January 2019, Volume XXXII, No 10
The future of medical innovation
igital finance is a rapidly evolving, disruptive technology incorporating elements effective for large-scale transactions in a globally integrated economy. The health care arena is particularly conducive to the concepts of “cryptocurrencies” such as bitcoin and the underlying technology of blockchain as an economic, integrative, and data management technology. Within clinical medicine, blockchain applications could address innovative—yet highly expensive—new therapies, unleashing potential advantages and creative economic opportunities. Large-scale financing of biomedical companies, drug development, genomic technologies, and molecular-based precision medicine will be greatly enhanced and accelerated by the opportunities and advantages of blockchain technologies and Initial Coin Offerings (ICOs) of cryptocurrencies.
A blockchain primer
This revolutionary technology is currently disrupting whole industries, offering unparalleled levels of both hope and hype. Simply referring to blockchain can skyrocket valuations of a company; Long Island Iced Tea, now Long Blockchain Corp., increased 500 percent in one day. The largely unregulated and dynamic blockchain industry currently holds a market valuation of around $250 billion. (U.S. individuals or businesses that use virtual currencies to pay for goods or services, sell or exchange them, or hold them as an investment may incur tax liability.)
But blockchain is about much more than the financial world. Blockchain may seem abstract, but it is tangible and easily applied to solve numerous problems. The point of blockchain is simplified, efficient, and secure data storage. At a micro level, a blockchain is simply a series of “blocks” linked together, thus forming a “chain.” A block is generally a data container that holds a record of recent “transactions” and a reference to the block before it. These blocks of information are then validated, linked to the other blocks, and put on the public ledger—the “blockchain.” From a macro lens, it is “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions, but literally everything of value,” according to Don and Alex Tapscott, authors of “Blockchain Revolution.” It provides an unalterable, distributed ledger system that may be used for the tracking of any sort of “transaction” across systems.
Users—individuals, governments, companies, or a combination of actors—can see the past and present conditions of whatever they are tracking without the need for “independent” verification by an intermediary. Further, this information is independently verified by an additional layer of processes.
When combined with artificial intelligence (AI) and Internet of Things (IoT) devices, blockchain provides a thorough and effective analytic system that is unparalleled in comparison to other current technologies. Each element works together to integrate systems, collect and analyze information, and make decisions. Blockchain technology is decentralized, trustless/peer-to-peer, immutable, and transparent.
The core of the distribution ledger technology, which underpins blockchain in the broadest context, is that it induces trust between parties, in the absence of a central core such as government. This is accomplished by ensuring that information cannot be unilaterally altered nor manipulated. Once smart contracts are added to the equation, which are already being given recognition by the courts, these trustless systems offer unparalleled capacity for parties to engage with each other with minimal interaction or prior connection.
Blockchain approaches are highly applicable to the current realities and needs of precision medicine.
People frequently conflate and/or confuse blockchain and cryptocurrencies. Bitcoin, perhaps the most commonly known cryptocurrency, utilizes blockchain technology and can be thought of as a blockchain application. Consider blockchain as the base technology, and cryptocurrency as the tokenized, monetized entity that is used to pay for and power the infrastructure of the overall network, incentivize users to employ a specific network, and play a role in transaction validation based upon governance structure. The creator of bitcoin, an anonymous user known only as Satoshi Nakamoto, announced the release of an “electronic cash system that uses a peer-to-peer network to prevent double spending” in late 2008. With this, Satoshi created a digital currency. Unlike the U.S. dollar, bitcoin does not depend on a central authority for governance. It relies instead on mathematics and cryptography to encode and thus enforce its rules, creating a trustless system that is recorded on a decentralized blockchain ledger.
People also frequently mistake bitcoin with Ethereum, a separate dominating cryptocurrency that serves very different functions. Bitcoin can be thought of as a stable commodity like gold, a store of value. Ethereum currency—Ether—is a commodity like oil or gas, a usable fuel that powers processes. When you buy Ether, you are in theory buying computational power on its platform to run programs and complete processes, such as smart contracts, as well as decentralized applications (dApps).
Ether is the “what” or the currency that enables you to get things done, and smart contracts are the “how” or the means by which things get done. Smart contracts enable the direct and almost instantaneous payment for services upon their completion. Contracts may be written with terms that are met and validated in real time, until the fulfillment takes place and the pre-decided transaction completed. Using the Ethereum platform, programmers can create their own dApps and projects that run on their own currency. Thus, you can view the Ethereum platform like the internet, and dApps as websites that run within the framework. dApps frequently utilize their own tokens, further increasing simplicity and integration as well as token-specificity, accounting for execution of specific commands within smart contracts. These commands are defined by the Ethereum-20 token governance protocol, which applies to specific dApps and their functionality.
Tokens, whether on the bitcoin platform or created independently, are sometimes also referred to as “altcoins.” In fact, all non-bitcoin cryptocurrencies are generally classified as an alternative coin or an “altcoin.” Altcoins have varying purposes. Altcoins range from “joke coins” like Dogecoin to coins with real world applications, such as Ripple, a coin designed for money settlement and remittance payment.
Tokens also allow blockchain companies to finance in a completely new way. ICOs have taken the space by storm—jointly bringing in over $6.8 billion in 2017. They are known as the cryptocurrency variant of crowdfunding, and they operate in a similar manner. ICOs allow blockchain companies to raise money efficiently and effectively for projects (usually in bitcoin or Ethereum, which offer liquidity) from investors who get tokens from the platform in exchange. These tokens are not equivalent to equity, but still offer potential for strong short- and long-term return on investment. On the other hand, these investments are highly speculative and carry a higher risk profile. Because of the regulatory inaction as of yet (which may soon change), as well as regulatory uncertainty (as ICOs span national borders), there are few laws to protect consumers from bad ICOs. In fact, current regulation leaves room for ICOs to get around barriers to entry by labeling themselves as “crowdsales” or “donations,” even if this designation does not reflect reality.
There have been recent talks about labeling various cryptocurrencies as securities and requiring ICOs to register with the U.S. Securities and Exchange Commission (SEC). This has been put on hold, however, and, even if done, not all ICOs (as defined by functionality) would be categorized as an investment in a security. In every case, investors must conduct thorough due diligence and tread carefully.
Many use-cases for blockchain projects exist; however, some of the most promising use-cases on the horizon are in the field of medicine and health care.
Each year, 800,000 people die worldwide due to complications from taking counterfeit drugs.
David R. Brown, MD, FACE, is senior vice president of biomedical innovation at DHB Global.
Joey Wilson, MS Tsinghua University (global affairs), is a DPhil candidate at Cambridge University (Oncology).
Charlie Hu, MSc Neyrode Business Universiteit (financial management), is Chinese blockchain advisor and cofounder of the DAOONE Blockchain Community.