Blockchain: The Foundational Technology Behind Cryptocurrencies. Dr. Zach Steelman Assistant Professor Information Systems Department

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1 Blockchain: The Foundational Technology Behind Cryptocurrencies Dr. Zach Steelman Assistant Professor Information Systems Department Healthcare Financial Management Association Conference Friday, August 23 rd, 2018 Blockchain Hype Significant amounts of public investments in blockchain technologies Cryptocurrencies(e.g. Bitcoin, Ethereum) $26 Billion in April 2017 $800 Billion in December 2017 $330 Billion in April 2018 $214 Billion in August 2018 Blockchain was the most searched term on Gartner.com for % of CEOs see blockchain as major and transformational. 85% of projects with blockchain in the title will deliver value withoutactually using a blockchain. 1

2 But what is blockchain?... Blockchain is an evolution of database technologies. Blockchains are distributed ledgers of time-stamped transactions backed by cryptography and consensus mechanismsto validate and permanently store transactions in a peer-to-peer network. How about we compare to existing IT systems MANUFACTURER DEALER LEASING CO. AUTO DISMANTLER Multiple versions of the data. Lack of transparency through network. Duplicated efforts of reconciling. Potential for fraud and delayed response to partners. AUDITOR 2

3 MANUFACTURER Now with a blockchain DEALER AUDITOR LEASING CO. Peer-to-Peer Network All participants share information directly. Distributed Ledger Shared ledger of all transactions Cryptographic Hashing Automated record reconciliation Consensus Mechanisms Single version of the truth AUTO DISMANTLER Consensus Validation and Storage Each peer stores a copy of all transactions. All transactions are sent to each peer in the network. All new transactions are combined with prior transactions, hashed, and compared with other peers. If any peer attempts to change prior transactions, the hashed values do not match and all peers reject the changes. Consistent, distributed, single version of the truth. Hash DKDU FJKSL FU DFK-2893 New Hash Hash 346G FJKSLF DKDU FJKSL U JFDW FU DFK-2893 Hash DKDU FJKSL FU DFK-2893 Hash DKDU FJKSL FU DFK

4 How exactly does it remove third parties? Cryptography and consensus mechanisms to automate record validation and reconciliation. Smart contracts are pre-defined set of rules to a transaction that automatically executes on the blockchain network. Smart contracts can eliminate the need for trusted third parties to initiate and validate the rules of a transaction. The Messy Music Industry MUSICIANS MANAGERS MUSIC LABEL RETAILERS CUSTOMER 4

5 The Next Wave of the Music Industry The smart contract executes instant micropayments for each song MANAGERS 10% CUSTOMER 90% MUSIC LABEL MUSICIANS RETAILER DEVELOPED BLOCKCHAIN SYSTEMS The Distributed Music Industry 10% MANAGERS 90% DISTRIBUTED BLOCKCHAIN MUSIC SERVICE CUSTOMER MUSICIANS 5

6 Cryptocurrencies and Blockchain Cryptocurrencies (e.g., Bitcoin, Ethereum, etc.) are digital representations of assets stored on a distributed ledger that can be instantly transferred, validated, and audited on a blockchain. A digital record of ownership that can be 100% verified Monetary focus Bitcoin, Ripple, Tether Application focus Ethereum, EOS Utility or Service focus Dentacoin, Medishares But what are some specific use-cases when we might use these 6

7 Leading Healthcare Use-Cases Patient health data exchange Clinical trials and mass population research Insurance claims, billing, and adjustment Drug supply and traceability Provider licensing and credentialing Healthcare Blockchain Projects 7

8 Healthcare Blockchain Projects Blockchain Opportunities and Issues Technology poised to restructure, reallocate, and revolutionize data governance and validity. Only the beginning of the blockchain revolution and the next killer app hasn t been created yet. Technology that embeds trust into transactions by ensuring agreed-upon rules are executed without bias or fraud. Distributed, global nature of blockchain technologies provide economies of scale by reaching global industries previously unavailable. 8

9 Blockchain Opportunities and Issues Emerging technology with limited production-ready solutions. High market volatility for all cryptocurrencies used as payment, utility, or service. Significant data privacy concerns to address. Unclear and inconsistent government regulations globally. 9

10 Market Volatility Cryptocurrencies are an unregulated and HIGHLY volatile market actively traded cryptocurrencies on the market, each with varying goals, designs, and stability. Coins can have billions of dollars of valuation wiped off the market in short time periods. Daily volatility is great for traders, a nightmare for organizational management and investment

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12 Data Access and Security in Blockchains Public blockchains (e.g., Bitcoin, Litecoin, Ethereum) allow any individual to participate in the network as well as view the record of all transactions ever made. Permissioned blockchains (e.g., Hyperledger, Quorum) require membership in the network and have strict controls to data privacy. Why does this matter?... 12

13 Data Privacy and Psuedonymity Would you allow everyone on the planet to see your bank account transactions? Data Privacy and Psuedonymity 13

14 Data Privacy and Psuedonymity Take your name off a lifetime s worth of medical records, and there s probably still enough to identify you. Jayce Wagner, DigitalTrends The amount of data stored about individuals has grown exponentially each year in all areas of business creating a digital fingerprint of individuals. With this data shared globally in a distributed system, the security concerns, privacy concerns, and traceability concerns expand. Data Privacy and Psuedonymity Existing solution is to use private/permissioned blockchains to share information and have it controlled by a consortium or network. Requires all members of network to agree on processes, data structures, and governance. Retains tight access control on who can see what data with focus on benefits for organizations not individual patients. Slow to innovate due to only members or supporting vendor to drive new development and implementations. Public blockchains (e.g. Ethereum) forgo some privacy concerns to allow for faster innovation, open markets, and individual-focused applications. These will not be used in isolation but share data back and forth between organizational blockchain networks while retaining tight control and access to data that the patient allows to be shared. 14

15 Your Healthcare Use-cases What areas do you see as opportunities for blockchain and cryptocurrency solutions? Do you have any on-going use-cases? Does your organization have interest in accepting cryptocurrencies for services? Why? University of Arkansas Support Teaching providing quality education around the business opportunities and issues of blockchain across a variety of fields. Research providing leading-edge insights into how successful organizations are managing these blockchain issues. Service providing local organizations with training, support, and innovation through collaborations with our faculty and students to drive blockchain innovation. 15

16 How are we ramping up blockchain knowledge? 2017 University of Arkansas Blockchain Hackathon 2018 Hackathon scheduled for September 28 th and 29 th in Fayetteville, AR Contact me if your company is interested in participating 2017 Walton College Blockchain Conference 2018 Conference scheduled for March 29 th, 2019 Multiple Information Systems Courses Undergraduate Major and Minor (for Finance, Accounting, Supply-chain, and others) Graduate Blockchain Certificate (1 year program) Graduate Masters with emphasis on Enterprise Systems (1 or 2 year program) Online Blockchain Training Modules Coming Soon 2017 University of Arkansas Blockchain Hackathon 16

17 Blockchain Hackathon Winning Team Video Link Blockchain Conference

18 Blockchain Center of Excellence Mission: To develop and establish research partnerships by conducting collaborative industry-university research Promote and enable dissemination of knowledge about blockchains Accelerate industry adoption of blockchain technology Advisory Council: ArcBest, IBM, JB Hunt, Tyson, Walmart Additional positions available for interested organizations Grand Opening Announcement: Stay up to date with our events and research! A few books to change your perspective 18

19 Questions or Comments? Thank you, and please me if you would like to meet again and talk further about your own projects. 19