It’s the target du jour. I understand why, with recent dramatic price declines, high-profile bankruptcies/frauds, and noise around long-term viable use cases.
Much of the negativity is deserved.
Beyond expensive jpegs and business models that rely on ponzi-nomic-type structures, there hasn’t been a killer use case for web3. That has to change.
However, I still believe it’s early, and we will see those killer use cases. So what’s next?
To find out, let’s look to the past.
Enter Hype Cycles
In 1995, Gartner published their hype cycle visualization. The visualization depicts the adoption of technology over time, with peaks and valleys along the way.
The hype cycle has become a tangible illustration of the journey that most major technological breakthrough seems to take before they find mass market adoption.
On its y-axis, we have “Expectations,” and on the x-axis, “Time.” The Hype Cycle is meant to visualize the five stages of technology maturity, including the peaks and valleys along the way.
The stages include:
Innovation Trigger: The aha moment
Early proof-of-concept ideas start to take shape, and people begin to pay attention
Peak of Inflated Expectations: This is going to be amazing
Early success drives more people to the space, and there is early traction
Trough of Disillusionment: The oh shit moment
We start to see a few high-profile failures, and the “I told you so” chorus starts to gain momentum
Slope of Enlightenment: Hmm, maybe this will work
Better use cases start to take shape, and we learn from the past failures on how to build better, more functional applications for the technology
Plateau of Productivity: Ah, product market fit
Mainstream adoption occurs, and the use cases of the technology are clearly defined – the technology becomes part of our everyday lives
Think about the illustration below for a minute. I’m sure you can recall several technological breakthroughs that follow the cycle below. For example, computer chips, the internet, cloud computing, the gig economy, and so many more.
The web3 hype cycle
My take is that we are in the “Trough of Disillusionment.” Everything in web3 has a component on FUD right now. Negativity abounds, certainty is scarce, and use cases are few.
We started our journey up the hype cycle with the advent of the blockchain, Bitcoin, and Ethereum.
All game-changing technologies.
Then came NFTs and their meteoric rise and subsequent fall.
Among these advances, we also had the Celsius and Luna debacles. NFT price bubbles. Then came the coin price drops and a massive case of FUD with them.
The subsequent “crypto is a scam” voices grow louder. And so, we sink deeper into disillusionment.
How do we get out of the valley?
It comes down to utility.
Utility is defined as practical use cases beyond speculation.
What does utility look like?
Web3 and its underlying technologies are plumbing. It’s what’s built on top of them that provides utility.
In the same way, faster computer chips increased the usage of computers. Just as smartphones on better bandwidth networks spawned a new generation of apps like Instagram, Uber, and YouTube. We need applications to sit on top of the technology that drives mass adoption.
Until then, we will continue to be at the whims of the hype cycle, slowly climbing our way up the slope of enlightenment.
The potential of web3 is not in copying/pasting web2 use cases, but in the way it empowers individuals and communities to come together and solve significant challenges, as Vibe Bio is doing using web3 primitives, for its funding of treatments for rare diseases.
If you’ve been paying attention to crypto Twitter over the last few weeks, there has been a lot of noise around viable web3 use cases. While this isn’t a new topic, it’s picked up momentum recently. It all started with a conversation on Logan Bartlett’s podcast Cartoon Avatars between Packy McCormick and Zach Weinberg on the merits of web3 and the underlying, yet still nascent, use cases of the technology.
Check out the exchange below for more (apologies for resurrecting this, Packy!)
Yesterday @packyM was asked to explain a Web3 use case.
Having listened to the episode, it’s clear that Zach came prepared and ready to fight, while Packy, let’s say, could have done a bit more homework. To be fair, Packy did reference a much more serious situation that warranted his attention.
The conversation forced those who believe in the promise of web3, like me, to take a step back and answer the question – “what are the fundamental use cases of web3 that will drive incremental value?”
It’s a question that has plagued web3 technology and crypto movement for some time.
To date, the narrative has been driven by speculators, which has led to both spectacular booms and recently, busts. Arguments have been made that web3 is just a copy/paste version of web2 with a blockchain. I don’t believe that argument, but I understand it.
Outside of Defi, and some traction in gaming with “play-to-earn,” mass adoption and clear, viable use cases for web3 that answer the incremental value question are still outstanding.
Or, just, maybe that’s about to change.
Enter – Vibe Bio
Last week, VIbe Bio came out of stealth and announced that they had raised $12mm “to advance its community-driven approach to identifying and developing treatments for rare diseases. By leveraging a decentralized autonomous organization (DAO), Vibe Bio builds a global community of patients, scientists, and partners around a shared mission to cure rare diseases.”
As the company’s co-founder and CEO, Alok Tayi, Ph.D., stated in the press release:
“One in 10 Americans is living with a rare disease. For too many, the time it would take to develop a cure is longer than the time they have left to live. The challenge for rare diseases isn’t necessarily finding a treatment – it’s funding it. For the first time, Vibe Bio is giving patients with rare and overlooked diseases access to the funding and community support they need to develop cures and ownership over the results.”
Vibe Bio Co-founder and CEO, Alok Tayi, Ph.D
The mission of Vibe Bio is to research, fund, and commercialize promising treatments for rare diseases that in today’s world would often go unfunded. The way they will fund treatment is novel as well, and utilizing the tools developed in web3, like DAOs and tokens.
The Vibe Bio DAO will fund treatments using its $VIBE native token. The token will be used to govern decisions on which treatments should be funded, and to incentivize the community of scientists, patients, and other stakeholders to drive progress on solving the problem of rare diseases.
Ladies and gentlemen, we may have found our answer. It lies in community and alignment of incentives, both of which are at the core of web3.
How it works
Vibe Bio is using web3 primitives to solve the problem of funding research and treatments of rare diseases in the following ways:
Community: For those that have spent time in web3 and crypto understand that the idea of community is central. Vibe Bio is no different. Utilizing the DAO model, they bring $VIBE token holders, which are groups of scientists and patients together. This allows for collaboration from both stakeholders, which drives progress forward.
Propose: Token holders or members of the community can propose promising treatments, which are then evaluated on both their clinical efficacy and financial viability. This proposal process naturally allows for diverse voices to be heard, and opinions are taken into account to surface the best treatments.
Develop: Using the sales of the $VIBE token, development work for approved treatments is funded. This includes all of the traditional steps of drug development, such as clinical trials, pre-clinical development, and manufacturing.
Sustain: This is when things start to get interesting. If the treatment is licensed or commercialized by a 3rd party, the Vibe Bio DAO will share in the proceeds that can fund future projects.
And, so the flywheel spins.
Show me the incentives…
According to a study in The Journal of the American Medical Association, based on data from 47 pharmaceutical companies, the median investment to bring a drug or therapeutic treatment to market was an astronomical $985mm. It’s no wonder then that only the most promising treatments are funded.
The pharma business is one with significant fixed, but low marginal costs. The incentive of pharmaceutical companies is to fund treatments that have the highest economic upside. Once a homerun treatment is funded, developed, approved, and commercialized, it behooves the maker to extract all the value it can from that treatment.
This means that there is an inherent opportunity cost built into the system. Potentially promising new treatments, but with lower patient populations often go unfunded – the economic incentive is just not there. That leaves many potentially breakthrough treatments left on the table.
Vibe Bio by leveraging the DAO model is giving a voice to patients and incentivizing scientists to tackle and research treatments they may not have otherwise. By removing the financial pressure of funding, they are incentivized to focus on cures rather than chasing profits.
We are still so early…
The development of life-saving drugs and therapeutics is expensive, lengthy, and challenging. The rate of failure is incredibly high at an estimated 90%. Companies like Vibe Bio are likely not to change that fact. It would be naive to think otherwise.
However, what Vibe Bio will do is drive funding, and with that, hope for the 1 in 10 Americans that struggle with a rare disease. Hope to patients like the co-founder’s daughter who is one of those Americans desperate for new treatment options to find a cure for their ailment.
There are still lingering questions about how much traction Vibe Bio will obtain, given that the overwhelming majority of patients and scientists are very much used to a web2 world. Funding new treatments is incredibly costly and involve significant infrastructure and partnerships. How that all plays out is still to be determined – but that’s beside the point.
Perhaps the question of what value web3 tools and technology will create is at the individual level driven by communities coming together to solve a real problem like Vibe Bio is doing. The way Vibe Bio does that is by leveraging novel tools that reduce friction and align incentives for all stakeholders. That is at the core of web3, and it just may save a few lives in the process.
While the title might be clickbait, the idea that Bitcoin may save healthcare may not be too farfetched. There’s a company that believes it can. That company is Crowd Health.
We are starting a Bitcoin “Crowd” full of just Bitcoiners (generally young, healthy, and care for their bodies almost as well as they care for their cold wallets). You will fund health expenses for only Bitcoiners. We need 1000 to start. Read more here https://t.co/mJ8iDI4GXepic.twitter.com/DuZ7mI1H4M
Who is Crowd Health, and why do they think Bitcoin will save healthcare?
Who is Crowd Health?
When you visit Crowd Health’s website, they are quick to remind you that they are not a health insurance company. Most of the reason why has to do with the red tape surrounding regulation, but some of it is also due to novelty. Something bold in the world of traditional healthcare coverage.
Crowd Health is not an insurance company, but rather a “Healthcare crowdfunding” platform – hence the word “crowd” in their name. Their goal is to “enable you to live boldly without the fear, and emotional distress, related to health care bills. No doctor networks. No huge monthly premiums. No annual deductibles. No surprises.”
That goal alone says a lot about the challenges of healthcare today.
Crowd Health is a new take on an old model. The company is digitizing the healthcare cost-sharing model that has been around for tens of years. The healthcare cost-sharing model is often associated with religious organizations. The goal of this model is to bring together a community of like-minded individuals and families to share in the cost of covering each other’s healthcare expenses.
Crowd Health’s model works much the same.
A member signs up for a plan based on the size of their family where they contribute a set monthly amount into a “Health Funding Account,” less a $30 monthly administration fee (this increases to $150 for the family plan). The monthly contribution amounts start at $255 and increase to $695 for a family up to eight. This is significantly more affordable than the average monthly premiums for traditional health insurance coverage of ~$644.
Similar to a traditional health insurance plan, Crowd Health members are responsible for a portion, in this case, $500 of any healthcare event. Instead of calling this a deductible, Crowd Health labels it as a “Commitment.” After the initial “commitment” the remainder is submitted to be “crowd-funded” by the other members, which they call the “Crowd”.
The Crowd then votes to approve them within 72 hours according to the company. This is where the “we are not an insurance company” line makes things interesting. The Crowd, just like a traditional health insurance company can deny covering a healthcare event. This ultimately leaves the member responsible for the cost of those “unfunded” healthcare expenses.
Those in the Crowd receive a “Generosity Score” for the healthcare events they help fund. This generosity score becomes tangible social proof of your contribution and commitment to the community. This score reflects your participation in crowdfunding events and can help your chances of approval for your healthcare expense submissions.
Given that Crowd Health is not an insurance company when members seek out care, they present as “uninsured”. This designation allows them to negotiate self-pay or cash pay prices for pre-scheduled healthcare events. They do this through the use of “Care Advocates” that work with hospitals and healthcare providers to negotiate the prices for these procedures. Crowd Health also shares in the “savings” from these negotiated rates.
There’s a lot more to this, including restrictions on the types of healthcare events that the Crowd will cover, such as cosmetic surgery. There are also limits on the amount of healthcare expenses the Crowd will fund annually. You can learn the details in their Member Guide.
What does this have to do with Bitcoin?
Well, Crowd Health just released a new crowdfunding healthcare plan that is all about Bitcoin. Instead of keeping your monthly contributions to the plan in fiat currency, they convert them into Bitcoin.
But why? Let’s start with a quick lesson on what Bitcoin is.
What is Bitcoin?
Bitcoin is a decentralized digital currency invented by pseudonymous developer Satoshi Nakamoto in 2008 and introduced in his seminal whitepaper. Bitcoin is decentralized because it doesn’t rely on a single central bank or authority to set monetary policy like other fiat or traditional currencies. Instead, it relies on a public ledger system or Blockchain that records all transactions transparently.
These transactions are verified by nodes, which are a peer-to-peer network that uses cryptography to validate that transactions are accurate. In exchange for the verification, “miners” earn Bitcoin or digital currency as a reward for their efforts.
Unlike many cryptocurrencies, Bitcoin has a limited supply. There will always only be 21 million Bitcoins ever mined. Since its launch in 2009, the current supply of Bitcoins in circulation is ~18.925 million, which leaves a bit more than 2 million Bitcoins still to be mined. The expectation is that the last Bitcoin will be mined in the year 2140.
Given its limited supply and relatively scarcity with ~90% of all Bitcoins that will ever exist already mined, the price of Bitcoin has increased substantially over the last 13 years it’s been in circulation.
Bitcoin is often described as “digital gold”. Given its similarities to physical gold in terms of scarcity, limited supply, inflationary hedge, and perceived value, the comparison is appropriate.
Back to Crowd Health – why have member store contributions in Bitcoin?
To me, there are three main reasons – ease of use, appreciation potential, and yes, novelty.
Let’s start with ease of use. As I wrote in Healthcare and Web3 – Hope or Hype? the beauty of using Web3 tools is the ease of transactions. There’s something magical that happens when you complete your first transaction in the crypto world. It’s seamless and feels completely frictionless. Yes, Bitcoin may not be the fastest blockchain out there at ~5 transactions per second, but it’s still relatively quick compared to more traditional mediums of financial exchange.
As the chart above shows since its inception Bitcoin has appreciated by 29,000%. As many of us are painfully aware, we’ve seen a sharp decline in crypto prices, including Bitcoin recently. While I firmly believe in the long-term viability of cryptocurrencies and web3 in general, there will undoubtedly be variability in the price, sometimes that variability will be wild. With variability comes the possibility of appreciation and given the highly inflationary environment, we are in currently, Bitcoin may be a good hedge to traditional currency.
It’s important to note that not all of a member’s contributions will be converted and held in Bitcoin. The company states that 25% of the funds in a member’s account will remain in fiat currency. The main reason for this is to not have to sell any Bitcoin to fund the initial $500 contribution for a healthcare event and other smaller healthcare expenses that wouldn’t be submitted to the Crowd for funding.
Lastly, one can’t ignore that there is a novelty factor to all of this. The past few weeks aside, crypto and web3 at large are still exciting and full of possibilities. Offering a novel healthcare coverage product backed by a novel currency may seem like a marketing play, and perhaps it is, but it’s innovative.
Bringing It Home
If you’ve been reading The Deductible for any length of time, you know that I am incredibly excited about the future of healthcare given the possibility and promise of web3. While the Bitcoin-backed healthcare coverage product that CrowdHealth is offering may not usher in a revolution in the way we pay for healthcare, it is a step in the right direction.
Healthcare companies like Crowd Health alone may not be enough to save healthcare, but its thinking and innovations like this that will eventually get us closer to that goal. We are still so early.
TLDR: Web3 holds tremendous potential for Healthcare, but developing solutions that protect and store Private Health Information securely in a Web3 world will take time.
I’m taking a slight detour with this week’s essay, but I assure you, there will be a healthcare angle. Let me tell you the story about getting hacked.
Setting the Stage
It was relatively early on a Saturday morning when I rolled over to do what most of us do first thing in the morning – check Twitter. That’s when it all started to go wrong. Still groggy from a great night’s sleep, I started scrolling through Web3 news and updates on the latest NFT drop. That’s when I came across the tweet that would ultimately cause me much heartache. The actual tweet has since been deleted and the account banned, but I managed to find the screenshot below.
My sleepy, groggy self could not believe my eyes. I had a new follower — and not just any follower. It was none other than a co-founder of the blue-chip NFT and cultural phenomenon Bored Ape Yacht Club. Not only was I the lucky one she followed, but I was also being granted the opportunity to mint a one-of-a-kind Mutant Ape. A dream.
I looked at the name of the person who had just so graciously followed me and saw that they were verified. That makes this legit, right? Look at that follower count, 60k+ followers – this has got to be real!
So, I clicked on the tweet to view the comments. Wow, more validation! These people who minted the impossible are over the moon with their decision. The NFT gods had smiled on me.
Let’s assess the situation so far – your half-awake Deductible writer has just stumbled on an unbelievable offer from a co-founder of an NFT giant. The Twitter account looks legit, the comments are above-board, and it all adds up.
So, I click the link. And…
It takes me to a legitimate-looking website. It looks exactly like boredapeyachtclub.com. I continue to read and it all seems to make sense. The website, the follower count, the verification checkmark – we’re off to the races!
So, I click “mint”. And that’s where it all went wrong. So very wrong.
A prompt appeared for me to connect the website to my Metamask wallet. So I did.
Another prompt asked me to enter the number of ETH I wanted to send. Wait, that’s unusual. This is when the alarm bells should have been blaring in my head. Hmm, this is strange, I thought, having minted a few NFTs in the past. That’s not how these transactions typically work. Ignoring that thought, I proceed anyway. So, I input the mint amount of 0.33 ETH, a relative bargain for a Mutant Ape that trades at a floor price of 24.8 ETH (yes, I know I’m an idiot).
I push “confirm” and the transaction goes through. I am now the proud owner of a MAYC NFT!
Or not. That’s when it all hit me. I have been scammed.
I definitely did not become an owner of the prized NFT. Over the next few days, I would come to realize the scale of what a mistake I had made.
The beauty of the blockchain is that it’s there for all to see. Each transaction is clearly displayed in its entirety as an unalterable record of the past.
As you can see by the transaction ledger on Etherscan, I hadn’t minted anything. All I had done was send a decent amount of ETH to a scammer that had cleverly lured me in with a too-good-to-be-true opportunity. The scammer packaged it in a way that not only spoke to my desire to own the prized NFT, but to that innate sense of making a quick buck.
In the blockchain transaction below, you can clearly see the .33 ETH simply move from my wallet to one that has since been labeled as “Fake_Phishing 5397” by the kind folks over at Etherscan.
The pain unfortunately did not end there. Over the course of the next few days, the scammer drained my wallet of all my NFTs, including my favorite LinksDAO NFT which I have written about so often here.
Take a look at the carnage below. Three of my more valuable NFTs were moved to that same “Fake_Phishing” wallet. A clean, simple transfer out of my wallet, into another. It’s elegant, really.
When all was said and done, the scammers took home a total of 145 ETH, or $420k, from unsuspecting folks like me.
Besides my obvious lapse in judgment, how did this all happen? We first must get a basic understanding of how crypto wallets work to fully understand this scam.
How Digital Wallets Work
There are two types of crypto wallets – digital and hardware wallets. For the purposes of this essay, we will focus on digital wallets.
Digital wallets are similar to your physical wallet. Physical wallets store valuables, such as your credit cards, paper money, insurance cards, and other items that you want to keep close and safe. When you purchase something you provide a credit card or cash that then is used to facilitate the transaction.
A digital wallet works much the same, but with a few more features. A digital wallet is made of three key components – an address, a public key, and a private key.
An address is the “name” of your digital wallet. Just like many of us have chosen a specific design or added embossed initials, a wallet’s address is how we know the wallet belongs to you. If an entity or person wants to send you cryptocurrency, they first need to know your wallet’s address. Your address makes your wallet visible on the blockchain to send and receive crypto, tokens, or NFTs.
Public keys are the way for you to receive transactions within your digital wallet. Think of a public key as similar to the routing and account number combinations of traditional bank accounts, but with one major differentiation. With digital wallets, in order for a transaction to process and be verified on the blockchain, the transaction must match the wallet’s private key which allows the transaction to proceed.
The private keys in a crypto digital wallet are analogous to passwords that are needed to confirm or sign a transaction. A private key is a way to “prove” that you are the owner of the wallet. Once matched to the public key, the private key decrypts the transaction and places it in your wallet. It’s important to note that your private keys are never visible on the blockchain.
In order for a transaction to process successfully and be placed on the blockchain, it needs to be signed. That is where the interaction of the public and private keys take place. The way a transaction is signed is as follows:
A transaction is encrypted with a public key
The transaction is then signed by the private key, which proves that the transaction is legitimate and hasn’t been modified
A private key is then used to decrypt the transaction
A digital signature is then created with a combination of the private key and the data associated with the transaction
The transaction is then verified by Nodes on the blockchain network whose job is to verify the transaction and all others like it
Once a transaction is verified and authenticated, it is then stored on the blockchain and is irreversible
Here’s what that looks like visually.
Here’s a great video that explains this concept further.
So, how did I get hacked? It’s simple.
By connecting my wallet to that fake minting site, I gave full access to my wallet, including my public and private keys. The scammers had access to do whatever they wanted with the contents of my wallet.
What are the lessons here?
First, there is absolutely no one to blame but me for what happened. I fell for a scam that appealed to my interests. It seemed to pass the initial sniff test, albeit a very brief sniff and looked legitimate. I took the bait, hook-line-and-sinker. A two-second Google search would have revealed that this was a scam – but I wanted it to be true. I acted recklessly and connected my wallet to a website that I did not triple-check its validity – the cardinal sin in crypto.
Second, with any nascent and new technology, there will be bad actors. We saw this with the dawn of the internet with email scams and it still continues today with phishing hacks and the like. Bad actors will exploit those that fall for their scam, but that shouldn’t taint progress. These scams will happen from time to time and are part of the technology landscape. Which is no different for Web3.
So, how does my mistake relate to healthcare and Web3?
Healthcare Data Security in a Web3 World
This experience is a perfect illustration of the seamless nature of Web3, its speed, and transparency, but also the gaps that exist in securing wallets and the assets that reside in them.
If Web3 is going to have an impact on healthcare where data security is paramount, we’ve got a lot of room for improvement ahead of us.
So, how do we bridge the current reality of easily hacked Web3 wallets to one that supports the complexities of storing private health information?
The answer is, unfortunately, not as elegant or exciting as you may want to hear. The answer is time.
As with all new technologies, at the early stages, there is a tradeoff between adoption, usability, and security. That doesn’t mean that today’s digital wallets are flawed. It’s just early. There will be better security protocols that will allow us to secure wallets that hold our private health information much better than we currently can in a Web3 world.
Similar to a “real-world” wallet, I think the digital wallet of the future will have various slots for different types of transactions. In the “real-world”, we use different credit cards for different types of purchases (e.g., groceries, travel) to maximize the points we earn. We may use an HSA card to pay for our health-related expenses
In the Web3 world, we also make a decision on which “card” to “connect” to a third party. I see a world where each slot or card will have a purpose. Our digital wallets must include the ability to connect only the “healthcare” portion of our wallets to a set of whitelisted wallets, pharmacies, providers, etc. that we’ve verified.
The solution to a more secure Web3 experience that can store private health information is a combination of time, technological advances, and common sense.
Bringing it home
I eventually did that two-second Google search (after my wallet was emptied). Turns out that the Twitter account was in fact verified and Ally was a real person. However, she was definitely not a co-founder of Yuga Labs, the creator of the Mutant and Bored Ape NFT franchises. She is an accomplished paratriathlete, whose Twitter account had been hacked. All of her recent tweets had been deleted and replaced with NFT and Bored Ape-related content. The perfect scam.
Yes, it was a painful and expensive experience, but one that I learned from.
Often in life, experience is the best, but also the most expensive, teacher.
Yes, the world of crypto and Web3 has a lot to improve on when it comes to security and data protection. But, it’s not worth discounting the massive upside potential of the technology based on the seemingly frequent occurrence of hacks. It’s part of the maturation cycle of the technology.
The current speed of Web3 adoption and technological advances mean that we will solve the data security and hacking issues relatively quickly. In the meantime, with a bit more common sense, diligence, and without losing our appetite for risk, we will continue to push forward into the brave new world full of promise that is Web3.
TLDR: Health Insurance DAOs are a way to decouple Health Insurance coverage from employment, provide members more customized coverage options while developing a network of communities.
Just like much of healthcare, Health insurance is broken.
Health insurance today is anything but seamless. Patients face tight enrollment windows, the hassle of obtaining pre-authorizations and being limited to a network of providers. Not to mention the challenges of reimbursement for care and ensuing battles for when already-delivered care is denied.
The current model for health insurance coverage is often coupled with employment. Plans come in various flavors of coverage with deductible ranges, coinsurance cost-sharing, and stipulations for seeking care. Coverage options are usually limited to a few choices hand-picked by an organization’s insurance broker.
How these plans are paid for can be complicated. Your employer pays the majority of the monthly premiums while you cover your smaller share. It’s a model that’s become the norm but leaves patients with limited choices. If you decide to leave your employer, you lose your current insurance coverage. You’ll need to re-enroll in a new plan either with your new employer or seek out a plan on an exchange.
It’s no wonder that Net Promoter Scores for Health Insurance providers were a dismal average of 20 out of 100 in 2020, and for some fell as low as -1.
But what if there was another way?
It’s time to decouple health insurance from employment. It’s time to think of coverage, as a community of members who have more choice, flexibility, portability, transparency, and ultimately lower cost to the patient.
It’s time to rethink the concept of health insurance through the lens of Web3.
Enter the DAO
DAOs, or Decentralized Autonomous Organizations, are organizations run by their members. Members vote on initiatives and make decisions on how the DAO operates. Think of them as the democratization of a corporation in which shareholders have complete control, and each of them has a say. It’s the Web3 version of the LLC.
So how does this all work?
I’ve been dabbling a bit with NFTs, with mostly disappointing results, except for one.
At the beginning of 2022, I purchased a Leisure Membership NFT in LinksDAO. I was fortunate to be on the whitelist for the initial mint, which allowed me to buy the NFT before the next day’s public sale. It was a concept that intrigued me and brought together two of my interests – golf and Web3.
It’s a fascinating story, much of which is still to be written, but the summary is as follows.
LinksDAO is a DAO of like-minded individuals who came together to purchase a golf course. Not just any golf course, but one of the top 100 in the world. Membership in the DAO is based on the ownership of an NFT, which was sold as a way for the DAO to raise capital. Capital that will be used to purchase the course. The total money raised by the initial mint was $11.5MM, a tidy sum for a newly formed entity in a nascent concept.
How is this different from other organizations?
Well, from idea inception to NFT mint, it took a total of 14 days and brought together a community that was non-existent just days before. That’s the speed of Web3 and the power of community.
LinksDAO is more than just a novel way to raise funds. It’s a community of 15,000 members who backed a cause they were passionate about. We/they did it in a way that allowed us to have a say on the strategic direction of the DAO. With no central authority.
Yes, there are, what could be called administrators that did the initial legwork to get the DAO setup. But for all intents and purposes, the DAO is decentralized.
One example is a recent vote by members on a potential charity initiative. With secondary sales of LinksDAO NFTs, a royalty is earned by the DAO. It’s a single-digit percent earned on each secondary sale and a way for the DAO or NFT creator to earn a perpetual recurring revenue stream.
A proposal was put up to a vote whether or not to donate all proceeds from secondary sales to a specific charity. Not surprisingly, the vote passed unanimously by a fully engaged and excited community within a few hours
Ok, great, but how does this apply to healthcare?
Health Insurance DAOs
It’s a novel way to think about insurance coverage. It’s all there – capital, members, networks, and communities.
Let’s walk through what this could look like for health insurance.
A Health Insurance DAO can be formed to provide insurance coverage to patients under the care of a “network” of providers. The DAO can create an NFT that provides buyers access to the network as members. With that access, members can purchase coverage based on their healthcare needs.
The NFT can hold each member’s plan coverage information and benefit details. Those details are stored securely on the blockchain. The sale of those NFT purchases funds a treasury to cover the cost of care for the community.
Members of the DAO can choose from a variety of coverage options based on their predicted use of care. You can tailor your coverage to your healthcare needs. The coverage you chose could also flex with your life stages. Single and healthy? There’s a plan for you. Getting ready to start a family? The DAOs got you covered. No longer will you pay premiums for the care you don’t need or use.
The Health Insurance DAO could further be divided into various Risk Pools or tranches that could be customized by use, demographics, or other risk-based factors. This customization would allow not only for more predictable usage measurement and prediction but also build and strengthen the community within that tranche of members.
When care is rendered to a member of the community, the Health Insurance DAOs treasury picks up the cost based on the coverage chosen. A seamless, transparent, and frictionless reimagining of health insurance coverage built around community, rather than corporations.
What does this all look like in practice?
A New Hope
Derive.Health is decentralized health insurance. The organization utilizes the DAO framework to build a health insurance network that allows its members to design coverage plans and vote on coverage options while being incentivized by their token $DERIV.
Derive is leveraging the 100-year-old model of health share plans but adding a Web3 lens to an already proven concept. It’s not a new idea, but we now have the tools to democratize, incentivize, and drive change in the healthcare space for the first time.
It’s a perfect illustration of many of the components of Web3 coming together to change the way we view healthcare coverage.
Bringing it Home
Healthcare needs help and a fresh look at the components that make up the life cycle of care. Health Insurance is a massive component of Healthcare decision-making on how, who, and when care is provided and received. By decentralizing health insurance coverage via Health Insurance DAOs, we have an opportunity to align incentives, decouple coverage from employment and ultimately drive down the cost of care.
The tools and frameworks born out of Web3 might just be the way to do that.
TLDR: Web3 can take much of the friction out of healthcare as it exists today, including solving the interoperability and data portability challenges within healthcare. But is it hope or hype?
What do you think of when you hear Web3?
For some, it’s the missed opportunity of “investing” in JPEGs that are now worth millions. To others, it’s another momentary trend that’s likely to fizzle out like the many that came before. But what if that wasn’t the case? What if Web3 is more than just trendy digital art? What if it could change the way healthcare is delivered, managed, and paid for?
Web3, as defined by Packy McCormick, the Web3 and Startup Strategist, is, “the internet owned by the builders and users, orchestrated with tokens.”
But what about Web1 and Web2? What happened to them? I will let Chris Dixon provide an overview of the timeline that brought us to Web3.
Let’s dig deeper into how Web3 could impact healthcare.
To understand Web3, we need to start with the infrastructure, or “internet” layer. For that, we need to get a basic understanding of the blockchain:
The blockchain was born as part of the Bitcoin white paper written by its pseudonymous creator, Satoshi Nakamoto. A blockchain is a decentralized database or ledger of records, that are grouped together in blocks and secured by cryptography.
Each block contains a cryptographic hash, a timestamp, and the transaction data of the previous block. This creates an immutable ledger that cannot be altered. With each block added, the chain becomes more secure. Check out this video to learn more about the blockchain.
What makes a blockchain appealing for healthcare data is its inherent privacy and security. Keeping private health data secure is the highest priority for patients and healthcare providers alike, and the blockchain can do that. With the increased frequency of data breaches, the promise of the blockchain’s privacy is both appealing and needed more than ever.
But how does this all work, practically?
Healthcare in a Web3 World
Let’s use a hypothetical real-world example.
Patient Joe needs to visit his PCP, so he jumps on ZocDoc and schedules a visit to his local Provider.
Being the early adopter that Joe is, he has already downloaded a crypto wallet that he has been using to HODL his Ethereum tokens. That wallet also has the ability to store data and interact with the blockchain.
When he schedules his appointment, he provides his blockchain public key to the Provider. This connects the Provider to Joe’s wallet where he has his PHI for all previous healthcare transactions. Joe decides what he shares with the PCP, if anything.
After the visit, the prescriptions, notes, tests, and other data obtained during Joe’s visit are sent via an API to his wallet. They are then verified on the blockchain as transactions and stored securely.
This process repeats every time Joe visits any Provider and receives care. Joe chooses what to share and with whom. Joe is in control of his healthcare data and he carries it with him in his wallet wherever he goes. The true definitions of interoperability and portability.
So what does this have to do with Web3? Blockchain is the backbone infrastructure that drives much of Web3. It’s the “internet” on which everything else will be built:
It is the internet of Private Healthcare Information, owned by Joe, and only Joe.
That’s the internet part of Web3. But what about tokens?
I really admire Jack Butcher’s work. The illustration below is a very clear way to visually describe what an NFT is.
NFTs, or non-fungible tokens, are a non-interchangeable unit of data stored on the blockchain. Think of them as a piece of data, like a certificate of authenticity stored on the blockchain that is verified and complete. They’re unique digital assets, which is where the non-fungible part comes in.
NFTs are still in the early days. Yes, the current rage is digital assets like Cryptopunks selling for millions of dollars, but that’s just the start of potential use cases.
Most of us use health insurance for our medical expenses. That insurance is often provided by our employers, who cover the majority of the cost. We pay our part to be “insured”, including the premiums, coinsurance, copays, and deductibles.
When you get insurance coverage, you are issued a health insurance card. That little white plastic card is our key to unlocking access to a slew of providers, as long as they are in-network, of course.
But what if that card was an NFT that unlocked all sorts of healthcare Web3 glory?
Imagine if instead of that plastic insurance card, you were issued an NFT. A one of a kind digital asset that was specifically for you, the token holder. Recall the finger-print visual above.
That NFT would be listed on the blockchain and would be an immutable record of your insurance coverage. A record stored in your wallet and shared with Providers and other healthcare organizations of your choosing. We can call it your “Proof-of-Coverage.”
Let’s take it one step further.
Healthcare NFTs – Proof-of-Coverage
All health insurance coverage comes with varying levels of coverage and exclusions for things like emergencies, wellness visits, prescriptions, etc. Often we don’t know whether a service will be covered until we get the bill, which can take up several months to arrive.
Web3 can change that.
All of your coverage would live on the blockchain. Your insurance card NFT gets you access to the Providers of your choice, all pre-verified.
Let’s see how this process could practically work.
The patient schedules her visit. She connects her wallet to the Provider’s portal. A query is sent from the Provider to her wallet to verify that she has coverage for the service. She arrives at her appointment. The Provider provides care, and then she is free to go. There is no checkout procedure. There is no bill mailed to her house. No fighting denials or calling for claim status.
When the Patient checked in for the visit, a smart contract was automatically created for the service needed. It included the charge, any out-of-pocket amounts, etc. All automatic, all seamless.
Once the service is rendered, the smart contract is triggered and the appropriate payments made. The patient responsibility portion of the bill was paid by a pre-funded HSA that lives inside your wallet. As simple as that.
We’ve covered the blockchain, how NFTs can be used to unlock health coverage, but why would you want to? What’s in it for you?
Let’s talk about tokens.
There are thousands of tokens out there, but one of the most used and adopted is ETH, or Ether, which is the transactional token that facilitates the Ethereum network. Think of it as the gas that drives the network (pun intended).
Tokens are incentives. They attract people to support or use the “network” that you’ve created. See where I’m going with this?
Shyro Health is a way for individuals – including you and me – to earn tokens in exchange for providing health data. By providing fitness data from your Apple Watch, for example, you will earn a yet-to-be-named token.
So why do this?
Community: you’re joining a group of like-minded people looking to dive into the world of Web3 and healthcare.
Rewards – by providing and sharing your data you can earn rewards and discounts. For example, your monthly Peloton fee could be paid for by Shyro in exchange for Peloton connecting to their healthcare data API.
Token appreciation – Doge to the moon! need I say more?
Another exciting, and still early use case for NFTs in Healthcare is the development and research opportunities.
Let’s say you “mint” your health information on an NFT, it automatically becomes an edition of one. Not just because it’s a rare NFT, which by definition is unique, but because it’s you. There is only one of you and there is only one NFT of your healthcare data.
That extremely rare healthcare data NFT can be used, with your permission, to license to Pharmaceutical companies for their research and development process. They now have access to a trove of actionable data that is unique, personalized, and secure. Think of the potentials for drug development or biotech research. The possibilities are endless.
One of the great features of NFTs is they are easy to monetize. As the holder of an NFT you can set it up so each time your healthcare data is utilized, you receive a royalty. You’ve just effectively created a recurring revenue stream for yourself, of yourself. Now, that’s Meta!
Bringing it home
We started this journey into the intersection of Web3 and healthcare with a definition.
Web3 is “the internet owned by the builders and users, orchestrated with tokens.”
Healthcare is challenging. From the way care is delivered, the patient experience to how it’s reimbursed, it’s all broken in one way or another. Web3 can take much of the friction out of Healthcare as it exists today.
Web3 will help solve the interoperability and data portability challenges within healthcare with the use of wallets. The blockchain can help mitigate data breaches by storing private health information securely. NFTs and DAOs (that’s for another day) will change the way we think about health insurance, provider networks, and other healthcare communities.
Yes, Web3 is buzzy right now, but I’m super excited to see where this all goes.
The future of healthcare is a white space for Web3 to have a long-term impact that goes beyond hype. Is the hope for the industry? We will have to wait and see how it all plays out.