Blockchain Healthcare 2016 Report – Promise & Pitfalls

There’s a lot of hype around blockchain. In 2015, Tierion was the first company to complete a blockchain healthcare project through becoming the first partner in Philips Blockchain Lab. To separate the hype from the reality, we’re sharing our perspective after a year of working with the world’s largest healthcare and insurance companies. Many blockchain reports portray overly optimistic scenarios. We aim to provide a balanced perspective that addresses the opportunities and risks for the use of blockchain technology in healthcare.

Download a PDF of this report

What is Blockchain?

Blockchain started with Bitcoin in 2009. Bitcoin was designed as a global network for routing value without trusted intermediaries. Blockchain is a term used to describe systems that borrow technology and design patterns from Bitcoin. Key characteristics include no central point of control, high availability, strong data integrity, and network-wide consensus.

“…the term ‘blockchain’ has been so misappropriated that no one knows what it means anymore.”
– Elaine Ou, Bloomberg

There is a fierce technical debate over the definition of blockchain. For those making strategic technology decisions, the details of this debate may not matter. Companies will continue to market a broad range of technologies that carry the blockchain label regardless of the outcome.

Promise & Pitfalls of Blockchain Healthcare 2016

Most blockchain technology is not ready for mainstream deployment. Financial services companies have produced hundreds of proof-of-concepts. Most of these projects have not evolved into production ready software due to technical and regulatory challenges. Experimentation continues and activity is starting to accelerate in the health care and insurance sectors.

Promises
Data Integrity & Security
  • Improve the security and management of patient data.
  • Higher quality clinical trial data.
  • Reduce regulatory & compliance costs.
New Standards
  • Opportunity to establish new standards and practices
  • Optimize interactions between health care and insurance companies.
Disruption
  • Mid-sized companies and startups have the opportunity to form consortiums and disrupt incumbents.
Pitfalls
Vendor Lock In
  • Blockchain vendors want customers locked into their platform.
  • High switching costs give vendors control and pricing power.
  • Risk building new data silos where customers rent access from vendors.
Hype Overload
  • Analysts and professional experts are issuing overly optimistic reports in an effort to make their mark on the industry.
  • Betting on technology before it’s ready is a fast way to lose your job.
  • Tokenized platforms such as Ethereum have an incentive to hype the technology to increase the value of the token.
Immature Infrastructure
  • Most blockchain technology is experimental and untested.
  • Greater security risk and higher development costs.
  • Use blockchain to enhance secure cloud based architectures.
Patient-Controlled Data
  • Enabling patients to manage their health care data is risky.
  • Deploying wallets creates a large key management problem.

Promises of Blockchain Techology in Healthcare

Data Integrity & Security

The volume of patient data managed by hospitals, doctors, and insurance companies increases each year.

  • Electronic Health Records
  • Health Information Exchanges
  • Data collected from monitoring systems and IoT devices
  • Medical insurance claims

How can organizations securely share information and allow each party verify the data is correct? A hallmark of blockchain systems is strong data integrity. Once information is recorded on the blockchain and confirmed by nodes on the network, it is nearly impossible to modify or erase.

There are two primary approaches to using blockchain to securely record and share data. The first is to build a private blockchain system among a trusted set of parties. It’s not yet clear that this approach offers advantages over systems that use a distributed database.

The second is to anchor data to the public blockchain. This generates a proof that can be used to verify the integrity and timestamp of any data, file, or business process. Anyone with this proof can use open source tools to independently verify the data without relying on a trusted third-party. This seemingly minor technological advance could have far reaching implications for the healthcare industry.

  • Verify the integrity of patient health data shared between organizations
  • Create immutable audit trails for health care business processes
  • Prove the integrity of data collected in clinical trials
  • Reduce the cost of audits and regulatory compliance

Technology to monitor the integrity of systems is sometimes marketed as blockchain technology but this predates Bitcoin by decades. The key differentiation is that new advances enable data integrity and verification on a global scale.

New Standards

Interest in blockchain brings the opportunity to improve standards for managing health care records, insurance claims, and patient data. R3Cev is a consortium of 45 member banks that researches and develops the usage of blockchain technology in the financial sector. A similar consortium could be formed by large health care and insurance companies. Additionally, organizations such as the Council for Affordable Quality Health (CAQH) can start analyzing blockchain technology and make recommendations on it’s usage.

Disruption

Modernization of infrastructure creates the opportunity for smaller players to disrupt incumbents. Interest in blockchain may encourage smaller players to create networks and compete in new ways. These networks don’t necessarily need to use blockchain technology. Interest in blockchain combined with secure cloud computing technology may be sufficient to have a meaningful impact.

Pitfalls of Blockchain in Healthcare

Vendor Lock-in

Blockchain vendors want customers locked into their platform. The network effect of attracting many companies to their platform increases switching costs. This gives vendors control of customer data and the ability to raise prices. This is an unacceptable scenario for many companies.

Companies promoting blockchain technology platforms know that once an applicaiton is built with their software stack, the cost of moving to another platform is prohibitively high. It may be best to wait for established software vendors to integrate new technology than to try and build something from scratch.

Hype Overload

Analysts and professional experts are issuing overly optimistic reports in an effort to make their mark on the industry. There’s little penalty for them to be wrong about predicting the future. The consequences for those making strategic technology decisions can be disastrous.

Betting on technology before it’s ready is a quick way to lose your job. Before making any commitment, ask hard questions and compare new technology to existing solutions. Start small and scale up once something has demonstrated value.

Tokenized platforms such as Ethereum have an incentive to hype their technology to increase the value of the token. This risk hasn’t existed with prior generations of technology. Blockchain hype has led to misinformation and widespread misunderstanding. This is an important factor to consider this when evaluating vendors.

Immature Infrastructure

Healthcare technology moves slowly, in part because of the high consequences of failure. People can die. Healthcare data is a prime target for hackers. Cybercriminals sell medical records on the dark web for $20 compared to $1 per credit card number. These pressures increase the need for companies to use proven technology.

Most blockchain technology is less than two years old and has not been tested in a production environment. Smart contracts, blockchain identity, decentralized systems, and other popular buzzwords are in a very early stage of development.

Developers with blockchain expertise are rare. Blockchain developer tools are nascent. These factors increase security risks and make the cost of developing with blockchain platforms higher than existing technology stacks.

Public blockchain platforms are constantly attacked and subject to security exploits. For example, in Q3 2016, Ethereum suffered two attacks that shut down a large percentage of nodes. An exploit in a smart contract resulted in the loss of $60 million USD. A political decision to rectify this exploit led to a network fork. There are now two competing versions of Ethereum. The risks of building mission critical applications on unstable infrastructure is significant. Over time, countermeasures to attacks may harden the security and resilience of blockchain networks.

Many companies will choose to wait for mainstream providers to integrate blockchain technology with their products instead of taking a risk on a new vendor.

Patient Controlled Data

Giving patients control of their health records sounds like a good idea, but it comes with significant risks. If a patient is incapacitated, emergency workers need to gain access to health records without the patient’s permission. This necessitates an alternative access method is built into the technology that safeguards the data. This backdoor represents a security risk.

Blockchain systems use wallets and private keys to control access to information. In some scenarios, multiple parties must sign a transaction for it to be valid. This means that a third-party will have access to patient data, which is no different than current models. Broad deployment of blockchain healthcare technology would likely result in the world’s largest key management problem.

There is a significant cost and risk in deploying wallets and training consumers on their proper use. Usability problems and user errors could increase the likelihood that patient data is stolen or lost. Consumer Bitcoin wallet companies have struggled with usability issues for years. Managing access to healthcare data is more complicated than managing payments. It’s likely that the risk of errors would be even higher than the already high error rate of Bitcoin wallets.

Conclusion

Blockchain technology presents more pitfalls than promises at this early stage. We’re optimistic about the impact of blockchain in the years to come, but sober about the reality of what is possible today.

Blockchain Pushback on Breaking Banks

Blockchain hype is strong! Tierion CEO, Wayne Vaughan, was a recent guest on Breaking Banks radio show where a group of experts discussed the practical applications of blockchain technology.  Also discussed were the pitfalls learned from a year of working with enterprise customers, challenges with blockchain identity, blockchain in healthcare, and IoT. Other guests included Bart Stephens, Managing Partner of Blockchain Capital, and George Samman, writer of sammantics.com.

Create a Tierion Tutorial & win the hack.guides() Contest

Starting today, we’re sponsoring $500 for the best tutorial using Tierion’s API during Pluralsight’s hack.guides() 2016 Tutorial Contest.  Additional contest participants include Uber Developer, Amazon Alexa, HelloSign, RethinkDB and more.

If you’re not familiar with hack.guides(), it’s a developer community for writing technical guides. Creating a tutorial is a great way to get recognized and spread your knowledge across a growing open-source community!

What makes the best Tierion API? In this case, one-third of your score is based on the number of hearts (or “likes”) that your article receives, one-third is based on the number of social shares of your article, and one-third is determined by a panel of Pluralsight’s API judges who will gauge your writing style, effective use of technologies and APIs, ability to communicate your point, and overall quality!

If you write a guide, please share it with us on Twitter at @Tierion. We’re excited to see your entries… good luck!

View Contest Rules

hack.guide sponsors

Who Pays For The Decentralized Web?

I recently attended the Decentralized Web Summit where industry giants Vint Cerf and Tim Berners-Lee spoke about designing a new architecture for the Web that was harder for businesses and governments to censor and control.  This new Web would be self archiving, it would use Bitcoin as a native payment mechanism, everything would be encrypted, users would control their data, and broken links would be a thing of the past!  The vision presented was so grand that it seemed fitting that we were gathered in an old church.

As the morning wore on, something began to bother me. No one was discussing the economics of this new Web. I’ve always been a bit of a troublemaker (sorry Mom), so I got up and asked the question, “Who pays for all of this?”

 

I was disappointed with the answers.  In my view, the economic challenges of decentralized systems are often more difficult than the technical challenges.  For example, Bitcoin works because miners earn money for running the network infrastructure. Take away that incentive, and everything falls apart.  As I spoke with others throughout the day, it became clear that not enough thought has been given to my question.

The First Failure of P2P

I remember the excitement of the P2P revolution of the late 90’s and early 2000s.  Millions were pissed off when Napster was shut down. Nullsoft, the gloriously irreverent company that created the popular MP3 player WinAmp, had sold their company to AOL. They created Gnutella, a system for file sharing that had no central point of control.  It was a Napster that couldn’t be shut down. Thousands of us downloaded the software after seeing the launch on Slashdot.  AOL was furious. They made Nullsoft remove the software from their servers and cease work on the project.  It was too late.  The launch of Gnutella marked the beginning of a peer-to-peer file sharing revolution.

Soon there were dozens of file sharing networks including Limewire, Kazaa, and eDonkey.  Downloading music and pirating software had never been easier.  As governments cracked down on users of these networks, they evolved to become increasingly resilient.  The music, film, and software industries were forever changed.

Businesses got in on the P2P revolution as well. There was a wave of companies that were building software that didn’t require central servers.  The most notable was Groove, a decentralized ancient cousin of Slack built by none other than Ray Ozzie, the creator of Lotus Notes. I remember building my own Groove applications.  They worked, but they were clunky.  The developer experience was horrible. I was thrilled to learn that Microsoft was going to acquire Groove for $120 million and appoint Ray Ozzie as Microsoft’s Chief Technical Officer.  Surely, this was the boost that the P2P revolution needed to go mainstream.

Things didn’t work as planned.  Groove was eclipsed by Sharepoint, one of most universally loathed pieces of software to ever ship.  The killer app for P2P business software never materialized and what looked like a promising movement faded into obscurity.

Today we have BitTorrent, which is arguably the only success from the era.

Is This Time Different?

During the Decentralized Web Summit, Muneeb Ali of Blockstack made the observation that the Bitcoin blockchain offers a fundamental innovation that provides new hope for decentralized systems.  The blockchain can serve as a trust anchor that has the potential to reduce the role of intermediaries in the Web’s infrastructure.

 

It will be interesting to see how this plays out over time. My own company, Tierion, is using the blockchain to build a proof engine – a global platform for verifying the authenticity and integrity of any file, data, or business process.

Bitcoin can also make it easier for computers to exchange value.  Someday, each computer may use Bitcoin microtransactions to buy/sell resources with other computers on the network.  This vision is reflected in the work being done at 21.co.  They recently announced an open source toolkit that allows machine-to-machine micropayments.

The combination of the blockchain as a trust anchor and a global value transfer network may provide new tools for incentivizing decentralized systems.  I doubt we’ll see a wholesale transition away from the current centralized architectures.  Rather, we might see a gradual replacement of intermediaries with new functions provided by networks.  The rise of Bitcoin and Bittorrent are prime examples.

What of the recent wave of blockchains such as Ethereum?  They’ve financed their network through speculation and piggybacking on Bitcoin’s hype and infrastructure.  It’s unclear if there’s real value being created.  

What’s clear is that one cannot ignore the costs of running decentralized networks if the vision presented at the Decentralized Web Summit is to come to fruition.  More thought needs to be put into incentivizing actors to subsidize the cost of the network infrastructure.  I suspect there may be new economics to discover and maybe even a Nobel Prize for those who blaze a path forward.

It’s difficult to make predictions, especially about the future.  Maybe we’re at the dawn of a revolution in decentralization.  Perhaps the giants of today, Google, Facebook, Apple, Microsoft, and others, will fall as a new wave of decentralized networks disrupt their core businesses.  Or, maybe it’ll be like the P2P revolution – a movement that fades quickly and leaves us with a few new useful technologies.

We shall see.

Old Satoshi Talks About New Satoshi

In the spring of 2014, Dorian Satoshi Nakamoto was incorrectly named as the creator of Bitcoin by Newsweek. The media attention turned his life upside down. I recently had the opportunity to sit down with Dorian and talk about his life since being named Satoshi, and to get his thoughts on Craig Wrights most recent claims. Surprisingly, Dorian didn’t know much about Craig Wright before his arrival to San Francisco.

 

Tom: “Did you hear about what happened with the “new Satoshi”, Craig Wright?”

Dorian: “I just got some news out of it. I don’t know if I have the latest, someone told me that like a couple weeks ago, he retreated.”

Tom: “Yeah, he said that he’d provide real cryptographic proof and never did.”
Dorian: “Oh he didn’t? I thought he did…..hm.”

Tom: “What’s your take on the situation?”

Dorian: “I think it’s nice, you know, to have that mystery of Bitcoin!”

Tom: “Do you think the real Satoshi will ever come out?”

Dorian: “I don’t know, but I say don’t come out, oh yeah. He should stay in hiding.”

Throughout our conversation, I was struck with Dorians humility. He lives a very simple life. He arrived to our home carrying a single old backpack with DORIAN NAKAMOTO and his phone number written in big black marker on the front. He spoke with passion about his model trains for hours. He just enjoyed being around other people, and engaging in conversation with them. While driving him to the bus station, I asked him one final question:

Tom: “What good came from being named Satoshi?”

Dorian: “It did affect my family relations. Some of these people that I met yesterday kept on asking me too, what was the outcome, and what was the happy side of things? I reply that because of this incident, I was able to understand Bitcoin much better and understand that there is the existence of community such as Bitcoin, and the amount of generosity from the people. I went through some of the comments online, and it really made me much happier than before the incident. I hated it because they put everything out to see, the reporter, it had some consequences on my livelihood.”

Spending two days with Dorian confirms why I love working in Bitcoin. We have a very unique community. This man had nothing to do with Bitcoin, and now he’s become the go-to legendary face of Bitcoin. Exciting, hilarious, and weird things happen all the time in this industry.

Tom Kysar and Satoshi Nakamoto


My name is Tom Kysar, and I’ve recently joined Tierion full time as Director of Growth. Previously, I was Head of Marketing for crypto crowdfunding platform Koinify, and currently reside in San Francisco.

You can find me on Twitter @tomkysar.

Tierion Launches Free API To Anchor Data In The Blockchain

Today we’re announcing a free high-performance API for anchoring data in the blockchain. Tierion’s new Hash API is perfect when you want to generate proofs or audit trails, but need to keep your data private. For example, you can use the Hash API to create an audit trail for the evolution of a medical record without revealing any patient data.

View Hash API Documentation.

Free use of the Hash API is capped at three records per second or 1,000 records per hour, which is sufficient for many applications.  Please contact us if you require a higher volume of records.

 

Tierion Sponsors Consensus 2016 Hackathon

We’re excited to announce Tierion’s sponsorship of the Consensus 2016 Hackathon. Additional sponsors include Microsoft, IBM, Deloitte and ConsenSys. Over a hundred Bitcoin and blockchain developers will compete for $5,000 and bragging rights. The event will be hosted at Microsoft’s technology center in Times Square.

Tierion CEO Wayne Vaughan will return to this year’s event as a judge. His team won the 2015 hackathon by building an insurance claims processing system that used Tierion to create an audit trail for the claims process in the Bitcoin blockchain.

“Winning the Consensus 2015 Hackathon was a breakthrough moment for Tierion. I’m thrilled to be returning this year as a judge, and Tierion is proud to sponsor the event. Last year’s competition was intense. I can’t wait to see what participants create this year!”

– Wayne Vaughan

coindesk hackathon

Interested in competing? Visit http://www.coindesk.com/events/consensus-2016/hackathon/

Consensus Hackathon

About Consensus
Consensus is the leading annual blockchain technology summit, presented by CoinDesk,the industry leading information and news source, in collaboration with Digital Currency Group (DCG), the blockchain industry’s most active investor, and Coin Center, the industry’s leading public policy research and advocacy center. The multi-day event brings together the perfect blend of innovators, power brokers and deal-makers from startups, investment firms, financial institutions, policy groups and academia with a focus on making blockchain real in commercial and enterprise applications. For more information visit Consensus2016.com

Combating Payments Fraud Using The Blockchain

BlockNotary’s new app uses Tierion to combat fraud and simplify signups for Pay-Me, a Russian mobile payments processor with over 30,000 installed devices. Currently, new Pay-Me customers must visit an office for an interview with a customer service rep. Blocknotary replaces this in-person visit with a video interview conducted via a mobile application. Tierion is used to collect the data and create a verifiable record of the entire process.

Demonstration Video (1min)

 

Why is this needed?

Russian criminals steal credit cards and use mobile PoS terminals to launder money. In response, Pay-me requires new customers visit an office for an interview and pass a background check before shipping a PoS device. Blocknotary’s Video Interview application let’s customers verify their identity and conduct an interview from their location. The customer’s statement of intentions and the information needed for a background check are collected. This makes the onboarding process smoother for new customers and allows Pay-Me to ship a PoS device before a background check is complete. Additionally, Pay-me gets a tamperproof record of the entire process that can be verified using blockchain. This record can lower Pay-Me’s legal liability and be useful to police that are investigating fraudulent activity.

“Recording a video of yourself during the registration process helps prevent fraud. As CEO, I’d like to make it as difficult as possible for criminals to use Pay-Me to conduct illegal activities.”

– Pay-Me CEO, Vladimir Kanin.

We’re thrilled that Blocknotary chose to build their new product using Tierion. The company is exploring other applications for this technology including tenant background checks, purchasing firearms, and insurance claims submissions.

Blocknotary’s first product is an IOS application that allows you to notarize photos, documents, and videos in the blockchain. Download the Blocknotary IOS app.

Improving Insurance with the Blockchain

Our team recently won the Coindesk Makeathon by creating an insurance claims processing system that records each step of the claims process in the bitcoin blockchain. Tierion was our secret weapon, making it possible for us to record thousands of sample claims on the blockchain.

We actually had two secret weapons

Our other secret weapon was our team. None of us had met before the event. Coindesk assigned participants into sixteen teams of five and gave us two days to build something. I’m incredibly fortunate that I was matched with such a high quality group.

Thulasi Nambiar— Credit & Portfolio Risk Management Associate, Citi
Deepak Atal — Computer Science, NYU
Emily Faber — Marketing, Coinsetter
Dom Steil — Sales Engineer, Apptus
Wayne Vaughan — CEO, Tierion

Everybody wants to record data on the blockchain

Nearly every team’s concept involved recording data on the blockchain. The problem is that the bitcoin might be the world’s slowest and most expensive database.

Problem 1: Bitcoin can process about seven transactions per second
Problem 2: Each transaction costs $0.03
Problem 3: Each transaction can store 80 bytes of data

Let’s look at how these numbers translate into a real world problem. Several team’s ideas involved using the blockchain to record credit scores. There are currently 170 million credit card holders in the United States. If you tried to record each person’s credit score in the blockchain, it would take 281 days and cost $5,666,666. That’s assuming a throughput of seven transactions per second, so you’d render Bitcoin useless for nine months.

Introducing the blockchain receipt

In the real world, we use receipts to verify transactions. A blockchain receipt can be used to verify the content and timestamp of something recorded in the blockchain.

Tierion is a cloud datastore that generates a blockchain receipt for each record. If you send Tierion 100,000 records, you’ll get back 100,000 blockchain receipts. We’re the first system capable of recording millions of records in the Bitcoin blockchain.

Here’s how it works:

We hash each record sent to Tierion and add it to a queue. Every ten minutes we generate a Merkle tree of all the hashes and publish the Merkle root in a bitcoin transaction.

We trace the path from the root back up the tree to the target hash and use this data to generate a blockchain receipt. This allows us to generate millions of receipts using a single bitcoin transaction.

Bottom-line: we’ve created a way to overcome the scalability limitations of bitcoin and record millions of records in the blockchain.

Building a better insurance claims processing system with the blockchain

Insurance companies spend over $2 billion each year on fraud and compliance. We saw the potential for to use the blockchain to improve the claims process.

We made a mobile app that submits the claim to Tierion which then generates a blockchain receipt for both the claimant and the insurance company. This gives both parties a verifiable record of the contents of the initial claim and the time it was submitted.

blockchain insurance

Insurance companies often use a network of outside providers to process claims. For example, when you submit a claim, you’ll get a call from an operator in a call center to collect the details about your incident. Call centers and insurance companies typically use old school processes to exchange data — Excel and email/FTP. This limits the insurance company’s visibility into the claims process. More importantly, they don’t have the same controls for data integrity, fraud, and compliance that they have for internal processes.

Our solution eliminated the need to email Excel files by moving to Google Sheets. We built a mobile app that posted the initial claims data to Tierion. We used Tierion’s integration with Zapier to move the data and the blockchain receipt to a Google Sheet. When the Google sheet was edited, the data was automatically sent back to Tierion and a new blockchain receipt was generated. Through this process we were able to create an audit trail on the blockchain as the claim moved from “Initial Claim” to “In-process” to “Completed”.

To show that our system could work at scale, we modeled a thousand sample claims and automatically posted the data to Tierion. Our simulation took a few seconds to complete.

Presenting at Consensus 2015

Winning the Coindesk Makeathon gave us the opportunity to present onstage at Consensus 2015. The moment had an extra special meaning for me. It was the first opportunity to publicly talk about Tierion since our launch on September 1st.

Thanks to Matt Roszak for the picture. @MatthewRoszak

 


A remarkable experience

Coindesk and General Assembly did a great job organizing the event. Consensus 2015 was the best business oriented bitcoin event of the year. I’ll never forget my new friends.