimant
Claimant 5
Claimant must validate status and confirm they are seeking re-employment services.
Claim request is initiated via ETH smart contract.
If valid, benefits are administered.
Once re-employed, smart contract validation terminates benefits.
Claim Request
Smart Contract
Contents of Termination Report
Notifications
Benefits
Info:
Employee ID
Employer ID
Reason of Termination
Salary
Date of Employment 3
State Agency
State agency receives notifications of benefits as they are administered and as they expire.
Data collected and used to analyze improper payments.

7. Blockchain technology be advantageous for each stakeholder group and meets key criteria for implementation
Five criteria for using blockchain applications:
Distributed Ledger
Multiple states and agencies require read/write access
Remote Independent Writers
Each party must contribute to share information
Existence in Absence of Trust
Causing Disintermediation
Blockchain technology reduces touchpoints and effort required to manage
Economic Benefits for Participants
Major savings opportunity to reduce admin costs and improper payments
Employers
Transparency with privacy
Reduces improper payments from manual reporting
Claimants
Improved efficiency
Benefits can be received <two weeks
Benefits can also be applied retroactively
State Agencies
Allows multiple parties to write to the system without burdensome oversight
Reduction in fees paid to third parties (banks, Visa, etc..)
BeneChain

8. The first implementation of Benechain will focus on one state
The first implementation of Benechain will focus on one state. If successful, expansion will follow
Full State Adoption Under Federal solution
In Future: “Fed Coin” could be used to administer payments
Multi-State Unemployment Insurance (UI) Ethereum Solution
Full blockchain solution; distributed ledger network for all states
Each state represents a node on the private UI blockchain
Single State POC (NC)
Hybrid database/blockchain solution
3 Key Parties: Employers, Claimants, US Dept. Labor
Validate process and cooperation among parties

9. Business Model & Monetization Strategy
Cyclical Revenue Model
Opportunity for Immediate Monetization
Implementation Contract: Charge pilot state - NC (and successive partner states) a platform development, implementation, and training fee commensurate with comparable IT system implementations
Transaction Fees: Extract minimal transaction fee from state (<$1) every time a new record (initial claim, job offer, etc.) is written to the blockchain by an employer; in this model, states could seek direct reimbursement from companies, or pay fees with admin $ saved by program
Ongoing Services: Receive revenue from ongoing maintenance of state systems, training/consulting on Benechain updates, and eventual move to 100% blockchain solution
Implementation Contract
Transaction Fees
Ongoing Services
This three phase model is repeatable across every additional state (and benefit program) Benechain supports and provides a certain level of stability in cash flows

10. Financial Implications
North Carolina Use Case
Some Important NC Unemployment Statistics*:
High Level Revenue Projections
Only Includes State Level Unemployment Systems
10 Year Unemployment Average. = 7.4%
5 Year Avg. Weekly Initial Unemployment Claims: ~5,250
Improper Unemployment Payments: >14%
October 2015 Total Benefits Paid: $17.5 M
5 Year Average Annual Unemployment Benefits
$321 M
x Estimated Fraudulent Payment %
15%
= Annual Estimated Fraudulent Payments
$48 M
+ Annual Estimated Card Fees
$5 M
= Total Annual Addressable Program Costs
$53 M
Annual Estimated Benechain Cost Savings**
$35 M
Revenue Source (Avg. State)
Est. Contribution
Implementation Charge
~$250k
Transaction Fees
$205k (annually)
Ongoing Services
~$35k (annually)
*Source of all information: United States Department of Labor; North Carolina Division of Employment Security
**Assumes fraudulent payments reduced to 5% and transaction fees reduced to .5% as a result of Benechain solution

11. Risk Analysis Description:
This initiative requires funding and buy-in from congress and government agencies
Mitigation:
Seek bipartisan supporters within state and federal ranks. Maintain a narrow focus early to demonstrate benefit early on, which can help drive adoption rates as expansion occurs.
Risk: Political climate prevents implementation
New data allows for more thorough analysis of waste, identifying more improper payments than the agency was aware of before
Incorporate data analytics and predictive models into the product to increase transparency during and right after implementation. Communicate this paradox and early and often
Risk: The improper payment rate increase in the short term
“Fraud is dynamic “ and people will always adapt to find new ways to take advantage of the system
“Create a learning system that responds to ever changing threats.” Deloitte suggests this strategy and it can be implemented using the data from the blockchain. Statistical models can help define business rules that can constantly search the system for potential improper payments
Risk: People will find new ways around the system

12. Competitive Analysis London based firm previously known as GovCoin
Direct Competition – DISC Holdings
London based firm previously known as GovCoin
Worked on a 6 month pilot for UK Gov’t to rollout welfare benefits through Blockchain, claimed it was a success
Known to work on a broader pilot program as of today
Companies that provide Blockchain enterprise services could be a potential threat due to low barriers to entry
Companies with advanced smart contract implementations capabilities are a threat as well
Potential Competition

13. Future opportunities for Benechain include implementation across to other gov. agencies
Longer Term Plans & Additional Application Opportunities (2+ years away)
Multi-State Rollout : Expand Benechain beyond North Carolina by targeting other states in the region who also have large %’s of improper unemployment payments
Fed Coin Currency: Champion implementation of proposed currency to interact with Benechain applications and expand use of blockchain for benefits nationwide
Food Stamps: Provide more secure (and less expensive) method of managing and distributing nutritional benefits through blockchain solutions
Social Security: Expand solutions to larger, Federal level programs, such as Social Security, where blockchain can make wage record and benefit distribution more transparent

14. Benechain rollout will ramp up over the next 1-2 yrs
Next Steps (next 1-2 Years)
Secure additional funding to continue building out team with coding talent and business development professional(s) in anticipation of pilot implementation
Secure contract with state of North Carolina to build hybrid blockchain/database system & continue to refine platform technology and capabilities
Onboard North Carolina platform and train state employees to use system and communicate new requirements to companies employing people in the state
Facilitate seminars on new documentation requirements and beta test Benechain NC; outreach to additional state employment agencies in the South East (likely TN & SC)
Begin writing and storing employment and unemployment records on the platform
Begin contractual process with additional state employment agencies in the South East A B C D E F
2017
2018
2019