Using Blockchain will create resilient health, economic and social future
History rhymes during the crisis.
- Venice, a major 15th-century commercial hub knew that quarantining (from Italian: Quaranta giorni or 40 days), plague-stricken people on the Island of Lazzaretto Vecchio, was the only way to allow the economy to survive the Black Death.
- Dr. Tuttle (the Dr. Fauci of 1918) experienced during the Spanish Flu, the same resistance to his calls for social distancing, even though President Wilson was sickened by it and forgone his post World War I negotiations.
- September 11th was a single day that exposed the frailty of homeland security, but our daily habits didn’t shift, except at airports.
- The 2008 financial crisis uncovered the limitations of the banking industry and maybe caused by the rise of Bitcoin, but capitalism didn’t change.
But this crisis is different.
COVID-19 is a global biological threat that exposed significant weaknesses in our healthcare, economic, and social systems. Everyone together has to change in order to deal with it.
Blockchain can help with this change by promoting (1) transparency, (2) tokens, and (3) trust.
#1: Blockchain can track our tax-payer bailout (transparency)
The direct medical cost of the acute infection of COVID-19 in the U.S. is estimated to be between $214.5 billion (if 20% of the population gets infected) to $654 billion (if 80% of the population gets infected). These costs (around $3500-$14,000 per patient) do not include professional fees, follow-up care, and long-term disability.
Yet, while more than $175 billion in taxpayer bailout have been already sent to hospitals, who by the way do not have to repay these funds, (HCA Healthcare $700M, Community Health Systems $245M, Banner Health $200M and Mayo Clinic $150 M), small doctor groups, rural providers and safety-net facilities that treat a higher proportion of vulnerable patients, are not getting funded enough.
Doctors are reporting revenues falling anywhere from 50% to 90% and the Primary Care Collaborative survey shows that close to half of physicians are unsure if they have enough cash to keep their practices open, 42% have experienced layoffs, and furloughed staff, and predict closure within 4 weeks. Close to one-fifth of physicians are applying for SBA loans and in the long-term, the COVID-19 pandemic could be encouraging doctors to retire, close their practices, or opt-out of patient care altogether.
The main problem is that there is no transparent, auditable and fair mechanism to track where our bailout money is flowing. Blockchain can fix this.
#2 Blockchain can introduce incentives when assessing economic risk (tokens)
Already a quarter of us knows someone who is ‘COVID positive’ and 1 in 8 knows someone who died from the virus. Together with quarantine fatigue and a grief tsunami, fear from financial collapse remains at all-time high.
Without incentives to encourage responsible public health behavior (like social distancing or wearing a mask), assessing the pandemic threat, trusting government policies and following them remains highly partisan (below).
Therefore recently the Army Research Office (ARO) launched a multi-university research initiative using game theory to examine the impact of incentivizes on behavioral collaboration among individuals, local governments, state governments, and nations, in the context of the COVID-19 pandemic.
Blockchain is not only a distributed data structure, but through tokens is an economic way to incentive us to adhere to public policies.
#3: Computational trust using Blockchain can serve the global community (truth)
Trust in public institutions and in science is key to global public health. This speaks to a deep fundamental human need to find rationality and truth during uncertainty, especially since there will be future pandemic waves, which might never peak.
So on one hand, we are nearing a Great Depression-era unemployment rate shaking our beliefs in the virtues of the gig economy, silicon valley, and employment system, and on the other hand witnessing enormous profits of select companies and debt hedge funds, following the $6 trillion quantitative easings of the Federal Reserve. Not only do these aggressive policies risk debasing the dollar, but they create a moral hazard, where investors have incentives to take risks that somebody else (you) will pay for (sounds familiar?).
COVID-19 has not only crashed the ‘just-in-time’ global supply chain and ‘sharing’ economy but revealed huge holes in our social fabric. These economic and social inefficiencies may result in 4 distinct scenarios (below, for details see here), namely:
(1) The passing storm: with the increasingly effective health system and political response, the virus is eradicated due to coordinated best practices. Fiscal and monetary stimulus help, but cannot reverse the losses that small businesses and lower- and middle-income individuals and countries experience.
(2) Good company: the growing burden on governments creates a surge of public-private partnerships. Social media, platform, and tech companies gain, and the economy shifts further towards “stakeholder capitalism”. Income inequality deepens.
(3) Sunrise in the East: China and other East Asian countries manage the disease more effectively, whereas Western nations struggle with deep and lasting human, social, and economic impacts. The ability of China, Taiwan, and South Korea to contain the outbreak through strong, centralized government response becomes the “gold standard.”
(4) Lone wolves: A prolonged pandemic causes mounting deaths, social unrest, and economic free-fall. Nations put strict controls on foreigners and force supply chains home, in the name of local security. Countries grow isolationist in the name of domestic safety and Government surveillance is commonplace, where tech monitors people and their movements.
The distributed and decentralized nature of Blockchain can accelerate multi-lateral collaboration by improving system response (computational trust), dampen economic costs (trace) and increase social trust (transparency).
Final Thoughts: Resilience = Capacity + Capability
This week I was quoted on Calcalist saying:
“…First of all, we are not going to return to normal because normal is what caused us to be in this predicament in the first place… People understand that they need to change, so when people ask me ‘oh Dr. Cahana, what has changed since Covid-19?’ they expect me to say ‘I’m working remotely and I’m not eating out’, but that is not what really has changed. What changed to me is that now people who have not been interested in what I’ve been doing in the last five or six years are suddenly calling and saying maybe there is something to what you are doing. Maybe there is something to this way of looking at life that can help us design a new economic model, a new way of interacting between us and a new way to do business…”
This pandemic has pushed Blockchain forward not just because it strengthens supply chains, helps deploy resources where they are most needed, or solves problems in sharing data. Blockchain is important because it allows us to increase our human and system capacity (time to survive) and capability (time to recover) by redesigning our economy.
Or in the words of Amartya Sen, the 1998 Nobel Prize winner in Economics and father of the Capability approach:
Poverty is not just a lack of money… it is not having the capability to realize one’s full potential as a human being.
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With COVID-19 We Need to Re-Make the World, Not Re-Cover from it: Transparency, Trust and Tokens was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.