You\u2019ll soon be able\u00a0to buy and sell health data with tokens, similar to how you\u2019re issued drink tickets at a comedy club. The first step in understanding why tokens will be important to the future of health is differentiating an IPO (initial public offering) from an ICO (initial coin offering), which we\u2019ll discuss here.\nThe definition of what a token is has changed. Traditionally, tokens were visible representations of value. Arcade tokens were physical coins that you bought with quarters. The words \u201cArcade Only\u201d were stamped on these coins. The machines in the arcade network didn\u2019t accept quarters \u2014 only tokens. Arcade tokens were valid only at a single arcade location. In the future, tokens \u2014 thanks to blockchain \u2014 will be durable and transferable.\nIPO and ICO regulations\nInitial public offerings, venture capital (VC) and crowdfunding have been used until recently to raise money or sell a stake in a company. The initial coin offering is the new method for cryptocurrency projects to generate capital. IPO and ICO are similar in that they both raise money. Investors know the inherent risk in every new venture but recognize the possibility of a significant reward.\nIn the United States, it\u2019s the Securities and Exchange Commission (under the Securities Act of 1933) that regulates IPOs. In the United Kingdom, the UK Listing Authority reviews and approves prospectuses and operates the listing regime for shares in publicly traded companies. However, ICOs have no government oversight except what\u2019s built into the cryptocurrency.\nHow initial public offerings work\nThe energy behind an IPO builds when a privately-owned company decides to search for investors with the intent of raising money. After the disclosure document is provided to the government, interest in the IPO will grow. The journey, from a wish in hopes for investment dollars to the reality of a traded stock, is a highly regulated and complex endeavor.\nThe IPO process consists of:\n\nDue diligence and pre-IPO preparation: conduct background research.\nRestated financials by peer-reviewed auditor: reassess financial position.\nDraft prospectus: create an overview of an investment offering for sale to the public.\nValuation and issue pricing: determine proposed share valuation.\nExchange approval: determine the trading exchange.\nDevelop equity story: define the value proposition of the idea or the company.\nInitial SEC filing: file a prospectus.\nSEC review: formal review of the prospectus.\nAnalyst meeting: educate potential investors.\nFile prospectus delivered: submit a formal SEC filing.\nRoad show: campaign in support of the offering.\nListed and trading: initiate public trading.\n\nThe primary goal of an IPO is to raise money and build investor trust. The challenge of the initial offering is that capital markets are very restrictive at this stage. Many brokerage firms allow only experienced, qualified investors to invest early on. For example, Fidelity requires that its investors have $500,000 in household assets and 36 trades a year or validation as a premium or private client group customer. The rationale for limiting investors to those who are more experienced and accredited is to create stability. These investors are better prepared to take risks and have the financial support to make these investments using logical thinking. This model also prevents the market from whipsawing back and forth as smaller, short-term investors step in and out of the trading based on thin fluctuations of the stock price.\nIPOs are released much more frequently than ICOs, but that\u2019s about to change. There were 21 IPO announcements in April 2017.Here are the top 10\u00a0offerings:\n\nSchneider National Inc.: $550.1 million\nVantage Energy Acquisition Corp.: $480.0 million\nHess Midstream Partners LP: $340.0 million\nWarrior Met Coal, Inc.:\u00a0 $316.7 million\nEmerald Expositions Events Inc.: $263.5 million\nCloudera Inc.: $225.0 million\nCarvana Co.: $225 million\nOkta Inc.: $187.09 million\nFloor and D\u00e9cor Holdings Inc.: $185.3 million\nNCS Multistate Holdings Inc.: $161.5 million\n\nHow initial coin offerings work\nDigital tokens are units of value created and managed with smart contracts. They\u2019re similar to stock certificates in that they only hold value within the project or company.\u00a0Tokens\u00a0represent any fungible, tradeable good or claims to such goods. These tokens circulate inside a closed ecosystem for the purpose of trade (defined as the ability to use a service) and work (the ability to contribute).\nSecurity industry norms prevented many smaller investors from participating in the pre-IPOs for Facebook (online social media and social networking service), SnapChat (image messaging and multimedia mobile application) and Cloudera (leading commercial platform that makes use of Hadoop).\nIn contrast, the process for ICOs is inclusive for all levels of investors.\nThe ICO process:\n\nDraft background: produce white paper (technical aspects), assemble a team of officers (known and perhaps unknown within the industry), create roadmap (achievable goals) and install investor protections (insulating risk), which includes some new products, services or innovations to prove viability.\nCrowdsale campaign: determine if a team will campaign or generate interest organically.\nEstablish multi-signature escrow wallet: collect contributions and publish key holders.\nPublic announcement: announce via Bitcointalk and Reddit.\nEstablish token: aggregate funding with platform, e.g., Waves.\nValuation and issue pricing: determine proposed share valuation.\n\nIn sum, the primary goal of an ICO, just like an IPO, is to raise money and build investor trust.\nTokens are an integral part of the incentive scheme for these cryptocurrencies. The transaction cost of creating blocks paid for with the cryptocurrencies\u2019 tokens, reduces blockchain bloat (uselessly validating transactions).\nThe popularity of ICOs is growing. In 2016, General-Beck wrote a script to identify all the tokens on Ethereum and found 272 different types of tokens. In late 2016, the site Ethplorer appeared, offering the ability to explore and search for tokens (best used for the lookup functionality). As of May 2017, the market capitalizations for the top 10 cryptocurrencies are as follows:\n\nBitcoin: $24.1 billion\nEthereum: $7.2 billion\nRipple: $2.2 billion\nLitecoin: $1.1 billion\nDash: $644.2 million\nEthereum Classic: $644.9 million\nNEM: $475.0 million\nMonero: $364.0 million\nAugur: $180.0 million\nGolem: $179.9 million\n\nThese and other cryptocurrency offerings are frequently announced on Bitcointalk.\nThe tokenization of healthcare\nHealthcare providers will soon issue tokens that offer historical proof of care. The tokens will represent a set of healthcare transactions (diagnosis, prognosis, symptoms, lab results, etc.) and the collective actions taken by the patient and provider.\nThe token will be a collection of activities encapsulated in blocks (transaction ID, token ID, time stamp, validation signature, nonce, etc.). Tokens will be portable and shareable across file systems. Healthcare ICOs will use tokens backed by the value of the data encapsulated within a\u00a0block, representing healthcare events and the associated patient data.\nThe flow to create a token would approximate the following:\n\nParticipate in a healthcare event.\nGenerate a set of transactions for encapsulation as a token (historical record), e.g., patient diagnosis.\nValidate the token authenticity of the issuer (digitally sign with hash, validator or a provider\u2019s private key).\nCreate a block to include healthcare transactions or health events.\nPost a validation block to a private, peer-based network.\nBroadcast the proof of validation.\nConfirm receipt of a token for the work or a set of healthcare transactions.\n\nThe Mayo Clinic (hKash) and the Memorial Sloan Kettering Cancer Center (gzHealth token) are the pioneers in this field. They were the first to offer a permanent, digital record of healthcare delivery. Is your healthcare wallet updated?\nAs it turns out, Mayo\u2019s hKash and Sloan Kettering\u2019s gzHealth tokens are near-term dreams of mine and of many others interested in using blockchain to deliver better care. They don\u2019t exist today, but tomorrow that may not be the case.\nWhile there isn\u2019t yet a system of asset-backed tokens (one that offers claims on an existing company\u2019s assets issued by the healthcare provider), the tokenization approach does provide a permanent and portable record of a patient\u2019s healthcare events.\nThe next generation of value-based care measures will be nontraditional. The future valuations of medical centers, hospitals and providers may be determined by the issuance of the healthcare provider\u2019s ICO in the form of health tokens \u2014 which is the logical first step toward community-owned care.