In a First Opinion piece on how blockchain technologies could affect health care and the life sciences, its landscape map included 48 projects covering areas like decentralized health records and data marketplaces. Just six months later, the map has tripled in size, covering nearly 150 projects that have raised more than $660 million in private and blockchain-funded (crypto) markets.

While a blockchain health care unicorn has yet to be crowned, the health care industry has seen substantial interest from developers and investors. The dizzying pace has made it difficult to assess what is going on in this space. That’s why Elektra Labs, a startup backed by the National Science Foundation I-Corps, joined forces with the newly-formed Center for Biomedical Blockchain Research at the Icahn School of Medicine at Mount Sinai to create a dataset and accompanying framework for understanding and tracking developments in health care and biomedical blockchains.

At its core, a blockchain is a digital ledger (similar to a spreadsheet) in which transactions are recorded chronologically and openly. The ledger is decentralized, with multiple copies stored across a large network of computers. It does not rely upon a central authority, like a bank or broker, to verify transactions. Participants who update the ledger can be paid for their work using a digital currency or token, like Bitcoin, Ethereum, or a specialty token customized for a specific project.

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To survey the landscape and analyze the most promising blockchain projects in the health care ecosystem, we launched an open-source, community-driven tool to track detailed, project-level metadata, such as fundraising, technology choices, health care vertical, and blockchain function.

Buyer be informed

In the past year, as hundreds of millions of dollars have flowed into blockchain-based health care projects, it’s been difficult to distill hype from reality. During our reviews, we identified several rules of thumb for the community to use to identify quality blockchain projects.

Does the project have a technical white paper that outlines the project roadmap? The blockchain community has a few quirks that might surprise investors and casual observers. In the traditional venture-backed startup, the document of choice is a pitch deck. In the blockchain community, it’s a white paper. That is actually an artifact, because many projects start out as technical projects. Beware: given the hype and money, many white papers are simply marketing tools, without much technical backing.

Does the project have a demo or working project? While that may seem to be an obvious question, less than 15 percent of the projects in our dataset have a functioning prototype, and even fewer have launched a product. Traditional investors often want to see working prototype for any serious investment in a software company. In the current blockchain climate, teams are raising millions with a white paper and a marketing website.

Does the project publish a public code base? Given that blockchains are software-based protocols, developers should publish their code, ideally on an open-source repository like GitHub. A publicly available code base offers transparency into the development process. Code is of particular importance when no prototype or product exists, as it represents a powerful mechanism for tracking progress.

The “funds raised” metric is one of the biggest red herrings in blockchain projects. Projects in our database are raising funds through two main pathways. One is through professional investors, such as venture capital, angel, and private investment. The other is through a new mechanism created by the blockchain community called an initial coin offering (ICO), where digital assets (tokens) are sold to raise capital. This method of crowdfunding has produced many valuations that are divorced from today’s value — a la the tulip mania of the 1630s — and these big valuations are placing a large bet on the future potential for the project.

Initial coin offerings are distinct from private capital because there’s no equity stake in the company. Tokens are often liquid and can be traded on exchanges, and in many instances token holders have priority to use the platform, akin to Uber investors being able to use that platform with Uber tokens. Because few investors perform their due diligence during an initial coin offering, the U.S. Security and Exchange Commission has started educating investors about potential scams and cracking down on illegal schemes. In our analysis (see the chart, “Total amount raised by industry focus”), we found professional investors focused on areas with operational needs in health care, such as insurance, and credential verification, and tended to avoid speculative areas like personal health records and fitness/wellness markets that raised primarily from initial coin offerings.

Blockchain investment 2018 by industry focus
Center for Biomedical Blockchain Research

Regardless of the source, money in the bank can be a powerful tool. Raising a large amount of capital via an initial coin offering with a decent management team can turn even the most fanciful team vision into a functioning product. Organizations that raise money via initial coin offerings can survive to fight another day — without dilution or traditional governance structures, like a board of directors, that may put pressure on the management team’s vision.

After reviewing more than 150 white papers, one thing is clear: many of these blockchain projects fall somewhere between half-baked and overly optimistic, with strong marketing teams and shaky technical fortitude (we excluded the outright scams, and strove to be generous to the remaining early projects). Compared to projects that focus on blockchain infrastructure across industries, many health care teams are missing blockchain domain knowledge and the technical expertise to execute their vision — and are often overstating their blockchain project’s ability to solve the perceived health care problem.

Because many of the challenges that health care faces today also exist in other industries, we are most excited about projects that aim to solve cross-industry blockchain infrastructure challenges — identity management, ecosystems and governance structures for data sharing and ownership, payment and claims of assets, supply chain transparency, and the like — and apply their technology to health care as one vertical out of many with a rich and pressing set of use cases. Blockchains are protocols. We already use standard Internet protocols across industries, such as TCP/IP for the web and SMTP for email. That said, we don’t have a different set of SMTP protocols just for health care companies. Projects like Blockstack (full-stack decentralization tooling) and OpenMined (secure multi-party computation) offer solutions that are applicable across many industries, and developers are adapting the protocols for the needs specific to health care.

There is one thing we are certain about: blockchains alone are not going to save health care. Health care needs better audit trails, secure data sharing, improved algorithm development, and more patient-friendly incentive systems that have clearer ties to financial incentives based on performance, which blockchain-based protocols could be better suited to track. To create this future, we need to combine blockchain-based tools with other advancements in cryptography, analytics, and governance.

Two lenses

We look at blockchain projects through two lenses: an industry view and a functional view.

The industry view represents the area of health care or biomedicine a project focuses on. We break it into nine areas, such as health care operations, personal health records, fitness and wellness, and the like (see the figure below). For simplicity, we tag a project with only one primary industry focus area; those without a defined a focus are tagged as “health care – unspecified” or “blockchain infrastructure” if it is building out a protocol that can be used beyond health care across multiple industries, such as finance, insurance, and real estate.

Blockchain projects by industry focus.
Center for Biomedical Blockchain Research

Among these focus areas, health care operations is the most popular, representing 31 percent of projects. These include systems that improve system management, like hospital-managed medical records and payment and billing management. Next, with 18 percent, is personal health record projects. These aim to solve challenges around data ownership and interoperability of health care records, like Gem and BurstIQ. Projects in this area plan to use the immutable features of the blockchain as a way to create a more efficient decentralized system.

The third largest industry category (14%) focuses on supplying digital medicines and clinical care. Blockchains make a lot of sense for protocol-level incentive systems, and organizations like Bowhead Health (medication adherence) and AIDOC (AI-based telemedicine) are looking to improve clinical care incentive systems.

The functional view contains six categories that describe the how the blockchain is being used to achieve the goals of the project (see figure below).

Blockchain projects by function
Center for Biomedical Blockchain Research

The most common function that blockchain projects aim to undertake is managing data and digital assets (37.5 percent), which includes identity management, patient data, health systems operations data, and more.

One of the most popular trends in blockchain projects is around “owning” one’s own data (namely decentralizing data access and allowing direct access to your own health record). This could threaten centralized data monopolies from companies like Facebook and Google, and health care companies like AllScripts and Epic.

Another function, one we call marketplaces (accounting for 23 percent of projects), extends the data and asset management paradigm and adds an exchange or platform that facilitates trade between entities, often designed to incentivize data sharing. Projects like Computable Labs and the Ocean Protocol are developing ecosystems and governance structures for sharing data.

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Many of these marketplaces and data and asset management projects are good examples of blockchain infrastructure projects that are not necessarily focused on health care, even though they have important health care and biomedical applications. These two functions make up 60 percent of all health care and biomedical blockchain projects.

Health care blockchains have raised hundreds of millions of dollars of capital which will be deployed in the next few months or years, and these projects will form the foundation of our healthcare system for years to come. Decentralization is a community effort that builds on community work, governance and investment. Help shape the movement by contributing to our open-source landscape, learn the skills to distill hype from reality, and support the best projects to craft more a people-powered health care system.

Andy Coravos is the CEO and cofounder of Elektra Labs and a fellow at Boston Children’s Hospital’s Computational Health Informatics Program. Noah Zimmerman is assistant professor of genetics and genomic sciences at Icahn School of Medicine at Mount Sinai and the director of the Center for Biomedical Blockchain Research. This perspective relies heavily on the open-source Healthcare and Biomedical Blockchains database, which was built by Matt Johnson and Mark Shervey of the Center for Biomedical Blockchain Research.

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