Reserves. Something not needed for immediate use but available if
required, or the act of keeping back something today for future use or
for a special purpose.
Also construed to be a form of purposeful rationing. A form of risk management. A form of operational smoothing.
Are reserves expensive? Of course they are. The flip-side to any reserve is the wastage associated with not using stocks in time before they spoil or depreciate. Reserves are inherently costly. But, as the story of Joseph and the pharaoh teaches us, they’re also essential for sound economic planning in systems exposed to unexpected externalities.
In the blockchain world however reserves are an abomination. Channelling banking theory, the view is that the larger the reserve system, the bigger the opportunity cost, thus the smaller the reserve the more efficient the system. Zero reserves are the ideal.
But whilst zero reserve systems just about work in the banking world (and that’s a very questionable assumption), it’s fair to say they only do so because their continuous circulation is made possible by their virtual form. Fungible money claims on real-world resources can be swiftly redeployed to those with needs and a capacity to pay-back that which they have borrowed.
The same, however, cannot be said of the real world of physical reserves and resources — especially in strategic industries — where space and time bottlenecks can get in the way of supply security. Chances are, if you diminish the national reserve stock on the assumption emergency supplies can always be bought in, you will expose yourself to risk.
In the world of blood reserve management specifically that space and time dimension can turn into the difference between life and death.
Please bear that point in mind whilst reading through the latest blockchain spin (with some un-spinning additions from FT Alphaville in blood red) from the University of Edinburgh about how a distributed ledger can diminish the overall amount of blood stock the national health system needs to get by:
Does it make sense to have reserves of AB- deployed on a continuous inter-hospital basis just to diminish blood reserve wastage? Lower reserves would make the system as a whole more vulnerable to shortages. And while the Bank of England can easily create additional reserves when banks need them, it’s hard to see how any institution could do the same for human blood.
Does it really make sense for institutions — especially in strategic locations — to make their inventory available for inter-hospital use, if the cost is their own security and resilience?
Do people donating blood mind if their blood goes to waste anyway? Or is it simply assumed that that’s the whole point of a blood donation? It could save a life, but then again it might not.
Does the capital saved on additional blood collection and storage offset the additional capital spent on keeping ambulances on standby for ferrying that blood from place to place?
Even if, after all that, the answer is yes: what works for banks can also work for blood, why would a consolidated system like the NHS — operating under a single set of rules and parameters — require anything other than a central database to efficiently distribute surpluses to deficit areas? A blockchain is unlikely to be any better at prioritising and ordering claims in a shortage scenario than a centralised ledger, especially when the only bartering currency is time and severity of need.
When you’re done contemplating that, we’d urge you to check out the following Forbes article from 2012, which tells the story of US company General Blood (now Hema Vista) and how it turned altruistic blood donation into a $4.5bn for-profit commodity trading business, whilst also putting a price on human blood.
Some might say that was a logical market-based solution (not requiring a blockchain) for an imbalanced blood market in a competing network of private hospitals. Others might add that as long as profits are passed back to those supplying the blood — perhaps on a revenue-sharing model — it’s a fair non-exploitative exchange.
And then there are those who might question the ethics of a just-in-time “for profit” blood market in general, whilst also pointing out that blood you have to pay for tends to be the worst quality blood of all.
Since the logical progression after that is an Uber for blood delivery, complete with surcharges for delivery during peak “crisis” periods, premiums for healthy donors and discounts for universal donor grades, we’ll leave it there.
Also construed to be a form of purposeful rationing. A form of risk management. A form of operational smoothing.
Are reserves expensive? Of course they are. The flip-side to any reserve is the wastage associated with not using stocks in time before they spoil or depreciate. Reserves are inherently costly. But, as the story of Joseph and the pharaoh teaches us, they’re also essential for sound economic planning in systems exposed to unexpected externalities.
In the blockchain world however reserves are an abomination. Channelling banking theory, the view is that the larger the reserve system, the bigger the opportunity cost, thus the smaller the reserve the more efficient the system. Zero reserves are the ideal.
But whilst zero reserve systems just about work in the banking world (and that’s a very questionable assumption), it’s fair to say they only do so because their continuous circulation is made possible by their virtual form. Fungible money claims on real-world resources can be swiftly redeployed to those with needs and a capacity to pay-back that which they have borrowed.
The same, however, cannot be said of the real world of physical reserves and resources — especially in strategic industries — where space and time bottlenecks can get in the way of supply security. Chances are, if you diminish the national reserve stock on the assumption emergency supplies can always be bought in, you will expose yourself to risk.
In the world of blood reserve management specifically that space and time dimension can turn into the difference between life and death.
Please bear that point in mind whilst reading through the latest blockchain spin (with some un-spinning additions from FT Alphaville in blood red) from the University of Edinburgh about how a distributed ledger can diminish the overall amount of blood stock the national health system needs to get by:
[An entirely theoretical] Edinburgh student innovation could [but has not yet] save[d] NHS £ millions in lost blood.We ourselves would be curious to know what the health professionals think and note their opinion is missing from the press release. That the Bank of England endorses a monetary-style liquidity management system for the nation’s blood reserves, meanwhile, is hardly surprising. It does, however, make us wonder whether what works in banking (with questionable success, mind you) can also work in the world of blood reserves.
A pioneering new approach to blood bank management developed by students at University of Edinburgh Business School [but never trialled in the real world of messy complex NHS bureaucracies, health and safety concerns] could save the NHS £ millions each year.
The team used the ‘Blockchain’ technology – which electronically shares and verifies data between individuals without an intermediary [but has as yet not been successfully trialled at scale anywhere without massive additional clearing expense] to create a new, more efficient [in their compartmentalised business view of the world] model of blood transfers between hospitals.
Around 45,000 red blood cell and 9,000 platelet units are lost each year when they expire. At around £180 per unit, this could be costing the NHS up to £10 million annually.
Red Blood Cells are crucial for blood transfusions, while platelets are key to the treatment of cancer, leukaemia and blood disorders. The NHS currently has a voluntary system to log blood supplies, however close to a third of hospitals don’t participate — [but why don't they participate? Could there be ethical issues, or that some carry strategic supplies?] Using the smart system, hospitals in need of blood could automatically request stocks from nearby healthcare facilities, electronically and in split seconds, without the need for manual intervention [leaving those hospitals redeploying their surpluses, in the style of bank reserves, suddenly exposed to unexpected deficits, and in turn the entire NHS system operating with such a minuscule blood reserve the system that an emergency situation could never be catered to].
The innovation came about through a recent Bank of England [which has always enjoyed a zero-reserve system of its own] competition to find uses for Blockchain that would benefit society.
Dr Malcolm Kirkup, Director of Educational Innovation at University of Edinburgh Business School, said: “Winning the Bank of England competition is undoubtedly a fantastic achievement. But the inventiveness our students have shown in developing this new model could lead to an even greater accomplishment in the future.
“The creativity they have displayed in addressing this challenge is incredible, and in this new model they really have the potential to make a hugely positive impact on healthcare in the UK.
["Have any of them worked in hospitals or in the emergence services? I'm not sure, but if they did we didn't think it was important to stress that fact in this press release," he did not add.]
“Their approach to the challenge is a testament to the benefits of the innovative learning environment we are dedicated to creating here at University of Edinburgh Business School.
The smart system could also use data on different hospitals’ usage to anticipate periods of high demand and ensure supplies don’t run too high or low [just like in the style of central bank liquidity and float management].
Rob Elsey, Chief Information Officer, Bank of England, said “We ran this competition to find students with strong ideas on how to leverage new technologies and tap in to the potential of Blockchain technology, in the essence of making a positive difference to society.
Our mission at the Bank is clear, to maintain financial and monetary stability for everyone in the UK and the Technology Division of the Bank works to research and exploit the latest technologies to continually improve our ability to deliver that mission.
“George, Sam, Ilya and Shuai’s idea to apply the technology to the NHS blood supply system really captured the essence of the competition and we’re delighted to offer them internships within Technology here at the Bank. It’s an exciting time of technological change and advancement and I am confident their creative ideas and different insights will be of benefit to the team in support of the Bank’s mission.”
Winning students, George Kassis, Sam Howarth, Ilya Strelkov and Shuai Zeng now hope to develop the model further and present it to the NHS’ Blood and Transport Service. The group will also join the Bank of England’s technical team for an internship in summer 2016.
Does it make sense to have reserves of AB- deployed on a continuous inter-hospital basis just to diminish blood reserve wastage? Lower reserves would make the system as a whole more vulnerable to shortages. And while the Bank of England can easily create additional reserves when banks need them, it’s hard to see how any institution could do the same for human blood.
Does it really make sense for institutions — especially in strategic locations — to make their inventory available for inter-hospital use, if the cost is their own security and resilience?
Do people donating blood mind if their blood goes to waste anyway? Or is it simply assumed that that’s the whole point of a blood donation? It could save a life, but then again it might not.
Does the capital saved on additional blood collection and storage offset the additional capital spent on keeping ambulances on standby for ferrying that blood from place to place?
Even if, after all that, the answer is yes: what works for banks can also work for blood, why would a consolidated system like the NHS — operating under a single set of rules and parameters — require anything other than a central database to efficiently distribute surpluses to deficit areas? A blockchain is unlikely to be any better at prioritising and ordering claims in a shortage scenario than a centralised ledger, especially when the only bartering currency is time and severity of need.
When you’re done contemplating that, we’d urge you to check out the following Forbes article from 2012, which tells the story of US company General Blood (now Hema Vista) and how it turned altruistic blood donation into a $4.5bn for-profit commodity trading business, whilst also putting a price on human blood.
Some might say that was a logical market-based solution (not requiring a blockchain) for an imbalanced blood market in a competing network of private hospitals. Others might add that as long as profits are passed back to those supplying the blood — perhaps on a revenue-sharing model — it’s a fair non-exploitative exchange.
And then there are those who might question the ethics of a just-in-time “for profit” blood market in general, whilst also pointing out that blood you have to pay for tends to be the worst quality blood of all.
Since the logical progression after that is an Uber for blood delivery, complete with surcharges for delivery during peak “crisis” periods, premiums for healthy donors and discounts for universal donor grades, we’ll leave it there.
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