A closer look at the promise of the blockchain in banking and biobanking

Introduction

Blockchain technology facilitates transactions over secure, public, and decentralized databases. Blockchain enthusiasts often make claims that the technology can do everything, from democratizing money and undermining the conventional banking system to solving issues of personal data stewardship. The promise of the blockchain relies on three characteristics of its design, based on its decentralized structure. First, it is a permissionless or transparent system. Owners of cryptocurrency or data can conduct transactions with others on the network directly, without any intermediary approving or facilitating the transaction. Second, it is immutable and therefore censorship resistant. This means, neither a central authority' nor a single third party can alter anything within a blockchain. For example, if Alpha sent Bravo some cryptocoins, she cannot then appeal to a third party', claiming that the transaction should be reversed, unlike credit cards and PayPal, which will respond and sometimes reverse transactions. While Bravo could choose to send back to Alpha the amount of cryptocoins he received from Alpha, this transaction would be between the two parties and would become a new (non-revisable) transaction on the blockchain.Third, trust in another party' such as a government or bank is not required, making the blockchain’s trustless nature a third key' characteristic. One party or even a small group of participants on the network cannot effectively alter the protocol. If one person or institution gained control of the majority of nodes on the network, altering the protocol would be possible. But this is unlikely, provided the network is sufficiently' decentralized. The three attributes of transparency, immutability, and trustlessness have led many to speculate about how the blockchain can be leveraged to facilitate global transactions safely and effectively and how it might address many technological challenges with data collections, as well as social and ethical concerns about the governance of peoples personal data.

This paper takes a closer look at the claimed advantages of particular uses of blockchain technology. Through the lens of social economics, we evaluate the social costs and benefits and highlight ethical challenges. We consider social norms around money' and privacy of personal data and how those norms might influence or deter the application and utility of the technology. In the next section, we raise questions about the extent to which Bitcoin and other cryptocurrencies can provide an alternative currency that could undermine the conventional banking system. We do not address every claim made by supporters of cryptocurrency and blockchain technology; rather, we bring attention to some overlooked social, ethical, and environmental costs of this technology' when deployed as a currency or financial security in current socioeconomic contexts. We begin by explaining what Bitcoin is, how bitcoins are created, and how they are then used for transactions. We focus on Bitcoin because it is the oldest and best-known application of blockchain technology', and also because the blockchain technology was developed to provide an alternative currency.¹ Next, we evaluate Bitcoin as a currency—a medium of exchange and store of value. Finally, we examine industries that have emerged surrounding Bitcoin, such as custodial and exchange services, the mining industry, and the ICOs industry'. We argue that there are social, economic, and environmental costs to Bitcoin, and that it appears to be in the process of replicating the concentration and power of the conventional financial system.

In the third section, we examine the proposed applications of blockchain technology to manage genomic databanks and other biobanks. Whereas the example we consider includes the use of a cryptocurrency in the form of tokens, its primary aim is to leverage the technology' to solve certain challenges facing “omics” research programs in biomedical research and healthcare. First, it aims to lower the cost of sequencing genomes to ultimately' grow biobanks and increase available data for biomedical researchers, biotechnology' entrepreneurs, and healthcare professionals. Second, it aims to eliminate the middleman in transactions of biological data, such that individuals retain more control over their personal data and gain the potential for being compensated for their voluntary' participation in research. Whereas the proposal suggests an innovative solution to particular challenges in the management of biobanks, it also raises important, and often overlooked, problems with respect to inequality, lack of diversity, and concerns about informational privacy. We outline some of the problems in biobanking and argue that the blockchain cannot provide a technological fix to those problems.