The blockchain: an explanation

The blockchain: an explanation

The blockchain is a complicated beast but it’s not that hard to understand. For the purposes of this explanation I’m just going to change the language a little so it’s not quite so alienating.

•           Shared record book = The blockchain

•           A new line item = A new transaction on the blockchain

Brief history & summary

Work on blockchain technology began in the early 1990s and was expanded upon by Satoshi Nakamoto in 2008 for the creation (and exchange) of, what has become the popular cryptocurrency, Bitcoin. At its core, Bitcoin was created to eliminate the expense of, reliance on, and delays caused by, banks as intermediaries. Regardless of bad press Bitcoin’s underlying technology – the blockchain – is private, secure and reliable. Its foundation is the equivalent of an electronic public ledger or shared record book, using a date and timestamp to establish ownership, removing the need for any intermediary, such as a bank.

So, rather than allowing a single ‘trusted’ institution to control your data, blockchain is a public, open-access system that can’t be hacked, corrupted or erased and which allows you to transact directly with another individuals.

That’s all great, you say, but how does it work?

When we talk about a shared record book we aren’t talking about one single book. We are talking about thousands of copies of the same book that everyone can see. It is exactly the same everywhere. It is viewed digitally on computers and devices worldwide. It can record loads of things, pretty much any data, not just currency; however, for the purposes of this explanation we’ll refer to it in financial terms.

When Bob wants to send money to Alice, a new line item is created in the shared record book detailing the transaction. This line item is sent to hundreds of other computers, all of which have a copy of the record book. Those computers confirm that this transaction is authorised, and they agree (or disagree) that everything about the transaction is legitimate before giving that line item a tick of approval. It has to receive 100% approval and match up perfectly on every copy of the record, to proceed.  This approval is done in code: the time it takes depends on the level of approval required and the type of transaction; the standard is one hour.

This is equivalent to Bob and Alice having a few hundred witnesses stand around them all watching Bob hand Alice the money, and then all of them agreeing that he really did hand her the money, that it was the right amount and that Alice received the money at a specific time. (A number of other features are confirmed as well, but we don’t need to worry about those now.)

There are no middlemen in this exchange, no central company that you have to trust, just an en masse consensus that an exchange did indeed take place.

This shared record book is not controlled by any one individual or organisation. It’s owned by everyone who has a copy and participates – but ownership does not mean control, individuals do not control the shared record book. They do however have control over their personal account and its contents. Additionally, this record book is irreversible or ‘immutable’. Every line entry made will exist forever, for as long as the internet exists. If Alice wanted to refund Bob’s money, this would need to be a brand-new line item that sent the money back, not the simple crossing out of the original transaction: this is not possible.

Additionally, if someone who has one or more copies of the record book on their computer was to try to dishonestly alter an existing transaction, those changes would be rejected by the many other computers used in the verification process – things wouldn’t match up. “Um, Bob, that’s counterfeit money… transaction denied!”

So where is all the money?

Here’s one of the more challenging parts of this to grasp: when we talk about digital currency such as Bitcoin, there’s no physical repository of coins – that line item in the record book is the money. Pretend for a moment that the first entry in the book was by someone named Jayne – the founder of this new digital currency – who writes at the top of the book, “1 million coins now exist”. Jayne then hands them out to lots and lots of people, creating a new line item for each transaction. Jayne sent 500 to Bob, 1000 to Alice (Jayne likes Alice more, obviously!), and so on.

To receive those coins, Bob and Alice would have to provide an address to Jayne to which she could send the money: this is a ‘wallet’ address. This is the equivalent of the account details your bank gives to you so you can receive deposits. Bob and Alice each have a very long, very secret code or ‘hash’ which gives them sole ownership of the line item relating to their wallet. In this way, only they can create new line items with the coins that have been sent to them. Once Bob has created a new line item which says he has put 50 coins in Alice’s wallet, he can no longer control those coins – only Alice can. This is how millions of people can have a copy of the record, without being able to add new line items relating to any of the other 1 million coins that are documented in this shared record book.

How does this relate to healthcare?

Let’s look at Electronic Health Records (patient records) as an example.

There are loads of possible applications for the blockchain for healthcare although all are in their early days currently.

This example is more relevant to the US, so apologies in advance that it is not a UK example. There are people better informed than me to think of applications for blockchain technology… perhaps e-invoicing? I will touch on this later.

The problem with EHRs is detailed in Robert Pearl’s book Mistreated: Why We Think We’re Getting Good Healthcare—And Why We’re Usually Wrong:

“The manufacturers of the large electronic health records don’t want doctors using comprehensive systems, unless the only application used is theirs. They fear what interoperability between systems would mean for their businesses. If health-record vendors allowed third-party developers to access their application program interface (also known as an API, a set of protocols and tools used in new software development), all your medical information could be combined into a single, comprehensive system … This would be extremely beneficial for patients and physicians. But doing so would make it much easier for doctors and hospitals to switch from one manufacturer to another, therefore reducing what these powerful companies can charge for their software.”

There are a whole host of other problems with the existing systems as well, including: data security, anonymity protection, hacking, data loss, and confidence in the system.

To keep the focus on the issue highlighted by Robert Pearl, the blockchain seems to be a very suitable solution to a number of these issues. We have talked so far about the blockchain in relation to currency and money however one bitcoin is nothing more or less than one token. Voting systems in the Australian parliament have been mobilised already, where each voter is awarded 1 token to cast their vote, the tokens are sent to a ‘yes’ or ‘no’ vote, for example; they are counted and a decision is reached without any third party intervention.

Instead of money you can store anything as a token, for instance with patient records there is a proposed shift in ownership of this data: with EHR, the most appropriate person to look after and own patient records is the patient themselves.

Blockchain line items are protected at the individual or patient level with a numeric public key, and/or a more complex privacy key as previously mentioned. Therefore, if someone were to hack an EHR system powered by blockchain technology, they wouldn’t be able to identify whose data they had accessed or manipulate the information, as they could in existing systems. Similarly, a clinician with access to your medical records couldn’t look at another patient’s record within the same health system or hospital without receiving his or her explicit permission. Questions remain about the issues of consent and in some cases the ability for an individual to give their consent.

A single, UK blockchain-based approach would allow patients to become the owners of their data. It would allow the information to travel with them (in their personal wallets) to every emergency department, doctor’s office and hospital in the country, both safely and securely. It would be updated as soon as new data was entered, anywhere in the country. And it could connect all of our medical information for the rest of our lives.

We aren’t there yet, and it isn’t clear when we will be. The use of technology in healthcare is a huge opportunity, but one that needs to be approached with caution. With that said, processes such as e-invoicing could logically be taken a stage further, and with the appropriate implementation support, low cost transactions could be entirely automated, freeing up time and resource for larger more complex transactions. The move to new technologies needn’t be a takeover but could be used initially as a simple support function to ease the burden on low cost, resource intensive, but computationally simple transactions.

Blockchain technology is internationally embedded far beyond proof of concept, the crucial decision we have to make is how we use it to benefit our NHS.

Any opinions expressed in this briefing are those of the creator Richard Sawyer and may not represent the views of his employer. A number of resources were used in the creation of this briefing, if you would like these sources or have any questions please feel free to contact him on