Blockchain and Healthcare, IoT, Insurance and Beyond

1. Summary

Interest in blockchain has accelerated dramatically over the past year. On Wall Street the number of fintech startups developing blockchain solutions for securities, banking clearinghouses or settlements, cross-border transactions and applications for financial inclusion in low-income areas has started to accelerate over 2015-16. With many analysts and technologists describing blockchain as the next layer in the evolution of the internet and its potential to impact virtually every industry, it is time to explore the significance in diverse sectors of the economy and think strategically about the best ways to engage with blockchain developments. In this report we will touch briefly on the developments in the finance space but extend our analysis into healthcare, insurance, and the emerging internet of things (IoT) which we believe will be the next areas that are ripe for blockchain applications and new business models that will emerge in the coming years.

So what is blockchain? Most have heard of bitcoin and it is not uncommon to encounter a great deal of confusion when we talk about blockchain in sectors like healthcare. Blockchain is the infrastructure that bitcoin is built upon; the two are interrelated but not the same thing. Blockchain is a distributed, public ledger, meaning that certain elements of transaction data are visible to anyone. It is decentralized so that no particular party can control the ledger. Due to the cryptographic nature of the blockchain, entries cannot be reversed therefore making a system more tamper-proof. Any attempt to change a previous entry will be immediately obvious because the entry will be hashed on the blockchain in a way that differs from the original.

William Mougayar makes a distinction between the technological, business, and legal meanings or significance of blockchain as follows:

Technically the blockchain is a back-end database that maintains a distributed ledger that can be inspected openly. Business-wise, the blockchain is an exchange network for moving transactions, value, assets between peers, without the assistance of intermediaries. Legally speaking, the blockchain validates transactions, replacing previously trusted entities.

He notes that we need to understand “blockchain as a new protocol that sits on top of the internet just as the World Wide Web sits on top of the internet.” As such we need to begin thinking about the new technologies and business models it will enable, which may not be in existence currently due to the architecture of the existing web.

Why is this important? Look at the internet in its present day structure. Security has become a seriously difficult challenge. Today’s internet cannot by any stretch of the imagination be considered a trusted network. We increasingly hear that there are two types of people in the world now, those who know they’ve been hacked and those who don’t know. Blockchain can enable a much higher level of security for transactions on the internet as well as offer efficiencies by cutting out third parties or administrators who take a fee for settling transactions.

Blockchain is based on cryptographic methods that involve keys, digital signatures, and hashing to verify the integrity of data (the hash). Keys enable controls over who can access information on the blockchain where we find multiple signatures (multisigs). Multisigs mean that for a given transaction to be approved, multiple signatures are required just like we see in paper contracts, but the blockchain can automate this process if the decisions or requirements of a contract are programmed into the blockchain. This is an important part of the blockchain that enables smart contracts and even smart property.

William Mougayar (2016) has identified six primary capabilities of blockchain that will enable and have effects on the future of these areas.

In the sections that follow, we will explore concrete applications of the blockchain that use these capabilities to create new products and services or alternative pathways that offer administrative or financial efficiencies over existing businesses. But one of the central advantages of the blockchain that many existing technologies fall short on is the growing need for new ways to think about identity management given our separate use cases that range from access to government services to banking, healthcare, and even social media. The largely paper-based notions behind current identity regimes is likely going to encounter significant changes in the coming years.