Rise and impact of the blockchain
There appears to be no end in sight to the hype surrounding blockchains and smart contracts. They are still in their early days and so there is a constant stream of new ideas for how blockchains can be used. These proposals come from diverse sectors of industry and society, which appear to have been waiting for this very moment. On the other hand, assessing exactly what is feasible is still tricky. There is still no objective definition of what the concept of the blockchain represents or what its advantages and future prospects are.
by Prof. Dr. Hans-Hermann Dirksen, Frankfurt am Main
What exactly is a blockchain?
Blockchains are a new technology for the transparent, anonymous and forgery-proof transmission and verification of data. In addition to one or more transactions, the blocks in a database contain a summary of all the previous blocks in the form of a ‘hash value’, i.e. a check digit of the type used in, say, the creation of an IBAN in banking. This hash value serves as counterfeit protection by verifying the authenticity of a transaction chain and hence flagging attempts at manipulation.
Another block chain paradigm is the equality of all the participants and the lack of a central authority. Each network operator is entitled to add new entries to the blockchain. Their entries are write-protected and cannot be altered retroactively without the approval of the network majority – which, given the large number of participants, is almost impossible. With new questions concerning digitization, data generation, data processing and data privacy arising all the time, blockchains can clearly be used for many different applications.
In German hospitals, for example, data is still only rarely forwarded due to the lack of interoperability. In other words, cooperation and communication between departments and hospitals are impeded because they speak different languages. Therefore, a technical infrastructure urgently needs to be created which is available to all participants and allows the integration of different departments.
A solution is provided by blockchain technology. In addition to transmitting digital values from one place to another, for the first time it also enables them to be transferred via a decentralized network such that every network participant can anonymously establish their validity beyond any doubt. In addition to high security against counterfeiting, the blockchain plays a key role in ensuring the integrity and transparency of the data stored in it.
What are smart contracts?
However, there is far more to this new technology. In the next stage, participants in blockchain technology can structure their systems even more specifically by using ‘smart contracts’.
Smart contracts are automatically executable programs that build on the blockchain and implement predefined transactional rules in their program code. A transaction running via a smart contract is automatically executed when all the parties involved meet a set of previously defined conditions. This eliminates the need for a central, intermediate body, especially if the parties involved do not know each other (and therefore probably do not trust each other), and also reduces transaction costs.
What are the benefits of this technology in healthcare?
In the healthcare sector, in concrete terms blockchain technology can improve processes by strengthening both data integrity and the digital identity of patients. Hospitals can use blockchains to issue counterfeit-proof prescriptions. Health records are currently not interlinked and are managed separately owing to the lack of a common architecture and standards. This is where blockchain technology comes in. Service providers can store their patient records in the blockchain so that all data are available quickly and without loss. Private cryptographic encryption enables data to be accessed exclusively by the patient, who can then decide who else may see it.
But that’s not all. In principle, the payment of doctors and pharmacies as well as the invoicing of health maintenance organizations could all be carried out by smart contracts on the blockchain. This could save time and resources for all the parties involved and make billing systems more error-resistant and tamper-proof. The transaction costs which could in theory be saved are enormous.
In the growing secondary healthcare market, participants are less regulated by law and more open to technological innovations. It can therefore be assumed that blockchain systems will initially be used in this sector. Data communication between physician, patient, other therapists and health maintenance organizations could take place directly via a blockchain. Possible applications include the communication and evaluation of health data as well as in particular early warning systems, for example for patients using devices to regularly take their own medical readings, e.g. for diabetes or blood pressure. Their readings could be immediately checked automatically with higher data security than conventional methods of data collection and storage.
What snags does the introduction of blockchain technology face?
In the healthcare sector, blockchain technology has great potential to bring important healthcare goals within reach. However, as is often the case when new technologies are launched, the corresponding legal framework needs to be introduced and verified. In the applications outlined above, too, implementation depends partly on network effects and partly on the stakeholders and legal requirements, which will first have to be adapted in this field. Moreover, the data stored on the blockchain will require a specific data protection system.
By the way, the blockchain is not a substitute for databases; it is not designed for large amounts of data. Nevertheless, links can be stored in the blockchain which grant exclusive access to other encrypted locations. The blockchain is primarily designed to store transaction data for which transparency and counterfeit protection are the top priorities.
In the future, a blockchain and the smart contracts stored on it will be able to make a wide range of economic and bureaucratic transactions cheaper, faster and safer than traditional centralized client/server-based information systems. We can look forward to the further development and adaptation of this contemporary, fascinating technology and should, if possible, become involved in it.