If you’ve been keeping up to date on tech over the past few years you’ve probably heard of the complicated system that is blockchain. Blockchain is a new way to structure data that’s been gaining attention everywhere from the technology sector to finance. Nearly every bank is currently undergoing research on blockchain and it is expected that 15% of banks will be using blockchain by the end of 2017.
In order to gain an understanding of the blockchain, we should first start by looking at Bitcoin. Bitcoin is the well-publicized cryptocurrency that acted as the first decentralized currency, and it is often heralded as the first public implementation of blockchain. Bitcoin does not operate under a single administrator and instead uses peer-to-peer transactions that process without an intermediary such as a bank.
These transactions are verified by network nodes through mining, a process of mathematical verification done by computers that can be done by everyone from individuals to full-fledged Bitcoin mining companies. As a reward for the computing work done in transaction verification, miners are rewarded with newly created bitcoins. In this way, mining is the process in which the supply of bitcoin is controlled.
Bitcoin does not have a central authority to distribute currency like traditional currencies do (such as how the dollar is controlled through the federal reserve). Instead, this mining process holds bitcoin steady by fluctuating the payout to match the supply of miners.
Blockchain came as a result of the realization that the foundation of bitcoin had application in other realms. Blockchain is powerful in its ability to share ledgers of information without giving any single party the ability to manipulate the information.
How it all works
There are three components of blockchain:
- A network of computers
- A network of protocol
- A consensus mechanism to validate transactions
Together, these pieces allow blockchain to provide a transparent, secure record of transactions. In retail, for example, this can be used to track a product through its lifecycle across different distributors and manufacturers. In the financial world it can be used to track the ownership of assets. The application is widespread and blockchain is positioned to make a major impact on healthcare.
Blockchain in Healthcare
Healthcare record keeping is incredibly outdated. For many hospitals and practices, patient files are still kept as hard copies. Blockchain could open the door for patient records to be transferred between physicians without being managed by a central entity. Blockchain transactions are logged publicly and in chronological order. The database containing these patient records in the form of blocks is secure in that no block can be changed or deleted. Credentialed users will be able to distribute and share information across layers with only the ability to view and add to the transaction log.
Blockchain also brings with it a heightened level of security. An estimated of 5-10% of healthcare costs are fraudulent. An estimated $60B worth of Medicare fraud was incurred in the 2015 in the US alone. By creating a system that more efficiently evaluates transactions, these fraudulent costs can be minimized.
Costs can also be reduced through the elimination of the administrative middle-man. By cutting down on the costs once incurred to verify transactions and by making that process more effective, blockchain can reduce a significant portion of healthcare’s administrative costs.
Healthcare companies will be also be able to create security through creating private chains that will run between specific organizations with binding legal and regulatory agreements. For example, this type of system would allow only the approved users to access sensitive health records.
Blockchain has the potential to both normalize and modernize health records and over 35% of health and life science respondents to a Deloitte questionnaire say they plan to implement blockchain within the next year.
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