Some Competing Economic Models of Genomic Data Markets
Comparing three major current efforts: Nebula Genomics, LunaDNA, and EncrypGen
The Scene and Setting
Not long after EncrypGen debuted its first prototype for what was to become the world’s first blockchain-driven genomic marketplace at the Boston Bio-IT world conference in May, 2017, other large players began to announce their intentions to follow suit. First LunaDNA, founded by several Illumina alumni, and then Nebula Genomics, founded by renowned Harvard Genomic scientist George Church, entered the fray. Catching the wave of interest in blockchains, at the height of the cryptocurrency bubble, each suggested they would offer their own cryptocurrency to be used in the exchange of genomic data. However, as the crypto bubble popped, and in an increasingly uncertain environment regarding the regulation of cryptocurrencies, both Nebula and Luna dropped crypto from their product roadmaps and went down different roads for creating their genomic database economies by adopting in one case shares in a public benefit corporation (Luna) and in the other, offering credits on a platform good for rebates on various product, or Amazon gift cards (Nebula). Only EncrypGen still has a cryptocurrency usable in their genomic data market, and exchangable for other cryptocurrencies and thus, through those exchanges, for fiat.
Let’s explore briefly the implications of these various economic approaches to incentivizing genomic data exchange.
Sharing, Renting, or Owning
As in the world at large, various economic models are employed by companies and coalitions creating new markets all the time. Also, as in the world at large, not everyone agrees as to the degree to which markets must be regulated in order to help achieve various purposes. Economies exist combining several types of state and other regulatory mechanisms, and flourish even in the presence of a variety of approaches.
Each of the three genomic blockchain companies discussed in this article have the same stated goals: to improve and increase the amount of data available for basic genomic science and personalized genomic medicine, and to provide some means of control, incentive, and reward for those whose data is to be made available and so used.
Each of these three companies has adopted models that mirror, in some respects, macro-economic models seen in the world at large, and implemented in various forms of states and their economic systems. We will explore each in turn as well as contrast and compare potential benefits and drawbacks. Because neither LunaDNA nor Nebula Genomics has launched their full marketplaces yet, we must rely on their public comments through various media to try to discern how their markets will ultimately function.
LunaDNA: a Sharing Economy
The term “sharing economy” emerged as a way of describing a phenomenon that has grown more prevalent, often facilitated by peer-to-peer technologies common on the internet and its World-Wide Web. The general notion underlying sharing economies (also sometimes, and originally, called “collaborative consumption” models) is the ability to engage in spontaneous market interactions among peers, unmediated by external forces. In practice, this isn’t perfectly adopted in any one platform, but numerous “gig economy” models of production and consumption can serve as references, including Uber, YouTube, Craigslist, Gigster, Taskrabbit, and others. Each of these platforms creates a market for individuals to offer and consume a service. In practice, those platforms derive their own profits through monopolizing to some degree their control of a particular market. As new competitors seek to encroach upon those markets, the platforms themselves face the choice of eating into the profits afforded to their producers and consumers, or lower their own expectations of profit. In the real world, for instance, rideshare platform competition has resulted in significant social angst over the fate of drivers who are working longer hours for diminishing returns as companies like Uber and Lyft compete to maintain their profit margins. The companies themselves appear to also be a long way from profitability.
LunaDNA, perhaps having sensed emerging concerns about the use of cryptocurrencies, opted to create a Delaware public benefit corporation, and describes their platform as one for “sharing” genomic data. Their terms and conditions for the use of the platform (worth reading in their entirety, by the way), explain that users will receive shares in LunaDNA and potentially dividends, at rates and times to be determined by Luna. Their model is as if Uber drivers were paid for their services by receiving an amount of shares in Uber to be determined by Uber itself, and contingent upon numerous other eventualities — and able to be rescinded at the will of the company. The difference is that the shares of LunaDNA are not exchangeable like those of Uber. Rather, they may earn dividends, and the drivers may expect to receive dividends at some point down the road, so to speak.
The primary motivation to participate in this type of sharing economy marketplace must be altruism, because economically it is not a viable “gig.” But the rewards in a sharing economy need not always be immediate, nor need they be material or fungible. Members of the LunaDNA are spoken of as being part of a “community” in current public statements by representative of LunaDNA, and they have stressed they are not trying to create a market for buying and selling genetic data, but rather a venue for data sharing. Altruism is a worthy motivation for many of us. Many people are motivated to act for the interests of a community, and certainly the greater public benefit of improved research and, eventually, health care are certainly goals many of us would act upon. It remains to be seen if this will be enough for LunaDNA to gain traction and user base such that researchers have a scientifically valuable pool of datasets to search upon. A final caveat is that LunaDNA can legally only issue shares to US residents, thus potentially limiting the diversity of the data.
Nebula Genomics; Genome Rental
It is difficult to describe the economics of the Nebula Genomics genomic marketplace because it remains in flux and original plans to offer a cryptocurrency appear to have also changed, perhaps for similar reasons as those of LunaDNA. Nebula often discounts the idea of selling genomic data by referring to what they will offer as an opportunity to “rent” the data to others, while stating that the individual is always the owner of the data. While claiming that they want to create a marketplace for genomic data that will somehow reward those submitting their data, the nature of future rewards remains a mystery. The best we can do is look at the current form of rewards: Nebula Credits.
For use on its beta platform, Nebula offers “credits” to users which can be used on their platform to purchase more testing or offset the cost of purchased tests. Those credits are offered at the sole discretion of Nebula, in amounts that are in their discretion. Those credits can be offered for referrals, filling in surveys, or for any reason Nebula chooses, and the offer of credits can be revoked at any time. Assuming the current credit model is not the ultimate economic model for Nebula’s genomic marketplace, we are left with recent statements from the principals at Nebula to decipher their ultimate business model.
Contemporaneous with the publication of Nebula’s Terms of Use, which state:
Beta Terms of Use
Version 1
Effective: November 15, 2018
Last Updated: November 15, 2018Welcome to Nebula Genomics, a company building the world’s largest, most trusted genomic and health data marketplace where everyone can participate to usher in an era of data-driven healthcare.
Nebula Co-founder Kamal Obbad stated that they were still “figuring out the business model” but the article in which this is stated also describes a model that works more or less identically to that used by the world’s most successful direct to consumer genetic testing companies: 23andMe:
It appears that their users will own their data which they will sell to drug companies (and others), but if they allow it to be sold for research then the profits will presumably flow to Nebula, so the term “participate” is a bit, erm, nebulous. This is how 23andMe profits by selling their tests at a loss, because the market for genomic data is enormous and the data is in great demand, especially when aggregated with data about subjects’ health, etc.
Nothing on Nebula’s current FAQ indicates that Nebula offers any profit for people getting tested. They claim only that users will be “compensated fairly” but do not elaborate as to how.
consumers can be rewarded for participating in the community and compensated for sharing data.
Giving Nebula the benefit of the doubt, Nebula may yet choose to create a marketplace where people have the right to the profits from the transaction of their data with Nebula’s data consumers, but the economics of their model are dictated by the large subsidies they are providing to sell their whole genome sequencing kits for just 99 USD each, a tremendous loss (extrapolating from the stated costs of testing by their partner company, Veritas) from their actual worth. Just like 23andMe, which loses money on their kits in order to profit by the sale of users’ data, until data buyers begin to subsidize the costs of the kits, Nebula will need to recoup losses on kit sales by charging a markup against the profits individuals might realize from the direct sales of their data to buyers. That mark-up seems likely to be passed along to data buyers, and impact data sellers, in order for Nebula to not lose so much money it goes out of business before it becomes profitable. All of this means the price of data will not be a natural one, dictated by markets, but rather one that is manipulated by the host of the “market.”
update: appears now Nebula is going to a subscription model: “$6.99/mo. billed yearly, first charged upon delivery of genomic data and report, cancel anytime thereafter.”
EncrypGen: Genomic Data Ownership in a Free Market
Assuming we do not know the free market value of genomic data (because no such free market yet exists), a reasonable way to sort out the natural pricing, and to enable individual sellers and buyers to participate maximally, is to create a free market for the data. A sharing economy without true decentralization will not find an optimal price, nor will a monopolistic one where the market owner takes the bulk of the profits. Free markets, unbridled by regulation or monopolists, are best at finding optimal prices according to modern economic theory.
EncrypGen’s business plan revolves around creating such a free market in order to best incentivize data flow. Because EncrypGen and its partners take only up to 10% of the transaction for a sale of data as a commission, with 90% or more of the data sale price going to the owner of the data, and because it does not bear the burden of selling kits itself at a loss to subsidize the market, users on either side of the transaction take the best value of any of the models described above and prices for data should approach optimal. Neither does the Gene-Chain market depend upon the altruism of users satisfied to join a community and share data for the betterment of science and health alone. They also get paid, through transparent transactions of money in the form of a cryptocurrency convertible elsewhere to other cryptocurrencies or fiat in any nation that allows it.
EncrypGen’s market launched Nov. 6, 2018 and is gaining users, and has hosted the world’s first and so far only blockchain mediated paid transactions for genomic data. It remains to be seen whether any or all of the models discussed above are sustainable, or can be profitable, and whether they will finally achieve the goals all share: to improve and increase the amount of data available for basic genomic science and personalized genomic medicine, and to provide some means of incentive, ownership, and reward for those whose data is to be made available and so used.
Time will tell.
Meanwhile other models may emerge, and any may choose to cooperate in new and creative ways to ensure that the silo-problem, in which data does not become shared but rather cooped up in a particular platform, hindering research, does not occur. As in the world at large, combinations of approaches, cooperative marketplaces in which competitive players create new opportunities for individuals to participate and profit, may yet emerge.
Dr. Koepsell is the owner and CEO of EncrypGen and creator of the DNA currency. He can be reached at drkoepsell@encrypgen.com and found on numerous social media channels. http://davidkoepsell.com