An introduction to bitcoin and blockchain technology

An Introduction to Bitcoin and the Blockchain

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Please Log in or Register. Health services must balance patient care with information privacy, access, and completeness. The massive scale of the healthcare industry also amplifies the importance of cost control. The promise of blockchain technology in health services, combined with application layers built atop it, is to be a mechanism that provides utmost privacy while ensuring that appropriate users can easily add to and access a permanent record of information.

Blockchains, also called distributed ledgers, enable a combination of cost reduction and increased accessibility to information by connecting stakeholders directly without requirements for third-party brokers, potentially giving better results at lower costs. New ventures are looking to apply blockchain technology to solve real-world problems, including efforts to track public health, centralize research data, monitor and fulfill prescriptions, lower administrative overheads, and organize patient data from an increasing number of inputs.

Here, concrete examples of the application of blockchain technology in the health sector are described, touching on near-term promise and challenges. Health is the foundation of an engaged and happy life, and modern humans have been the fortunate beneficiaries of great advances in medical technology Collins, With each new technology, more clues become available to decipher the problems that plague our well-being.

The advent of individualized information from cheaper genome sequencing, the Internet of Things, and widespread collection of health data may enable researchers to solve formerly inaccessible health problems. However, when this massive quantity of data is spread out with limited access, is in forms not conducive to sharing, cannot be easily packaged for computational methods, or does not exist as a complete record, it is impossible to perform the complex data analysis required to arrive at solutions.

To address these fundamental challenges in health data management, innovators are focusing on four main areas:. Technology can be part of the solution. In particular, blockchain technology has the potential to hold and control access to massive amounts of anonymized health data, enabling new research and new insights, while at the same time protecting the privacy of patients.

Importantly, blockchain technology serves as a protocol to connect important stakeholders to data without requiring an expensive layer of data mediators and escrow services to broker trust, removing middle management and its associated cost from the data-sharing equation. Better data sharing between stakeholders should also reduce waste, for example, that due to duplicate testing that occurs when healthcare providers are not aware of each other's actions.

This leads to costly and ineffective care. Blockchain promises to change that. We can fix healthcare by basing it on a set of new principles — collaboration, openness, and integrity, and where the patient co-creates their own data with full transparency into it. Blockchain technology is being applied increasingly in the finance sector, but as Mo Tayeb of Medicalchain points out, "your body is more important than your bank account" personal communication, August 25, It is now time to take what has been learned and apply it to something even more important: At its core, blockchain technology consists of a few straightforward ideas with interesting properties an introduction to bitcoin and blockchain technology align significantly with important healthcare challenges.

Blockchains are distributed ledgers — sequential lists of transactions with identical copies shared and maintained by multiple parties. There is no single source that claims authority over the true data, which is instead declared by consensus amongst the multiple parties holding the data Figure 1.

Because of this, blockchains are referred to as decentralized. This arrangement protects the data from tampering not just by individual keepers of the blockchain, but also external attempts at damage. In one example, the decentralization of blockchain solutions would offer intrinsic protection against assaults such as the recent WannaCry ransomware attacks because the blockchain would only be affected if simultaneously attacked at many sites Mattei, Stakeholders A have selective and controlled access to data elements stored in a set of identical verified blockchains held at multiple locations Bwherein each block contains auditable information about creation and sequencing C and encrypted private information D.

Information about sequencing could be in the form of a hash that acts as a signature to uniquely describe one or more previous blocks in the chain.

Although all arrows between A and B are shown as double-headed, read and write access to the blockchain would an introduction to bitcoin and blockchain technology stakeholder-dependent as defined in smart contracts. Each record in the chain includes precise information about when it was created and the cryptographic signature of the preceding record in the chain, along with additional arbitrary information.

The signature — or hash — consists of a cryptographically generated sequence of letters and numbers of a defined length that uniquely identifies any digital entity. Changing any record would change its signature, and would therefore create an easily detectable break in the chain. Records can only be added, never removed, and only by consensus of the maintainers of the distributed copies.

Blockchains are thus immutable. Information in each block can be encrypted such that only the holders of the correct cryptographic keys can access the information in it. Blockchains are thus private. An emergent property of this structured and shared data is that it eliminates the need for trust brokers between parties who require access to data.

Even if not all data in a an introduction to bitcoin and blockchain technology can be accessed due to privacy constraints, each stakeholder can prove with mathematical certainty that they are in possession of an exact and unmodified copy of the historical data stream.

Everyone has equal information, and well-constructed blockchains ensure that all stakeholders can see all the data required to audit the transactions on the chain. The decentralized and immutable nature of blockchain implementations combined with this transparency means that they convey trust. Additional rules, often referred to as smart contracts, can be built into these decentralized, immutable, private, and trusted ledgers to regulate how the data can be used.

Smart contracts are not a core feature of every blockchain, but are often central to their use in the complex world of healthcare. These contracts benefit from the properties of the blockchain: Why should anyone believe you? This cannot be construed as a guarantee of future performance, but it does provide some measure of confidence.

It seems important to add, given the frenzy in the press regarding blockchain technologies Panetta,that blockchains are tools with useful properties that may be applicable in many areas, but cannot by themselves solve the panoply of issues endemic to our institutions. Even with perfect technology, the information being put onto a blockchain can still contain faults, and any rules for accessing and adding new information to blockchains must first be created and agreed to by the holders of the consensus.

An introduction to bitcoin and blockchain technology benefits of applying blockchain technology can be fully realised only after investment in careful technical and administrative planning that includes all stakeholders. An examination of some real applications may give a better understanding of how blockchain technology works in healthcare, what it offers, and the current state of the industry. The following specific examples have been chosen to clarify concepts, and do not indicate the importance of one approach versus another.

A full exploration of blockchain technology companies throughout the health sector is beyond the scope of this review, but an attempt has been made to identify a collection of international and noteworthy an introduction to bitcoin and blockchain technology. Prescription drug fraud is a well-defined challenge to which blockchain technology can be applied.

In one example, the blockchain company Nuco attempts to address three common exploits employed to execute prescription fraud: Nuco identifies the problem as an "open-ended loop", meaning that there is incomplete feedback between the prescription writers physicians and the prescription fillers pharmacists. This fragmented communication is the kind of problem blockchain can solve Figure 2. A An example of an open-ended loop, where a patient is given a prescription by a doctor, who then delivers it to one or more pharmacist s.

A pharmacist has no knowledge of whether the prescription is original, accurate, or previously filled. B To close the loop, transactions are stored on blockchains. Each stakeholder can access and add to the blockchains as appropriate.

For example, a doctor can add record the original prescription and a pharmacist can check that the prescription is unaltered; a an introduction to bitcoin and blockchain technology can record actions on a prescription, and the doctor or another pharmacist can check its status.

Nuco's blockchain-based solution to the prescription fraud problem works as follows: This unique identifier is an introduction to bitcoin and blockchain technology associated with a block of information including the name of the drug, the quantity, the anonymized identity of the patient, and a timestamp. When the prescription is filled by a pharmacist, the symbol is scanned, the attempt to fulfill the prescription is recorded on and compared against the blockchain, and the pharmacist is quickly informed whether the prescription is eligible to be filled and given information to an introduction to bitcoin and blockchain technology its accuracy.

Copies of the blockchain, or distributed ledger, are held by multiple stakeholders in a decentralized network. These stakeholders might include pharmacy chains, insurance providers, auditors, or hospitals, each of whom has a vested interest in solving prescription drug fraud and is large enough to dedicate resources to the computing infrastructure required.

Due to the encryption of the blockchain information, privacy is maintained when it is passed between stakeholders, and each of the stakeholders can only access information to which they are specifically entitled through the possession of the correct cryptographic keys. Each of the stakeholders can trust that the information they have is accurate because each has an unbroken chain that is identical to the other chains and that they can audit to ensure its integrity.

This solution illustrates an example of a permissioned blockchainin which only specified parties can read information and transact. It is one of two common broad implementations of blockchain technology; the other is public chains, of which an example is given below.

The Nuco solution integrates on top of existing patterns of usage and uses existing technologies e. Interoperability will be an important consideration as new blockchain projects interface with both current and new technology for information storage.

HealthChainRx and Scalamed are an introduction to bitcoin and blockchain technology working on blockchain solutions to combat prescription fraud and are close to releasing solutions. Both have expressed a strong desire and emphasis on giving patients control over their data, including the ability to authorize who can use it and how Dave Evans and Tal Rapke, personal communications, August Scalamed plans to adopt a public blockchain rather than a permissioned chain see Nuco, abovewhich presents an opportunity to differentiate between these two approaches Tal Rapke, personal communication, August 27, In public blockchains, storage and maintenance of the blockchain is not restricted to trusted stakeholders.

Instead, anyone who participates is an introduction to bitcoin and blockchain technology for handling the encrypted data structure. The blockchain is decentralized across many public nodes that work together to verify and process transactions, resulting in trust that the chain is accurate. They do this without the ability to decrypt private data. The choice of one of these different models, permissioned versus public, is a fundamental decision made early in any blockchain project.

If there is a common undercurrent that runs through almost all blockchain technology companies working in the health sector, it is the desire to enable people to exercise more personal control over the data collected about them.

Physicians are already inundated with more information than they can deal with, and much, much more is coming. A blockchain solution can lighten this burden on the doctor by creating a higher level of organization, accessibility, and amenability to time-saving digital tools while also further engaging the patient in their own care.

As an initial project, Medicalchain has tackled hospital discharge summaries, which include a summary of treatment and necessary follow-up care. Hospitals have incentive to both ensure these documents are free of liability-creating errors and process them quickly to free up beds for the next patient in the queue. Currently, information is siloed: Medicalchain has introduced a digitized solution that leads doctors through a structured discharge process that reduces errors and omissions and speeds up review by senior staff.

An introduction to bitcoin and blockchain technology are currently moving this system to a blockchain, which will enable efficient decentralized sharing of data between stakeholders e. More ambitiously, Medicalchain is currently also developing a permissioned blockchain shared across a network of trusted international healthcare institutions to help patients receive care internationally without complicated collection and transfer of medical records Mo Tayeb, personal communication, August 25, Their proposed solution for enabling international blockchains is an opportunity to discuss another important concept: Some jurisdictions do not allow private healthcare data to be stored externally.

How then can one construct an international shared data structure? The answer may lie in the same type of cryptographic signature that enables each block of the blockchain to uniquely identify the block that it follows. Similarly, each block can contain cryptographic signatures of remotely stored documents that can be used to prove that a document has not been changed in any way. Data can be kept in each patient's home jurisdiction, and then, an introduction to bitcoin and blockchain technology transferred by the patient, proven through signatures recorded and shared through the blockchain to be the complete and accurate record of the patient's medical history.

In this scenario, only proof that the document is genuine is stored internationally on the blockchain; the actual documents can sit in encrypted form in home jurisdictions until the owner of the data the patient decides to share them. Healthcoin, an initiative that first developed a blockchain-based solution for helping people work together to improve diabetes symptoms has since expanded their vision towards building a system to construct a global electronic health record system.

They identify a value proposition for patient-centred information control that consists of three principles: Healthcoin sees themselves as not being an introduction to bitcoin and blockchain technology the healthcare business so much as the data sharing business, with the patient sitting at the control an introduction to bitcoin and blockchain technology.

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Bitcoin was invented by an unknown person or group of people under the name Satoshi Nakamoto [11] and released as open-source software in Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, [13] products, and services. As of February , over , merchants and vendors accepted bitcoin as payment. The word bitcoin first occurred and was defined in the white paper [5] that was published on 31 October There is no uniform convention for bitcoin capitalization.

Some sources use Bitcoin , capitalized, to refer to the technology and network and bitcoin , lowercase, to refer to the unit of account. The unit of account of the bitcoin system is a bitcoin. Named in homage to bitcoin's creator, a satoshi is the smallest amount within bitcoin representing 0. As with most new symbols, font support is very limited. Typefaces supporting it include Horta. On 18 August , the domain name "bitcoin.

In January , the bitcoin network came into existence after Satoshi Nakamoto mined the first ever block on the chain, known as the genesis block. This note has been interpreted as both a timestamp of the genesis date and a derisive comment on the instability caused by fractional-reserve banking. The receiver of the first bitcoin transaction was cypherpunk Hal Finney , who created the first reusable proof-of-work system RPOW in In the early days, Nakamoto is estimated to have mined 1 million bitcoins.

So, if I get hit by a bus, it would be clear that the project would go on. Over the history of Bitcoin there have been several spins offs and deliberate hard forks that have lived on as separate blockchains. These have come to be known as "altcoins", short for alternative coins, since Bitcoin was the first blockchain and these are derivative of it. These spin offs occur so that new ideas can be tested, when the scope of that idea is outside that of Bitcoin, or when the community is split about merging such changes.

Since then there have been numerous forks of Bitcoin. See list of bitcoin forks. The blockchain is a public ledger that records bitcoin transactions. A novel solution accomplishes this without any trusted central authority: The blockchain is a distributed database — to achieve independent verification of the chain of ownership of any and every bitcoin amount, each network node stores its own copy of the blockchain.

This allows bitcoin software to determine when a particular bitcoin amount has been spent, which is necessary in order to prevent double-spending in an environment without central oversight.

Whereas a conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, the blockchain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions. Transactions are defined using a Forth -like scripting language.

When a user sends bitcoins, the user designates each address and the amount of bitcoin being sent to that address in an output. To prevent double spending, each input must refer to a previous unspent output in the blockchain. Since transactions can have multiple outputs, users can send bitcoins to multiple recipients in one transaction. As in a cash transaction, the sum of inputs coins used to pay can exceed the intended sum of payments.

In such a case, an additional output is used, returning the change back to the payer. Paying a transaction fee is optional. Because the size of mined blocks is capped by the network, miners choose transactions based on the fee paid relative to their storage size, not the absolute amount of money paid as a fee. The size of transactions is dependent on the number of inputs used to create the transaction, and the number of outputs.

In the blockchain, bitcoins are registered to bitcoin addresses. Creating a bitcoin address is nothing more than picking a random valid private key and computing the corresponding bitcoin address.

This computation can be done in a split second. But the reverse computing the private key of a given bitcoin address is mathematically unfeasible and so users can tell others and make public a bitcoin address without compromising its corresponding private key.

Moreover, the number of valid private keys is so vast that it is extremely unlikely someone will compute a key-pair that is already in use and has funds.

The vast number of valid private keys makes it unfeasible that brute force could be used for that. To be able to spend the bitcoins, the owner must know the corresponding private key and digitally sign the transaction.

The network verifies the signature using the public key. If the private key is lost, the bitcoin network will not recognize any other evidence of ownership; [9] the coins are then unusable, and effectively lost. Mining is a record-keeping service done through the use of computer processing power. To be accepted by the rest of the network, a new block must contain a so-called proof-of-work PoW. Every 2, blocks approximately 14 days at roughly 10 min per block , the difficulty target is adjusted based on the network's recent performance, with the aim of keeping the average time between new blocks at ten minutes.

In this way the system automatically adapts to the total amount of mining power on the network. The proof-of-work system, alongside the chaining of blocks, makes modifications of the blockchain extremely hard, as an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted.

Computing power is often bundled together or "pooled" to reduce variance in miner income. Individual mining rigs often have to wait for long periods to confirm a block of transactions and receive payment.

In a pool, all participating miners get paid every time a participating server solves a block. This payment depends on the amount of work an individual miner contributed to help find that block. The successful miner finding the new block is rewarded with newly created bitcoins and transaction fees. To claim the reward, a special transaction called a coinbase is included with the processed payments. The bitcoin protocol specifies that the reward for adding a block will be halved every , blocks approximately every four years.

Eventually, the reward will decrease to zero, and the limit of 21 million bitcoins [f] will be reached c. Their numbers are being released roughly every ten minutes and the rate at which they are generated would drop by half every four years until all were in circulation. A wallet stores the information necessary to transact bitcoins. While wallets are often described as a place to hold [60] or store bitcoins, [61] due to the nature of the system, bitcoins are inseparable from the blockchain transaction ledger.

A better way to describe a wallet is something that "stores the digital credentials for your bitcoin holdings" [61] and allows one to access and spend them. Bitcoin uses public-key cryptography , in which two cryptographic keys, one public and one private, are generated. There are three modes which wallets can operate in. They have an inverse relationship with regards to trustlessness and computational requirements. Third-party internet services called online wallets offer similar functionality but may be easier to use.

In this case, credentials to access funds are stored with the online wallet provider rather than on the user's hardware. A malicious provider or a breach in server security may cause entrusted bitcoins to be stolen.

An example of such a security breach occurred with Mt. Physical wallets store offline the credentials necessary to spend bitcoins. Another type of wallet called a hardware wallet keeps credentials offline while facilitating transactions. The first wallet program — simply named "Bitcoin" — was released in by Satoshi Nakamoto as open-source code. While a decentralized system cannot have an "official" implementation, Bitcoin Core is considered by some to be bitcoin's preferred implementation.

Bitcoin was designed not to need a central authority [5] and the bitcoin network is considered to be decentralized. In mining pool Ghash. The pool has voluntarily capped their hashing power at Bitcoin is pseudonymous , meaning that funds are not tied to real-world entities but rather bitcoin addresses. Owners of bitcoin addresses are not explicitly identified, but all transactions on the blockchain are public.

In addition, transactions can be linked to individuals and companies through "idioms of use" e. To heighten financial privacy, a new bitcoin address can be generated for each transaction. Wallets and similar software technically handle all bitcoins as equivalent, establishing the basic level of fungibility. Researchers have pointed out that the history of each bitcoin is registered and publicly available in the blockchain ledger, and that some users may refuse to accept bitcoins coming from controversial transactions, which would harm bitcoin's fungibility.

The blocks in the blockchain were originally limited to 32 megabyte in size. The block size limit of one megabyte was introduced by Satoshi Nakamoto in , as an anti-spam measure. On 24 August at block , , Segregated Witness SegWit went live, introducing a new transaction format where signature data is separated and known as the witness.

The upgrade replaced the block size limit with a limit on a new measure called block weight , which counts non-witness data four times as much as witness data, and allows a maximum weight of 4 million. Bitcoin is a digital asset designed by its inventor, Satoshi Nakamoto, to work as a currency. The question whether bitcoin is a currency or not is still disputed.

According to research produced by Cambridge University , there were between 2. The number of users has grown significantly since , when there were , to 1.

In , the number of merchants accepting bitcoin exceeded , Reasons for this fall include high transaction fees due to bitcoin's scalability issues, long transaction times and a rise in value making consumers unwilling to spend it. Merchants accepting bitcoin ordinarily use the services of bitcoin payment service providers such as BitPay or Coinbase.

When a customer pays in bitcoin, the payment service provider accepts the bitcoin on behalf of the merchant, converts it to the local currency, and sends the obtained amount to merchant's bank account, charging a fee for the service. Bitcoins can be bought on digital currency exchanges. According to Tony Gallippi , a co-founder of BitPay , "banks are scared to deal with bitcoin companies, even if they really want to".

In a report, Bank of America Merrill Lynch stated that "we believe bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers.

Plans were announced to include a bitcoin futures option on the Chicago Mercantile Exchange in Some Argentinians have bought bitcoins to protect their savings against high inflation or the possibility that governments could confiscate savings accounts.

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