Ver 1.1

Celebrating the 10th Year Anniversary of

Bitcoin Genesis – the First Bitcoin Block

GenomeChain Inc.

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Table of contents

1. Blockchain’s limitations as to the truth of data ........................................................................... 8

2. GeNome Colored Coin ..................................................................................................................... 11

2.1 Selection of genome SNP set and their number................................................................. 14

2.2 Number of SNPs and distinctiveness ..................................................................................... 14

2.3 Gene coloring ............................................................................................................................. 15

2.4 Colored coin’s client app and full-node server ................................................................... 16

2.5 Limited issue of celebrity’s genome tokens ......................................................................... 17

2.6 Genome coloring; Unique identification of agricultural and fisheries products ......... 17

2.7 Encoding genome-wide hash value and family finding service ....................................... 18

3. Coin generation ................................................................................................................................ 20

3.1 Taking a snapshot of bitcoin UTXO ........................................................................................ 24

3.2 Raising a claim for GNC ............................................................................................................ 25

3.3 Lost coins ..................................................................................................................................... 25

3.4 Coin burning ............................................................................................................................... 26

3.5 Use of GENOMECHAIN-held coins ......................................................................................... 26

4. GNC Blockchain ................................................................................................................................. 28

4.1 Private blockchain - incubating .............................................................................................. 30

4.2 Delegated mining ...................................................................................................................... 31

4.3 Public opening ............................................................................................................................ 32

5. Developments in genome industry ............................................................................................ 33

5.1 Changes in the regulatory environment ............................................................................... 36

5.2 Genome sequencing cost ........................................................................................................ 38

5.3 Concerns over data security .................................................................................................... 38

6. Using genetic data to promote social goals and a shared economy platform .................... 40

6.1 Data sovereignty and free sequencing ................................................................................. 41

6.2 Data security ............................................................................................................................... 42

6.3 Information expansion and service offering ........................................................................ 44

6.3.1 Proactive management of potential diseases .................................................................. 44

6.3.2 Personalized diet .................................................................................................................... 45

6.3.3 Personalized exercise planning ........................................................................................... 46

6.3.4 Genome-based social network ........................................................................................... 47

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6.4 Growth of the ecosystem ........................................................................................................ 48

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Executive summary

Blockchain is a technological solution that guarantees the authenticity of records. On the

premise that its nodes are sufficiently distributed, a blockchain is immutable and protects data

from human errors and selfish greed. Blockchain is fueling high expectations that it will bring

significant change to food safety. Across the world, 400,000 people are dying every year from

management failure within the food supply chain. Transparency in the global agricultural and

fisheries supply chain, from production to consumer, will drastically reduce loss and raise

credibility, thus creating more business opportunities.

The authenticity of a blockchain record does not verify the underlying accuracy or truth of

the data it records. This first-mile issue is the Achilles heel of blockchain technology. If false

records are uploaded to a blockchain, they cannot be removed and, decisions and

authentications based upon them will be false. For agricultural and fisheries data, blockchain

presupposes trust in farmers and fishermen and yet blockchain is not a complete solution for

distrusting farmers and fisherman. Genome can be the ultimate solution that verifies the truth

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of data on organisms. Genome verifies variety, breed, place of origin, or mutation. Growing

genome data increases the number and accuracy of identification variables and subsequently

decreases the cost of storing and utilizing genetic data on a blockchain platform. The colored

coin is a type of commemorative coin created by encoding intelligible texts on bitcoin UTXO

which can then be used as a security or a coupon. Colored coins can be encoded with genome

data of agricultural or fisheries products and can be distributed along the global supply chain.

Eliminating the trust issue associated with the production and distribution of agricultural

products, by leveraging immutability of blockchain, will create a new mega industry combining

distribution and finance.

The increased penetration of smartphones into the third world is expected to bring the

global supply chain to 3 billion more global citizens. The biggest impediment in their

participation, as producers or consumers, has been their limited access to financial services.

Creating genome-based global identification has great potential for addressing this issue and

spurring the expansion of global supply chain finance. Genome identification for humans can

be created using the same colored coins, encoded with selected human genome data related

to physical characteristics. Immutability of genome data encoded on colored coins creates

“trust” in the data. Since only the owner of a colored coin can retrieve or transfer stored data,

using an app, the owner’s identification can be verified objectively by a third party. The third

party can view displayed genome data related to physical traits such as hair color, race, height,

gender and iris color and can compare them to the owner’s actual physical characteristics.

Genome data is also facilitating a new trend in modern medicine: precision medicine that

shifts focus from treatment to prediction and prevention. It is pushing the boundaries of

medicine into disease prevention and lifestyle management, as the data gathered enables a

wide array of life-enriching services including disease prediction and prevention, new drug

development, ancestry services, daily routine improvements, and career advice. New

industries are emerging accordingly. In particular, genome-based ecosystems focused on

providing information on the risks of certain diseases, and optimal lifestyle recommendations

are growing fast. However, with genome data being multi-faceted, operators face burdensome

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and ambiguous regulation. Some argue that genome data needs to be strictly classified as

personal information, as they are the most sensitive private information and can be abused in

many ways when leaked. Others argue that determining to what extent individuals need to be

informed of their medical information is in the realm of medical ethics and that experts should

manage genome data. Regulatory uncertainty and low awareness within society are in the

way of burgeoning genome-related businesses. However, these two groups can meet halfway

using a blockchain: the owner will have control over their genome data, whereas they need

to obtain consent from experts in order to access or use medically sensitive information. On

a blockchain platform, rights to access encrypted genome data will be shared between

individuals and the platform and data can be decrypted only with consent from both parties.

The GeNomeCoin project generates genome coins (hereunder “GNC”) to promote the use

of genome data for society by creating a genome-based shared economy platform. The shared

economy ecosystem will help secure vast amounts of genome data, which will be utilized to

accelerate advances in medical and science technologies and industrial development. Based

on transparency, a key property of blockchain, individuals will be rewarded every time their

genome data is used and be assured that their genome data will not be abused or accessed

without their consent. Once meaningful amounts of genome data are collected, various

sectors can come together to create a genome-based ecosystem. The ecosystem will attract

both consumers offering their genome data and organizations from food, cosmetics, insurance,

pharmaceuticals, medicine, research, and other areas.

In the early days of the ecosystem, the coin issuer plays a vital role in distributing coins to

reward those who contribute to our social goal of promoting the use of genome data for the

public interest. For example, patients with certain diseases need to be rewarded if they

volunteer to share their genome data. GNC will be generated by taking a snapshot of bitcoin

UTXO. GNC that are paired to lost bitcoins will be collected into a pool and used to reward

social goal contributors. GNC is generated through the uncommon approach of “snapshot”

because the bitcoin ecosystem and bitcoin holders have proven value which can act as the

underlying asset of the derivative GNC. Bitcoin has more long-term investors than other

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cryptocurrencies and has many long-term holders who are not easily swayed by price

fluctuations. The proven bitcoin ecosystem community is the best place for planting the seeds

of a genome-based, shared economy, ecosystem pursuing the utilization of genome data while

protecting each user’s genome identifiers.

Bitcoin holders will claim GNC, one GNC for every bitcoin they hold. The GNC ecosystem

will start with about 80% of GNC redeemed to bitcoin holders. This baseline value is what

differentiates the GNC ecosystem from an ICO token, making it more robust and promising.

ICO tokens often resort to an airdrop to grow the token ecosystem. However, distributing

tokens free of charge through an airdrop frequently ends up in price uncertainty and can fall

prey to token scammers. In the wake of an airdrop, the token ecosystem often finds itself in a

swirl of good news spun by those trying to push up the coin price and massive sell orders by

arbitragers dumping their airdropped coins.

We estimate that at least 5 million GNC will be unclaimed. That figure is based on published

reports that there are between 2 to 8 million lost bitcoin keys and on our estimation that

bitcoins held by hackers or unlawful holders, who are reluctant to leave a footprint, are likely

to be a multiple of the number of lost bitcoins. Reviving these unclaimed GNC and using them

to promote the public good of genome data is the basic framework of the GNC project. For

healthy growth of the coin ecosystem, certain amounts of unclaimed GNC will be excluded

permanently from the total coin supply. Immediately after the expiration of the claim period,

any unclaimed coins in the wallet of GenomeChain in excess of 3.3 million will be sent to an

irreversible address and burned. Three million coins in GenomeChain’s custody will be

distributed over a six-year period, in a planned manner, to minimize market disruption.

Company’s coin use will be limited to rewarding contributors to our social goals and will

minimize free riders and prevent speculative coin selling.

By taking a snapshot of bitcoin UTXO, the GNC project can bypass regulatory uncertainty

around ICOs and concentrate on creating a token ecosystem. It can start building an ecosystem

immediately following coin generation. Unlike an ICO token, it does not need to sell coins by

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touting the value of the token. Unclear regulations around ICOs are making large businesses

and institutional investors hesitant to participate in token ecosystems. The GNC project,

however, is free from regulatory controversy and exempt from market securities regulation

because it does not sell coins. As a result, the project can focus on achieving the long-term

goal of building upon the success of the GNC ecosystem to create a genome-based, shared

economy, ecosystem, instead of raising quick money through ICO.

Unlike other token ecosystems portraying a rosy picture of the future, the GNC project can

offer genome data-based colored coin services right away. GNC holders can order GeNome

Colored Coin(hereunder “colored coin”) containing their genome data by sending a certain

amount of GNC to service providers. Colored coin producers can deduct their service charge

from GNC that they have received. Users (initially bitcoin holders) will view such charges as

negligible as they have received GNC free of charge anyway. The minimum amount of GNC

required for colored coin production may change depending on market conditions. Encoding

can be done for 1GNC or 0.0001GNC. The minimum amount may indirectly affect the market

prices of colored coins. The existence of a useful function for all humanity is a key

differentiator between GNC and bitcoin, and it will serve as a price attractor.

Technological advances in disease prediction and prevention are slowing down due to lack

of genome datasets available. Colored coins will help raise people’s interest in the genome

and reduce sequencing costs, encouraging more people to use genome sequencing service

and thus accelerating the creation of a genome-based, shared economy, ecosystem.

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1. Blockchain’s limitations as to the truth of data

Bitcoin, the first blockchain network, is a distributed system of transaction records created,

and currently stored on, some 10,028 1 nodes around the world. Bitcoin verifies the

authenticity of transaction records without the need for third-party adjudication. When

bitcoin was first introduced, a small group of enthusiasts hailed it as a watershed event in the

history of civilization. Focusing on bitcoin’s authentication feature, to them, bitcoin was more

than a digital currency. As enthusiasts became familiar with bitcoin they started to pay

attention to a capability that became known as colored coins. Simply put, a colored coin is an

electronic form of a commemorative coin, stored on a blockchain. For example, with colored

coin, the amount of balance in one’s stock, bond or bank accounts can be attached to a certain

amount of bitcoin and transferred to someone else. Unlike bitcoin, that has no intrinsic value,

colored coin is a method for representing and tokenizing real-world assets. In addition to

proving ownership of real-world assets such as real estate deeds or car keys, colored coin can

also represent and verify college diplomas, transcripts or personal identification records. The

United Nations acknowledged that blockchain is the only viable method available for

authenticating personal identification papers presented by refugees.

Blockchain technology can enable global citizens with limited access to financial services to

participate in the global value chain as a producer or a consumer, which will double the size

of the global supply chain within a few years. Announcing the launch of TradeLens in August

of 2018, Maersk and IBM said that blockchain would transform a vital part of how global trade

is conducted. They also added that they were able to cut the transit time of a shipment by 40%

during their 12-month trial. IBM has been heavily investing in blockchain technology, believing

that blockchain will play an important role in digitizing global shipping, an industry that moves

four trillion dollars of goods every year.

1 https://bitnodes.earn.com/ December 9th 21:00

excludes all nodes prior to protocol version 70001 (i.e. >= /Satoshi:0.8.x/),

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Blockchain can propel innovation in the global supply chain particularly because it can

resolve the long-standing issue of trust in transactions. Various supply chain issues - data

visibility, process optimization, demand forecast, production and inventory management –

cannot be solved from a traditional technological perspective because they do not resolve the

need for a trusted party to mediate any exchange of valuable data. As Brigid McDermott, vice

president at IBM Blockchain Business Development said, trust is the missing piece in the

puzzle of digitizing the global supply chain and blockchain solves the trust issue, thus

completing the puzzle. Blockchain not only verifies place of origin, but can also control the

risks that may arise in the distribution process, such as last-minute order cancellation, by way

of transparency and mutual monitoring. Improving food safety is therefore a blockchain use

case that is garnering much attention.

Every year, about 400,000 people are dying from failure of the food supply chain2 and risks

posed by a handful of greedy food producers or distributors can spread quickly over the tightly

knit global supply chain. Since 2016, Walmart and IBM have been running a pilot to provide

better traceability to food distribution using blockchain. In announcing the result of the pilot,

they said they were able to trace distribution of mangoes in two to three seconds, not in seven

days as it currently takes. They also completed a pilot of migrating Walmart’s pork supply

chain to a blockchain platform. Starting in 2019, Walmart and Sam’s Club will be using IBM’s

blockchain platform to trace the distribution flow of green vegetables, like lettuce and spinach,

real-time from farms to supermarkets. Jack Ma, the co-founder of Alibaba of China, called for

tougher laws on counterfeits and said that fake food is a problem. Alibaba embarked on a pilot

of using blockchain technology to trace New Zealand beef all the way back to its country of

origin3. Provenance of the United Kingdom piloted blockchain technology to track tuna from

fishing sites in Indonesia to consumers in the United Kingdom. Sainsbury’s and Unilever are

carrying out a pilot project to reward farmers in Malawi, with financial incentives, who

produce and process tea in a fairer and more sustainable manner. The tea is shipped and sold

2 https://www.businessinsider.com/annual-food-poisoning-deaths-2015-12

3 https://which-50.com/alibabas-blockchain-food-tracking-program-launches-in-new-zealand/

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to consumers in a transparent manner using blockchain, allowing the growers to gain more

profits by commanding higher prices.

Blockchain, by definition, is a distributed network that does not give any nodes privilege to

control a central server. Based on this definition, some argue that technically speaking,

TradeLens and other blockchain platforms led by businesses are not blockchains because they

give privilege to certain nodes in the input stage. This form of implementation allows potential

abuse of such privileges and means corruption cannot be blocked. If false information is

encoded into the system in the first place, blockchain can be more dangerous than traditional

databases that allow easy error correction. Without the premise of advances in sensing

technology, blockchain cannot be relied on to ensure the truth of data by itself. Blockchain

guarantees immutability, but it is agnostic as to whether the data being recorded forever is

true or not. Blockchain protects all data, even false data, as soon as it has been recorded in

the system. This is an issue for all blockchain systems, regardless of being private or public.

Blockchain is most vulnerable in the areas where it intersects with the real-world, creating

the ‘first-mile issue’. In smart contracts, this vulnerability is referred to as the “oracle issue”.

How can real-world data be verified as correct before it is uploaded to a blockchain? As far as

organisms are concerned, there is a solution. Genome information can make blockchain

records capable of verifying both the authenticity and the truth of data. Genetic testing is the

best way to discern whether a tuna is real tuna or a calf is of a special variety. Genetic

information makes it possible to trust the agricultural or fisheries product while not

necessarily trusting the farmer or the fisherman. Selected genetic information that

distinguishes types of agricultural or fisheries products are encoded along with the producer’s

information into a token on the blockchain network. These tokens can be sold to consumers

in advance. A token gives high protection against potential risks as each token represents a

specific product from a specific producer. As the market price of token matches the risks that

may occur during production and distribution, producers can get financing. Consumers can

avoid the risk of fake food. Distributors and financial investors can get returns on their

investments in a transparent manner.

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2. GeNome Colored Coin

Colored coins are created by encoding metadata in bitcoin transactions. Value of real-world

assets such as stocks, land deeds, or real estate can be attached to a certain amount of bitcoin,

and the immutability of bitcoin’s blockchain ensures trust. NASDAQ previously looked into

developing a system using colored coins as tokens to represent stocks. More recently, bitcoin

cash advocates have attempted to expand the function of colored coin to establish a token

generating platform similar to Ethereum.

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The United Nations launched the ID2020 initiative to provide universally accepted identities

by 2020 for the 1.1billion global citizens who have no officially recognized identification.

ID2020 leverages blockchain technology, attaching biometric data such as iris or genome data

to a blockchain to record unique identification with immutability while preventing any attempt

to present false identification. This identification can be read anywhere in the world by an app

and allows objective verification of a refugee’s birth, nationality, and criminal record. This

reduces the risk, and leads to less wasted effort, in providing refugees with job opportunities,

education, and welfare. Supported by Microsoft and Accenture, who volunteered their

services, the system is expected to resolve controversies over states’ accepting refugees.

If an ordinary citizen, who does not have access to professional sources of intelligence or

investigative capabilities, acquires a tool to verify a person’s identity, trust-based transactions

utilizing identity data will exponentially increase. For example, many individuals across the

globe can make small investments in a medical student in Africa, on the premise of the

student’s potential income in the future. Financing foreign students, which was not possible

due to lack of verification of the student’s identity, becomes possible. ID verification also paves

the way for the growth of global supply chain finance. A small company without collateral can

participate in the global supply chain as a manufacturer or a consumer with backing from

financial institutions, which are currently only available to large companies.

Ultimately, encoding genetic data into a blockchain coin gives us global identification. For

the moment, 100 SNP (single nucleotide polymorphism) related to physical characteristics are

selected to be colored into the genome coin. A combination of just one hundred traits still

ensures a high degree of the unique identification of one in 5 billion, even after excluding

medically sensitive hereditary data and using only generic traits owned by 80% of the

population. Barring medically sensitive data in the selection of genes enhances the protection

of personal data and reduces data volume to encode in the blockchain as the input values

become standardized. In the same way that we do not know who owns bitcoin in UTXO,

colored coin’s metadata can remain on a transparent blockchain, and even if unencrypted,

ownership of the colored coin is not identifiable only with the data stored on the chain. A

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smartphone app can be used to display a colored coin in a human-readable format using

natural language, or even through the use of a generated, human-like image.

Combining a user’s 100 genome data visualizes their traits and gives users the pleasure of

discovering something new about themselves and expressing their genetic code in an avatar

for gaming or social networks. The genetic avatar leads to a better understanding of the

essential characteristics of family members and loved one, driving recommendations and

adoption of colored coin making.

In a survey that asked individual genome testers what motivated them to participate4, 78.4%

mentioned “detection of inherent risk of disease.” However, 81.2% of the 305 respondents

also answered “curiosity about my genes.” While experts and personnel in the genome

industry associate genome with illness, for consumers, the genome is also about

entertainment. Personal genome research is an effective means to satisfy the need to discover

oneself and can bring joy from learning about the characteristics of people close to oneself

and how that affects your relationships with them. A service utilizing genome data in this

way helps to increase the general public’s awareness of genome and enhances the capability

of dealing with more sensitive data like medical information.

4 https://www.genomeweb.com/genetic-research/health-not-primary-motivation-dtc-genetic-tests-open-

genetic-data-sharing#.XBCNvGgzaUk

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2.1 Selection of genome SNP set and their number

The set of SNPs encoded in the colored bitcoin should be

observable characteristics of an individual which are not medically

sensitive, i.e., hair color, hair fiber shape, skin hair, eye color, skin

color, ability to break down alcohol, height, weight, or breast size.

2.2 Number of SNPs and distinctiveness

The population frequency for a specific combination of one

hundred traits, present in 80% of the whole population, is one five

billionth. In mathematical terms, on average, one in five billion

people own that exact combination. This rate of occurrence cannot rule out the possibility

that the same combination of the traits does exist, but can obtain distinctiveness by adding

limited contextual information people can employ in real life. Limited contextual information

allows re-evaluation of distinctiveness with a conditional probability, reducing the chance of

an identification error to probabilistically insignificant levels. In practical terms, contextual

information such as age or nationality creates a subset of the global population, within which

one in five billionths chance of a genuine duplicate is infinitesimally small. Identifying

individuals using genome data in this manner is convenient and statistically reliable.

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2.3 Gene coloring

Hundred genotypes (the SNP pair) combined with two hash values take up 328 bytes of data.

Using a standard code structure to record the genotype, instead of full-text descriptions, can

reduce the amount of data that needs to be embedded in each colored coin. The amount of

base coin may vary according to the market environment, but the combination of genotype is

encoded into the transaction data of the base coin using a fixed standard code. A genome-

wide hash value is also inserted, as a link to the complete genome of an individual which is

stored separately. Decryption of the whole genome data, therefore, requires both the hash

values and the secret key of the colored coin. This ensures private data protection and allows

data sovereignty of the full genome data.

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2.4 Colored coin’s client app and full-node server

Bitcoin trading smartphone

apps or Simplified Payment

Vehicles (SPV) alone cannot read

colored coins because they do

not have access to all the blocks

that are required to verify the

block that includes the colored

transaction. Users must use a

smartphone app designed explicitly for colored coins, which relays between the user’s

smartphone and a full-node server. The client app sends a hash of the private key to the full-

node server, and the server checks the blockchain history to find the colored metadata

transaction. This information is returned to the client app, which subsequently uses the

metadata to visualize the genotype and create an avatar based on the genes. A significant

amount of research shows that a genome avatar expresses an individual’s unique features

quite closely and it is possible for a third party to compare a person in real life to the avatar

picture.

Users can then dress or dole up their genetic

immutable with accessory items. When presenting the

avatar as a verifiable ID to a third party, specific texts

plus trait values are also displayed; the name of genes

and the frequency of phenotypes are shown in

numbers.

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2.5 Limited issue of celebrity’s genome tokens

Another useful application of coin coloring occurs

when you encode multiple tokens with identical

metadata. Issuing a limited number of tokens in this

manner, containing a famous star’s genome

information, would allow its use in marketing activities

while preventing any potential controversies over

copyright as such tokens cannot be created without active consent from the star and/or their

management agency. Fans may want to own a token containing the genome of their favorite

celebrities or athletes. They can then personalize the avatar, even though the token is loaded

with the same base information. As celebrity genotype colored coins are issued in limited

numbers, scarcity makes them collectible, pushing up the value. The price of their token

becomes an indicator of the popularity of the star. Competition among fan clubs may drive

the star’s token prices up.

This process can be taken to the next level by mixing the data from different colored coins.

Fans can add another star's colored coin to that of their favorite star’s to create a new

combination of phenotypes. They can also imitate reproduction to create a child avatar by

combining the genetic information of the celebrity with their own. The avatar application

determines the trait utilizing random values.

2.6 Genome coloring; Unique identification of agricultural and fisheries products

As a financial platform, built on the premise of absolute trust in agricultural and fisheries

products, colored coins open the door to multiple opportunities for small producers. Those

with available labor and land, who could not previously participate in the global supply chain,

can now receive financial backing directly from the middle classes of developed countries,

producing good agricultural and fisheries products and meeting society's need for safe food.

Colored coins are created with selected genetic information that distinguishes types of tuna,

wine or cow. At production, a genetic test is conducted and the results are encoded, along

with the producer’s information, into a colored coin on the blockchain network. Tree

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structures make it possible to generate different tokens for different parts of beef or pork by

attaching information in tiers. For example, a colored coin for the pork knuckle of a specific

pig can be generated by adding a serial number to the specific pig’s data. In this way, one pig

produces a cluster of multiple colored coins that represent its different parts. These tokens

can be sold in advance to distributors or end consumers, who can, in turn, sell the colored

coins to others. When updates on the distribution process are loaded onto the blockchain and

attached to the hash of a token, the token price fluctuates reflecting the view of the market

of the new value of the product. This trading process is the equivalent of trading futures of

digital securities but for agricultural products. This trading in parallel, even before processing

and distribution, to agricultural production evolves colored coins into an agricultural financial

platform.

As colored coins are inter-operative with

other blockchains, through middleware, they

can be distributed on other blockchain supply

chain platforms that are being built to protect

food safety. Genome colored coin will be

launched alongside blockchain supply chains,

led by global giants such as Walmart and IBM,

reinforcing truth of data.

2.7 Encoding genome-wide hash value and family finding service

It is not practical to encode your entire genome onto a blockchain, but a hash key of your

whole genome is encoded in the colored coin that represents you. When this hash value and

a paired private key from your GNC are presented together, an individual’s complete genome

data, stored in the GENOMECHAIN database, becomes accessible, and its decryption becomes

possible.

The GENOMECHAIN genome database is a foundation for various services, among which

finding your biological family has garnered the most public interest. Genetic information is

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highly beneficial to finding family members. Adopted children often fail to find their biological

parents when relying on advertisements limited to a region. While searching the name used

before the adoption and other characteristics in the genome databases, they may find close

biological family members. It is also possible to find a connection from kin’s uploaded data,

even without information of parents or direct family members. This makes it possible to offer

services to find birth family relatives for adopted children, for the elderly suffering from

dementia or even to bring fallen soldiers back to the war bereaved.

The genome database can paint a family tree linking

close relatives, and facilitates complete genome-based

genealogy books, mainly targeting Asian markets.

Ethnically diverse countries like the United States of

America have seen fast growth of ancestry services that

show where one’s ancestors come from. One can draw

and then hash a family tree or ancestry distribution into

new colored coin.

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3. Coin generation

Regulatory uncertainty around ICO (Initial Coin Offering) persists. Particularly, the regulatory

bodies in the US have maintained a tough stance toward ICOs. The U.S. Securities Exchange

Commission (SEC) that regulates the securities markets holds a firm position that most current

ICOs are in violation of the U.S. Federal Securities Act. The SEC clearly noted that the act of

selling tokens without any functionality, before creating an ecosystem, is in clear violation of

the U.S. Securities Act. Several companies who performed an ICO have already been ordered

to return the raised funds and were levied fines. Against this backdrop, post-ICO companies

are defending themselves with the argument that the tokens they issued are utility tokens,

not marketable securities. However, in determining the nature of the token, the U.S. courts

place greater weight on the nature of the relationship between the investors and the issuer,

and less on functionality. Recently, there was a court ruling that if return on investment was

the greatest motivation for token investors and if the investors were aware that managerial

efforts of the issuer or a third-party have crucial impact on the market price of the token, such

token constitutes a marketable security. The court also stated in the ruling that the name,

property or technical features of the token do not affect the judgment as to whether the token

is a marketable security or not.

Ironically, bitcoin has overcome prolonged regulatory controversy and impediments

including trading bans. The chairman of the SEC stated that bitcoin is a true cryptocurrency

and does not constitute a marketable security. The U.S. Commodity Futures Trading

Commission (CFTC) defined bitcoin as a commodity and placed bitcoin under its supervision,

not the SEC. The CFTC went on to permit brokered trading of bitcoin futures and options.

Selling tokens classified as securities to the public without prior approval from the relevant

regulatory body violates the U.S. Securities Act; the seller may face prosecution by a U.S. law

enforcement body if any of the investors is an American citizen. The global nature of

blockchain-based token makes it impossible to keep track of the nationality of every single

investor to exclude American citizens. Therefore, having a legal entity offshore or carrying out

an ICO in an ICO-allowing country does not necessarily mean the “no American citizen” rule

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is satisfied. Furthermore, it is not realistic to exclude American users altogether when the goal

of ICO is to build an ecosystem around genome information.

If the goal of ICO is ecosystem creation, not quick money, the issuer can opt for a path that

does not pose regulatory uncertainty. Generating coins by taking a snapshot of bitcoin’s UTXO

can help the issuer to overcome the initial challenges it may face in building an ecosystem. If

GNC is distributed to bitcoin holders in the ratio of one to one free of charge, it is a conditional

airdrop. Since bitcoin holders paid for their bitcoins, this conditional airdrop will show a

different price curve than a generic airdrop where coins are distributed to the public free of

charge. This was already evidenced in the hard forks of bitcoin cash and bitcoin gold where

market prices formed immediately after the hard fork.

Behavioral economists often use games to gain insight into the human mind. The ultimatum

game shows how credibility and context influence the behavioral patterns of humans. The

basic game involves two individuals who do not know each other. One individual is given ten

dollars and one chance to split it with the other player. They can offer to share any amount of

the ten dollars, but if their offer is refused both players get nothing. While game theory

predicts that the lowest possible offer will be made (last game; therefore maximize returns)

empirical evidence shows that, under these circumstances, the average offer is four to five

dollars. These findings lead researchers to tweak the rules of the game and investigate further.

What happens if both players are given a chance to be the person that decides the split, for

example, by providing that privilege to the person who guesses closest to the number of bricks

it took to make the Great Wall of China? In this case, the proposer becomes less generous in

their offer; they’ve won the right to more of the ten dollars. In another variant both parties

are told that the proposing person has that role because of some preferable attribute, they’re

older, or better educated, this lends them legitimacy. In both of these variants the proposer

offers the lowest possible split, and invariably, this split is accepted. Contextual information

may change their perceptions of fair distribution. Whether such contextual information is

rational does not weigh much.

22

Users will be able to trade their GNC for bitcoin. You need to own bitcoin to receive GNC in

our airdrop. This infers a baseline value to GNC, with bitcoin acting as the underlying value

which drives the derivative value of each GNC. This baseline value is supported by the

contextual expertise of existing bitcoin owners, in the same way as the preferable attributes

add value to the negotiating value of the proposer in the ultimatum game.

Lost coins and illegally acquired bitcoins will be excluded from GNC distribution by changing

the address system so that claims made past the designated period will not be redeemed. This

will result in a big variance between the total number of bitcoin supply and the total number

of GNC supply but will increase transparency and legality of the coin ecosystem as a whole.

After the billing period ends, the total circulation of GNC is inevitably less than that of bitcoin,

therefore we generate 6 million GNC in advance. Burning ten years’ worth of bitcoin ledger

from January 3, 2019 will give clarity to the total number of GNC in circulation and enable the

GNC ecosystem to have a fresh start in asimple and transparent manner. GNC is therefore

differentiated from bitcoin, as the high percentage of coins acquired through unlawful or

dubious channels are unlikely to participate. Conversely, restrictions on GNC claims will help

to reduce uncertainty around bitcoin ownership because it clarifies which addresses among

the large bitcoin holders are still valid and fair.

Rewarding the contributors of the ecosystem with GNC the issuer holds will help accumulate

indirect capital and increase the value of the entire ecosystem. The issuer has abundant

resources to invest in the public good portion of the ecosystem. In a hard fork, the issuer of

the new coin expects a natural emergence of a new coin ecosystem separate from the old one,

driven by technological advantages of the new system. But shortage of resources makes it

hard for the issuer to invest in improving the public service of the new ecosystem. Bitcoin cash

and bitcoin gold had first mover advantages; they were the first bitcoin hard forks and gained

much traction among investors. They were traded for bitcoin almost immediately after the

hard fork, pretty much as soon as an exchange rate was formed. Their starting price was not

zero. As they established a market price, mining power followed. The next 40 hard forks that

followed bitcoin cash and bitcoin gold failed to create a stir. Without an initial price, there was

23

no driving force to create an ecosystem. No price meant no miners, and the lack of miners

rendered their blockchains unsustainable. Without proof of the robustness of a blockchain,

investors left or did not come in the first place. This vicious cycle became their natural state

and could not be broken without an external shock to the system.

Distributing coins or tokens that carry a certain value in a structured manner will add vigor

to the ecosystem. Rewarding behaviors benefitting the entire ecosystem will induce desired

behaviors, which will in turn raise the value of the entire ecosystem. However, promoting

behaviors beneficial to all participants is challenging because of the hazards of selfish thinking

as shown in game theory’s prisoner’s dilemma. Individual participants tend to wait for others

to do things benefitting the entire ecosystem rather than doing them by themselves as this

would subject them to an unfair burden of cost. In this context, the faith that there is someone

out there who is willing to incur cost to enhance the ecosystem will bring greater profits to all

participants as is the case of GNC. Such faith will encourage participants to take risks, investing

more of their time and cost for the ecosystem. More participants mean a bigger pie and a

bigger slice for every participant. This will create a virtuous cycle or self-reinforcing prophecy.

When the participants witness the self-reinforcing prophecy in motion, the ecosystem will

overcome the initial-stage challenges and start to grow.

There is a discrepancy between what is preached by blockchain advocates and what is

achievable by blockchain. A single ecosystem alone cannot create a shared economy, as

portrayed by each ICO white paper that maps out our near future. From a technological

perspective, the world did not have to wait for 20 years to see the wide penetration of social

networks after the advent of the Internet. But, social networks became widespread only after

the mass adoption of smartphones. Certainly, not all the blockchain ecosystems, as depicted

by many ICO whitepapers, are phony, but it will take many years for them to become a reality.

It takes time for an ecosystem to grow enough to change our way of living. But impatient

investors who bet on the blueprint portrayed by the white papers and suffered losses are

blaming the delayed creation of ecosystems for their loss. Some early investors are asserting

that ICOs are a big scam designed to raise easy money that need not be accounted for.

24

GNC does not follow the typical ICO path. It does not raise funds by selling massive amounts

of coins up front. Instead, it creates an ecosystem around a well-established coin because the

goal of token sale is to build an ecosystem, not to raise funds. Using blockchain to enable

consumers to perceive the value of genome information will lay the groundwork for vitalizing

the blockchain ecosystem and the genome-based shared economy. A virtuous cycle can be

initiated to induce contributions to the genome-based ecosystem and increase the benefits

to all participants by leveraging the generic human trait of responding to incentives.

3.1 Taking a snapshot of bitcoin UTXO

As of January 3, 2019 at 0:00 UTC, the snapshot of bitcoin UTXO will be taken. Addresses

that contain bitcoins at that point in time can claim redemption of the number of GNC

matching the number of bitcoins it holds. This process is called “snapshot” instead of a hard

fork because public mining does not start immediately after the ledger is copied. It is more

accurately described as a phased or tranche based fork that is carried out step by step, in this

case, over a year.

January 3, 2019 marks the 10th year anniversary of the launch of the bitcoin system. This

will be a monumental day celebrating the robustness of the bitcoin system that has been

proven by its long survival in a hostile environment. However, no official ceremony is planned

to celebrate the anniversary as no entity is expected to spend its own money on marketing

activities that will benefit the entire bitcoin system. Copying the bitcoin ledger by GNC can fill

the void and serve as a memorable event for bitcoin’s 10th anniversary.

The approach of GNC by taking a snapshot of bitcoin UTXO instead of an ICO will cause a stir.

The controversy around GNC befits bitcoin’s 10th anniversary as it will raise a philosophical

question as to the essence of the innovation bitcoin has brought. Copying the bitcoin ledger

and using it as the seedbed for a genome-based shared community is backed by the argument

of bitcoin champions, that the growth of bitcoin has clearly demonstrated the core principles

of the coin ecosystem. This argument is aligned with the idea of bitcoin as a “currency”.

25

Mainstream bitcoin critics assert that innovation comes from blockchain, not bitcoin and the

survival and growth of the bitcoin is just accidental. To their eyes, bitcoin is a mere happening

that will end sooner or later. While taking interest in blockchain as a technological innovation,

they do not attach value to the past decades’ participant experience and group learning

elements of the bitcoin ecosystem. As a result, they have never tried to create a coin

ecosystem, leveraging the bitcoin community.

3.2 Raising a claim for GNC

After the bitcoin snapshot is taken, bitcoin holders can download the wallet app from the

GNC blockchain explorer and raise a claim for GNC. When their private key is typed in, the

wallet app will automatically trigger a transaction and create UTXO. This enables bitcoin

holders to obtain the same amount of GNC. Bitcoin holders will be entitled to claim GNC from

April 1, 2019 to December 31, 2020. Any GNC unclaimed by bitcoin holders during the claim

period cannot be retrieved after December 31, 2020 with a bitcoin holder’s private key alone

because GNC will be managed with the new private-public key pair system.

3.3 Lost coins

Lost bitcoins have piled up for the past 10 years. Lost coins occur because the holders have

forgotten owning the coins or have lost their private keys. According to several projections

(which are widely divergent), around 2 to 8 million bitcoins will never see the light of the world.

High concentration of coins by mega holders is another thorny issue for bitcoin. Addresses

containing over 1,000 bitcoins account for half of total bitcoins in circulation. Mega holders

are problematic because they undermine predictability. They may be long-term investors, but

they may be responsible for lost coins. Because of the lost coins, the market has no clarity as

to how many bitcoins are up for trading. This is paradoxical when bitcoin is supposed to be

more predictable than fiat currencies such as the US dollar or the Korean won as bitcoin has

a fixed mining cap and block time.

Burning bitcoin's past ledger drives a fundamental difference between GNC generation and

an ordinary hard fork. This allows elimination of lost coins and unlawfully acquired coins –

26

hackers’ wallets - from total GNC supply and greater predictability than bitcoin. Furthermore,

GNC can bring transparency to the bitcoin ecosystem as bitcoin holders’ GNC claim patterns

can give insights into the nature of big holder addresses.

3.4 Coin burning

Unclaimed GNC are expected to be over 10 million BTC since owners who illegally acquire

bitcoin and lost coins whose ownership cannot be specified will claim GNC. The total amount

of GNC is confirmed after burning 10 years worth of bitcoin ledger.

3.5 Use of GenomeChain-held coins

GenomeChain will divide 3 million GNC out of 6 million GNC it holds into six lots in the unit

of 0.5 million GNC and distribute one lot of GNC every year for six consecutive years. Coin

distribution will take place evenly throughout the year based on predetermined schedules.

Continuous and gradual distribution of coins will help minimize an excessive burden being

placed on the GNC ecosystem. GenomeChain will distribute 2 million GNC out of 6 million GNC

to early GenomeChain investors. Of the remaining 1million GNC, 0.5 million GNC out of the

remaining 1 million GNC will be distributed among platform architecture designers,

developers, advisors and GenomeChain executives and employees who contributed in

building the GenomeChain ecosystem. To eliminate the possibility of a secret block trade

27

involving token scammers, withdrawal of these genome coins will be frozen through smart

contracts, or time lock, for about a year until mining is open to the public. 0.5 million GNC are

airdropped at coin exchanges to help vitalize secondary markets.

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4. GNC Blockchain

In the GNC ecosystem, blockchain is employed for processing and approving coin

transactions and creating and storing colored coins. The GNC Blockchain is relatively free from

database efficiency and decentralization issues commonly experienced by other blockchains

that are focused on data storage and sharing and on smart contract platforms. This new

genome blockchain will be established independently and will be interoperable with the

blockchain of genome-based shared market platform.

GNC will minimize changes to the bitcoin program. The bitcoin protocol is the essence of

minimalism and its robustness has been proven through its survival in an adverse environment

for 10 years. Seeking full node attainment as a critical goal at the expense of database

scalability, bitcoin has achieved a level of distribution that has no single point of failure. Bitcoin

also boasts high predictability in both coin supply and block time. The fact that bitcoin is still

up and running reveals what it takes for a coin ecosystem to be viable.

GNC adopts bitcoin’s proof of work as its consensus algorithm. A key to bitcoin design is

making mining cost almost equal to the bitcoin price. This design makes it impossible for any

participant to build a scheme to gain special profits, which leads to fairness and downward

price rigidity (the price does not fall below a certain price range for a certain period of time

after it has skyrocketed or plummeted).

Criticism of bitcoin mining requiring high power consumption is largely misguided. Bitcoin

price hikes will increase power consumption, but bitcoin mining also benefits the electric

power industry by acting as a variable sink for off-peak electricity manufacture. Power

generation requires massive machinery and equipment, adding rigidity to production

management. Production schedules are developed based on peak demand. During off-peak

hours, electric companies are in a dilemma between discarding electricity generated, causing

waste or suspending operations, causing low utilization. This dilemma can be solved with

bitcoin mining. Electric companies can use off-peak electricity to mine bitcoins themselves or

sell it to bitcoin miners, both of which will bring more profits. They can work with coin miners

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to address, in part, the efficiency caused by their inability to adjust electricity prices to meet

demand fluctuations.

Some critics voice concerns that collaboration between electric companies and coin miners

may create power supply shortages for the average consumer. These concerns may not be

grounded given the global nature of competition among miners. Given the fact that peak

hours and peak seasons spread well across the globe, most of mining power is highly likely to

come from off-peak regions. Nevertheless, some mechanisms are required to get around price

rigidity. When signing a contract with coin miners, electric power companies can include a

provision prohibiting peak hour mining. It would be much simpler if power companies select

to become miners themselves. All they have to do is mine during off-peak hours and sell the

mined coins during peak hours or peak seasons. This will cause downward price pressure,

prompting uncompetitive miners to leave the market, which will result in less competition for

electricity.

This principle of competition can apply to any electric power company regardless of energy

source, be it renewable energy sources such as hydraulic and geothermal or more

conventional sources such as coal or nuclear power. Having a higher percentage of fixed costs

vs. variable costs, coal-powered plants as well as nuclear power plants can benefit from

collaboration with coin miners. However, cooperation with coin miners is dominantly pursued

by the operators of hydraulic and geothermal power plants. Small and medium-sized cities in

Canada and the northeastern region of the US, home to many hydraulic power plants, are

actively seeking partnerships with coin mining companies to revitalize their local economies,

overcoming the industrial hollow-out.

Proof of work facilitates the projection of the correlation between GNC price and mining

hash power. Because rising GNC price will attract more mining power, managerial efforts to

raise the value of the ecosystem can make the system more robust. The argument that it is

not easy to control the mining power needed to fight against a hostile force is valid only when

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coin prices rise too high. Otherwise, amassing mining power at low prices to protect the

system is a perfectly viable strategy.

Immediately after the nodes of new coins are opened to the public, the system can be

exposed to malicious attacks – even though such act does not bring any particular benefits to

the attacker it may be undertaken as an intellectual challenge or for publicity. However, the

issue of malicious attacks can be addressed through phased-in public access.

No single blockchain project was impeccable when first introduced. All the projects

underwent a governance crisis regarding program improvements. Multiple issues can surface

in early days of operation. Program changes may be required for various reasons including

technical glitches. This justifies centralized leadership in the initial stage of operations, at least.

For example, bitcoin had only a small number of miners in the early days and program changes

initiated by Satoshi Nakamoto met with little resistance.

The GNC project will have an incubating period with monopolistic management system,

which can hardly be called a blockchain in a particularly strict sense. Mining will proceed with

blockchain architecture in operation even during this period. As the program becomes stable,

the blockchain will be operated as a closed, permissioned blockchain among companies that

share the vision of a genome-based shared economy. Participants will be able to get up to

speed with the GNC Blockchain during this period. They will increase hash rates through

consensus and prepare for the public opening. When sufficient hash power is secured, the

system can be protected from any malicious attacks that may occur after its public opening.

High mining costs will deter malicious attackers who will give up on any haphazard attack

attempts when they expect the high hash rate from a friendly solidarity group to last for a

certain period of time after mining is open to the public.

4.1 Private blockchain - incubating

Technically speaking, the GNC Blockchain is not pure blockchain. GENOMECHAIN will

operate several full nodes to store ledgers on the blockchain and approve transactions. The

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hash rate and level of complexity is low. The complexity of mining will be controlled so that

confirmation will occur every 10 minutes allowing us to maintain the same cadence and block

time as the bitcoin blockchain. This is aimed at enabling the public and the market to

understand GNC based on bitcoins from which they are derived. This period will see no mining

attacks by outsiders as node access is limited to qualified applications. Hacking will be blocked

by firewall and encryption. The ledger will be copied periodically to capture the transactions

occurring in this period and will be stored separately. This will allow ledger recovery or

program improvements even after the occurrence of hacking and prevent a panic-caused

chain reaction leading to system collapse.

GenomeChain will deploy an app that will allow bitcoin holders to claim GNC. During this

claim period, GNC holders can trade their coins in the same way as bitcoins using the wallet

app distributed by GENOMECHAIN. Bitcoin holders can claim GNC until December 31, 2020.

They can transfer GNC to other GNC wallet holders or trade them for dollars or

cryptocurrencies like bitcoins through exchanges or over the counter transactions. You can

read more about GNC transactions or blockchain at the GenomeChain website

www.genomechain.co.kr.

4.2 Delegated mining

Once the claim period ends, GENOMECHAIN will finalize total GNC supply. Then, the colored

coin blockchain will go into full operation. Companies wanting to participate in the GNC

ecosystem will be selected and 10 global mining companies will share full nodes and engage

in mining in a closed setting. Mining share will be determined through consensus and hash

power will be adjusted continuously in preparation for public opening. During this period, 12.5

GNC will be mined every 10 minutes, the same rate of mining for bitcoins. The cost of mining

will be much lower than the price of the coin with the differential passed to partner companies

for offering hash power.

The GNC Blockhain will have immutability and visibility even during this delegated mining

period. Fatal errors, however, can be addressed through consensus among participants, which

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is an advantage of delegated mining. Governance will be in place, but it will be hard for a single

entity to tamper with data unilaterally. As colored coins are issued with service offerings the

program will stabilize.

4.3 Public opening

When the program is proven to be stable, the GNC Blockchain will be open to the public and

any miners can participate in mining. The acceptance of colored coins, proof of program

stability and clear market value of the coins will attract more miners. Thanks to the delegated

mining period, the system remains ready to stave off potential 51% attacks that may occur

post-public opening.

Once the system is open to the public, GNC will work just like bitcoin with no single entity

having control over the system and the blockchain will be immutable. A crisis in the program

can inevitably escalate into a governance crisis because consensus can hardly be reached on

program or system change. A governance crisis will lead to the separation of ecosystems

through a hard fork. As the largest GNC holder GENOMECHAIN may be able to exert leadership

in a limited manner, but the greater the credence GENOMECHAIN attaches to the principle of

transparent and predictable distribution of the issuer’s coins, the weaker its leadership will

become. Absence of centralized leadership and the existence of decentralized governance is

the strength of blockchain. The GNC Blockchain will not be controlled by any one party, be

that a regulatory body, or a hacker.

After public opening, once stable operation is achieved, GENOMECHAIN may consider

donating some of its coins to establish a GNC Foundation for psychological leadership of our

coin ecosystem.

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5. Developments in genome industry

Precision medicine is an approach to patient care that

allows doctors to select treatments based on genetic

information and the resulting physical differences of

each patient. Conventional medicine administers, more

or less, standardized treatments to all patients with

same diseases, which can work well for some patients, but can cause adverse reactions for

others. Precision medicine treats patients based on their unique genome information and

potential correlation between their genetic predisposition and their diseases. Precision

medicine has been adopted in some healthcare areas with particularly pronounced advances

34

in oncology. Precision medicine is also instrumental in disease prevention. It helps to analyze

individuals’ genetic information to understand the chance of developing certain diseases and

to provide them with personalized lifestyle or exercise recommendations, heralding the age

of personalized healthcare service.

Genome-utilizing sectors, including precision medicine, require secure access to accurate,

truthful genome information from individuals. Developing drugs and treatment for diseases

caused by exogenous pathogens is relatively easy because patients will mostly get well once

the particular pathogen is removed out of their body. However, treating diseases involving

gene or hormone disorders is more complicated because they involve complex in-body

mechanisms and thus a single drug or therapy may not be sufficient to eliminate the

symptoms. These types of diseases can be best treated with customized treatment regimen,

developed through interdisciplinary approach, requiring collaboration among health care

providers, pharmaceutical companies, genetic sequencing companies and big data-based app

developers.

The Human Genome Project, the first genome-sequencing project, was completed thirteen

years after its start in 2003 with a total investment of 3.8 billion dollars. During the past fifteen

years, since the end of the project, genome technology has advanced exponentially, resulting

in dramatic declines in the cost and lead-time of genome sequencing. This has led to rapid

commercialization of genome sequencing technology. Since the advent of Next Generation

Sequencing (NGS) in 2017, the speed of technological innovation has accelerated even further,

substantially lowering sequencing cost and creating a full-blown market for genome

sequencing. The NGS market is growing by 20% every year and is expected to reach 13 billion

US dollars by 2020.

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-– Declining sequencing costs

Genome is one of the fastest growing areas in big data. The cost of genetic sequencing has

come down to as low as 1,000 dollars. With decreased cost and lead-time, orders for genome

sequencing are on the rise. As of February 2018, 12 million individuals have used a genome

sequencing service.

- Growth of DTC genetic sequencing market -

Precision medicine is growing by 12.6% every year and is estimated to post 89 billion US

dollars by 2022. Advanced countries including the US, the UK, Japan and China are leading the

market. The UK became the first country to adopt policies on precision medicine in 2012 when

David Cameron, the then British prime minister, announced “100,000 Genome Project.”5 The

project aimed at securing whole-genome sequencing data of 100,000 British people – a

combination of healthy people, cancer patients and rare disease patients – under the

leadership of the National Health Service. The United States’ precision medicine initiative is

5 http://www.medigatenews.com/news/393453848

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designed to create a large-scale, cohort database of 1 million volunteers with a budget of 215

million dollars6. The cohort database will include data on genome, clinical examinations, living

conditions, lifestyle habits and field of profession, which will be used to develop a knowledge

database named the “Precision Medicine Dictionary” on diseases, causes of diseases,

treatments, and new drug development. Japan established the “Individual-based Medical

Information System” project as the product of the Agency for Medical Research and

Development (AMED) 7 . This was carried out to materialize genome-based medicine for

disease treatment with an investment of 83 million dollars (9.3 billion yen). In July the same

year, Japan ran a project of treating pediatric patients suffering from diseases with unknown

causes with genetic sequencing information. They also laid the foundation for providing

medical information to individuals to increase healthcare efficiency and to encourage them to

take actions necessary to stay healthy. In March of 2016, China announced future investment

totaling 9.5 billion dollars for the next 15 years or 634 million dollars per year, to implement

the “Precision Medicine 5-Year Development Plan”. As part of the plan, hundreds of projects

kicked off to collect genome data and clinical data. Korea also embarked on the

“Intergovernmental Genome Sequencing Project’ with a budget of 515 million dollars (578.8

billion won) for the eight years following 2014. This project aims to secure world-class genome

research resources and information and develop customized prevention, diagnosis, and

therapeutic technologies in order to facilitate customized medicine.

5.1 Changes in the regulatory environment

Falling costs have extended the scope of genome sequencing to lifestyle improvement and

disease prevention. A lack of scientifically proven genome information is limiting use cases to

low-risk areas and stifling the emergence of new genome-based services. Attention paid to

new services launched quickly dissipates because of a correspondingly poor consumer

experience. On the positive side, governments are moving to ease regulation amid

heightening pressure from optimists who believe in advances in genome technologies and

their expected benefits.

6 http://www.medigatenews.com/news/2580060783

7 http://www.ibric.org/myboard/read.php?id=2698&Board=report

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Direct to Customer (DTC) refers to genome tests being requested directly by consumers, a

growing market as the US moves toward deregulation. DTC tests have been heavily regulated

in many countries to prevent DTC services not backed by scientific methods. In the US without

explicit regulation on DTC tests, “23andme” launched DTC testing services, and was subject to

supervision by the FDA. In 2017, however, they obtained FDA approval for their DTC tests for

ten diseases including Parkinson’s disease and Alzheimer’s disease. In March of 2018, they

secured FDA approval on DTC tests for the BRCA 1/2 gene, the first cancer screening DTC test

approved in the US. With this approval, FDA made cancer screening tests available for

consumers in four years after they issued a ban on the sale of gene test kits at the end of 2013.

The US genome sequencing market is massive in size, accounting for about 50% of the global

market. With 23andme, Navigenics, Pathway Genomics and Knome taking the lead, the

market is gradually expanding. DTC test market grew by 25.1% every year from 70 million

dollars 2015 and is expected to grow to 340 million dollars by 2022. This remarkable growth

was driven by the FDA approval of DTC tests in the US. After approving the extended scope of

DTC test applications in last April, the FDA announced pre-certification (pre-cert) schemes for

Genetic Health Risk (GHR) tests in November. More recently in March 2018, the FDA approved

DTC tests for BRCA genes for certain mutations.

Some service providers suggested the adoption of the “hybrid DTC model” to boost DTC tests.

Under the hybrid model individuals can have DTC tests freely, but need to engage healthcare

providers for interpretation and additional tests. The hybrid DTC model attempts to find a

middle ground between two conflicting views as to who need to have control over genetic

information. Some view genome information as part of medical information and argue that

experts, not the genetic data owners, must have control. Others believe genome information

is part of sensitive information and thus needs to be controlled by the data owners. The hybrid

DTC model moves some control away from the data owners to medical experts, who will

supervise the access to and analysis of genetic information. This hybrid model is designed to

accelerate deregulation on DTC tests.

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5.2 Genome sequencing cost

Only a small percentage of people around the world possess their own genome information.

Although technological advances have brought sequencing costs down to about 1,000 dollars,

consumers believe genome sequencing price is still too high for the value they get. In a survey8

conducted by a sequencing service company in February this year, only 2% of the respondents

said that they had their genes sequenced. For the question asking the major reason for not

getting a genome sequencing service, “high prices” was ranked number one, cited by 29%.

When these 29% respondents were asked to suggest appropriate price points for genome

sequencing, 33% said “less than 100 dollars” and another 33% said “less than 250 dollars”.

These findings reveal that sequencing price reductions driven by technological advances are

still not enough to overcome consumers’ psychological price barriers.

5.3 Concerns over data security

According to previous studies, many individuals expressed their intention to share their

genetic information for the development of medical technologies and improvements in

human health. For example, in a survey 9conducted by PatientsLikeMe’s, an online research

platform, on social media users in the US, 92% said that they were willing to share their

medical data with research organizations for disease studies and 85% said that they were

willing to share their medical data with pharmaceutical companies for the launch of safe

products. But, they said that they would share medical data only when it is guaranteed that

data shall be kept confidential and their consent shall be obtained prior to use of data. But,

the genetic data owners have no means to check if their genetic data have been used without

their prior consent and they have no choice but to trust what they are told. Possibility, even if

it is a remote possibility, of their data being used without their prior consent can cause

concerns, which will be an impediment in the growth in genetic data sharing.

8 Marshall, Deborah A., et al. “What Are People Willing to Pay for Whole-Genome Sequencing Information

and Who Decides What They Receive?” Genetics in Medicine, vol. 18, no. 12, Feb. 2016, pp. 1295-1302.,

doi:10.1038/gim.2016.61.

9 https://news.patientslikeme.com/press-release/patientslikeme-survey-shows-vast-majority-people-health-

conditions-are-willing-share-t

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Lack of transparency in the post-sequencing process leaves no choice for the genetic data

owners but to trust involved companies. In this environment, individuals may be reluctant to

share their medical and genome information even for a higher cause. Hence, a transparent

ecosystem is needed to give peace of mind. An ideal ecosystem is one that allows data

contributors to choose which organizations they will share their data with.

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6. Using genetic data to promote social goals and a shared economy platform

Genome colored coins center around personal identification and entertainment. The coins

capture selective genetic information that helps identify an individual by appearance,

excluding any sensitive disease-related information. Sensitive genetic information will be

encrypted and stored on the server. Encrypted information, even if hacked, will be useless in

identifying an individual. Sensitive genetic information, if decrypted, can be used for research

purposes with prior consent from the data owner. The individuals themselves cannot release

their genome information as control is shared with the platform. This feature conforms to

current regulation; that require genetic data owners to seek consent from medical experts

when accessing their own sensitive medical information, while giving the data owners

decision rights regarding their genetic information. Shared control has other added benefits:

It prevents any leakage or abuse of sensitive information through general user error and it

helps prevent hacking because information cannot be accessed with the owner’s private key

alone.

GNC will serve as a catalyst for the genetic data ecosystem. High expectations exist for the

potential of genome information in tackling diseases and raising quality of life. Despite these

high expectations, genetic data collection occurs slowly due to price and regulatory hurdles.

From an economic standpoint, the genome data market has a high dose of positive

externalities. Individuals getting their genome sequenced will see immediate benefits as their

genome data will be used to offer them personalized healthcare services, including lifestyle

recommendations, through precision medicine. Giving consent to pool genetic information

will help broaden humans’ knowledge horizon on genome, disease and life patterns. This

knowledge will boost the development of medicine and related industries and bring down

sequencing costs. But no matter how high the unit utility (benefit) to unit cost ratio becomes,

the current genome sequencing market cannot reach equilibrium. All the benefits of

sequencing do not attribute to the individual consumers picking up the bill, instead they

benefit society as a whole. This natural state of leakage will lead consumers as a group to

cease genome sequencing at a point where their utility equals their cost. In this case, the

market is not in equilibrium from the perspective of the whole society because production

41

and consumption reach equilibrium at a point where total costs are lower than total utilities

based on both public and private benefits. If it were a different market, not the genome

information market, government would step in and stimulate demand with subsidies in a

measure to address the market failure and to achieve market equilibrium. But the government

in the genome information market is more tilted toward its role as a supervisor than as a

promoter.

The market could reach equilibrium if

genetic data owners are incentivized to share

their information. This concept underlies the

“sell your DNA” market approach. If economic

incentives are not enough to motivate owners,

then the call to action where users share in

service of humanity and financial gain as

provided by GNC may act as the catalyst

needed for private subsidy of the public good from shared genome data. Rewarding data

contributors with cash incentives and rewarding them with GNC may seem like similar

strategies but they are very different and can make a huge difference in outcome. Compared

to cash, GNC have high price volatility in their initial stage. This very feature makes GNC a

better form of incentive for data sharers. Recipients of GNC can relieve themselves from guilty

conscience that they sold their genetic information for cash.

6.1 Data sovereignty and free sequencing

If regulation is a physical barrier, affordability and data

security concerns are psychological barriers. Data

sovereignty refers to the concept that data owners should

be given ownership of their data and control over them.

Individuals pay when they get their genome sequenced and

they pay additional charges for services that use their

genome information. Companies that hold data sell that

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data and make profits. This asymmetric situation can be improved if a direct transaction can

take place between data owners and potential data buyers. With blockchain, data owners can

have control over their genome data. They can decide which subset of genome information

they will sell to which companies and to which projects at what prices. In addition, they can

track how their genome data are being used after the sale. In the GNC ecosystem, users can

receive GNC by engaging in certain activities and use the coins to purchase services offered

on the platform. As genome sequencing can be paid for with GNC, GENOMECHAIN expects to

collect genetic data of over 200,000 individuals by 2020. At the current rate of cost reduction,

by 2025 sequencing can be offered at an infinitesimal cost just enough to cover administrative

costs incurred.

Normally, the credibility of a research rises with increases in the number of samples

included in target and control groups. It may not be the case for genetic data collection. Select

and focus is a better strategy at least in the initial stage, focusing on depth rather than breadth

in terms of disease coverage. Collection efforts need

to be focused on patients with rare diseases,

diabetes or cancers like breast cancer, colorectal

cancer, and prostate cancer. Previous studies

indicate that precise results can be obtained on

samples of about 40,000 patients per disease.

Furthermore, genome data of patients with specific

diseases can boost new drug development effort. Given the high value of disease-specific

genome data, patients with target diseases need to be incentivized to share their genome

data. The GNC project is designed to provide the needed incentives, through an ecosystem,

to patients with hard to cure diseases. Therefore, it is urgent to build the genome-based

ecosystem.

6.2 Data security

The diagram below is MGBlockchain’s service architecture excluding blockchain. Individuals

access the server and upload their genome data on the cloud platform. Based on their genome

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data, apps will send the users personalized recommendations on categorized products or

services. But, this architecture does not include a mechanism to address users’ concerns over

data security. Because dealing with genome data, extremely sensitive personal information,

naturally entails concerns over data breach, data misuse and abuse, hacking and overall poor

data management. The architecture also lacks transparency in data transactions and the

reward system. These deficiencies can make people reluctant to use the services.

To overcome these limitations MGBlockchain

will create a blockchain, which will ensure secure

data storage, transparent relationships between

the users and partner companies, and data

sovereignty. MGB has security solutions used to

securely process private information.

MGBlockchain complies with international

security standards, ISO 27001, 27017, 27018, and CSA STAR. With blockchain, data can be

stored more securely against the risks of hacking or data breach. Furthermore, MGBlockchain

will carry out security verification with application developers and data buyers. This

verification is aimed at preventing post-purchase data use outside the purview of original

purposes and registration of problematic applications. Registration will be limited to

applications committed to proper use of genome data within the purview of the user’s

permission. Violating applications shall be expelled from the ecosystem.

Running on the blockchain platform, the ecosystem will allow users to track where and how

their genome data are used. The requirement of obtaining user consent before any data use

will block data use or sale without the user’s knowledge. Users can determine the level of

granularity for their data provision and refuse to sell to uncongenial buyers. They can also

donate their data to new drug development projects of their interest.

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6.3 Information expansion and service offering

The genome-based shared economy platform not only enables individuals to understand

their genetic features, health status and risks of diseases, but also offers a variety of app-based

services, ranging from information on various diseases, to personalized healthcare

recommendations and even to entertainment services. Under the theme of “from cradle to

grave”, the platform aims to help individuals improve their health throughout their lives across

different life stages: rare disease tests and missing child tracking service for ages 0-9: genetic

aptitude tests, personalized diet and skincare, and aerobic capacity tests for ages 10-29;

partner matching service, early menopause tests, and Alzheimer’s diagnosis for ages 30-49;

and major cancer screening for ages 50+.

6.3.1 Proactive management of potential diseases

Rapidly growing DTC tests have wide use cases among which disease management is

attracting the greatest attention. Disease-specific genome sequencing companies provide

information on potential risks of diseases including cancer, obesity, Alzheimer’s and heart

attack. Disease-specific genetic sequencing is highly accurate in diagnosing certain diseases

like cystic fibrosis and Huntington’s disease. Even for more elusive disorders such as renal

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diseases, asthma and obesity not directly linked to genetics, genome sequencing can still add

value by offering estimated risks in the form of probabilities.

Some voice concern that genome sequencing can spread fatalism. But genome information

does not determine the fate of an individual. To the contrary, it instills a mindset that the

course of one’s fate can be altered through healthier lifestyles and preventive care.

Alzheimer’s occurs by a combination of 70% of genetic factors and 30% of non-genetic factors.

The “APOE” gene shows the highest correlation with the onset of Alzheimer’s, but not all

APOE carrying individuals develop Alzheimer’s, largely because of non-genetic factors. This

indicates that controlling non-hereditary factors could reduce the risks of Alzheimer’s or delay

its onset. Genome-based personalized healthcare recommendations can engage APOE

carrying individuals to undertake more specific activities that are effective preventative

actions. Drinking moderate amounts of coffee instead of alcohol, getting regular cognitive

tests and dental care, and socializing with close friends and families can all help lower risk for

APOE carriers. Low-risk individuals not carrying APOE can adopt more general activities like

regular workout, moderate wine drinking, and omega-3 intake, and efforts to improve

cognitive ability.

6.3.2 Personalized diet

Nutrigenomics highlights the importance of genome-based diet on the ground that gene

mutations of individuals can affect metabolism and actions of nutrients in the body. For

example, Korean women have lower concentrations of Vitamin D in the blood than women

from other countries even if they are exposed to the same amount of sunlight. VDR genes

responsible for in-body vitamin D synthesis make that difference. Korean women are,

therefore, better off taking Vitamin D rich food. In another example, deficiency of methyl-

related nutrients increases in-body homocysteine concentrations and can raise the risks of

cancer, dementia and cardiovascular diseases. Other studies revealed the efficacy of turmeric

and green tea in improving genome methylation, histone deformity, and micro RNA, affecting

the actions of enzymes and protein and subsequently gene expression.

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Food will be at the center of personalized service in the future. The nutrigenomics market

will grow at an annual rate of 16.8% to reach 17 billion dollars by 2023. The world will see an

explosive growth of ecosystems that offer personalized dietary management services based

on the combination of genetics and lifestyle data.

6.3.3 Personalized exercise planning

Previous studies show that genetics determines

whether an individual is either a morning person or

an evening person. Advances in genome sequencing

combined with big data and Artificial Intelligence

capabilities will boost personalized lifestyle planning

service. Physical exercise is an important element of

lifestyle habits and its impact on health is as direct as

diet. In fact, many patients have successfully

recovered from disease through regular exercise coupled with therapeutic diet.

Humans’ skeletal muscles can be classified into two types of muscle fibers: fast-twitch fibers

(type II) required for longer duration activities; slow-twitch fibers (type I) for activities with

quick bursts of power and speed. The “ACTN3” gene determines the ratio of fast-twitch and

slow-twitch fibers. Depending on the ratio, individuals can be fast-twitch dominant, slow-

twitch dominant or middle-type. Different workout programs are recommended to different

types. Weight training programs focused on increasing both weight and reps are better for the

fast-twitch dominant type. Programs with more reps with less strength are better for the slow-

switch dominant type. Even with the same amount of activities, workout results may vary

person to person because of individuals’ ability to reduce blood sugar and cholesterol levels

and to gain muscles. Many researchers are looking to find genetic markers that can explain

the difference in such ability.

When the app containing genome information is connected to wearable devices, it can

generate the analysis results of the wearer’s daily activities such as actual amount of daily

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exercise vs. planned, issues with lifestyle habits and stress level. Using these results, trainers

can provide the users with ways to increase the amount of health-boosting activities at a

minimum cost and effort with a visualized wellness plan. The users will learn how small

choices in everyday life such as walking to work instead of driving or using the stairs, when

practiced for a long time, can help improve their health and be encouraged to implement the

plan. Setting concrete goals and getting feedback on implementation will reinforce positive

behaviors.

6.3.4 Genome-based social network

Patients tend to use social networks to share information on their diseases. Social media can

serve as a channel to acquire medical information on new drug development or efficacy of

new drugs and to seek advice on lifestyle habits. All of these will combine to give a peace of

mind to the patients. As can be inferred from the survey results mentioned earlier that more

than 80% of the respondents expressed willingness to share their medical data, people have

a good will to help out others of similar hardships. People with genes vulnerable to a certain

disease will likely reach out to other people with similar conditions: those who have recovered

from the disease; those who are currently fighting the disease; and those who have the gene,

but have yet to develop the disease.

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Going one step further, if people with certain genes can be connected through a platform,

the concept of social networks can shift again. The Internet enabled social networks

transcending time and space. Genome information can add an element of “biological

solidarity” to the time-and space-transcending social network. People with mutant BRCA1 and

BRCA2 genes highly linked to breast cancer are likely to develop a strong bonding among them.

With deregulation, the genome-based platform will increasingly take the form of a social

media platform like Facebook.

6.4 Growth of the ecosystem

As the GNC ecosystem with a clear reward mechanism attracts more participants,

sequencing companies, pharmaceutical companies, app developers and health care providers

can secure vast amounts of data and select their markets on the GNC platform. In addition,

they are additional factors that lure players into the GNC ecosystem.

Firstly, the ecosystem ensures transparent transactions. As transparency and certainty in

transactions are secured in the GNC ecosystem even without a trusted third party, app

developers can accurately track the record of app downloads. Currently, at pharmaceutical

companies researchers do most documentation manually on genome data collection related

to data compliance, price negotiation and contracting. This makes genetic data collection

time-consuming and costly. Smart contracts solve this issue through the coin ecosystem.

Secondly, personalized information facilitates market segmentation. Breaking up markets

into smaller segments and developing customized services for each segment will create new

demand. Insurers can develop personalized insurance products. Diet or fitness partners can

classify their members into small groups of individuals sharing similar genetic traits and offer

tailored optimal workout and dietary programs for each group.

Thirdly, data can be standardized. Unstandardized data requires additional cost. Genetic

sequencing data need to be standardized before the establishment of an ecosystem. When

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the genome-based ecosystem grows, the ecosystem’s data standardization approach can

become the industry standard.

A series of steps comprising the process from

GNC to the genome-based shared economy will

take place in a virtuous cycle with each step

reinforcing the next. Users will acquire coins

through various channels and use the coins to pay

for genetic sequencing service. More users

purchasing sequencing service means more

genome data and expanded genome knowledge

base, which will be leveraged to offer personalized services. Personalized services will attract

more participants into the ecosystem. Enjoying greater profits, partner companies will invest

more in knowledge and innovation. The growth of the ecosystem will bring more benefits to

participants. As a result, the ecosystem will flourish.