Blockchain: where is it going?
IS BLOCKCHAIN A CRUCIAL MISSING LINK IN THE FUTURE OF THE CARRIER INDUSTRY, OR JUST A HYPE-DRIVEN FLASH IN THE PAN? GUY MATTHEWS ASSESSES THE POTENTIAL OF THE TECHNOLOGY AND CONSIDERS THE CHALLENGES IT REPRESENTS
Blockchain technology is emerging as a hot carrier topic, hailed as a potential game changer and industry re-shaper.
It didn’t start out that way. At its most basic, a blockchain is a data structure that makes it possible to create a digital record of transactions, and share it among a distributed network of computers. Blockchain’s early existence was all about enabling the Bitcoin digital currency, allowing for trusted transactions between anonymous parties, akin to paying for a coffee or a newspaper in the real world with actual coins, the legitimacy of which need never be doubted, with the identity of the payer irrelevant.
The financial sector soon noticed that something interesting was happening in the edgy and peripheral sphere of digital cash. By applying a variant of the original blockchain model to its own world, a bank might be able to reduce the settlement time for a securities transaction, necessitating less capital to be set aside to cover credit risk.
A so-called permissioned blockchain (see jargon buster panel, right) could allow trusted parties to do business with no need for a central authority, but in a way that a regulator can still monitor.
The blockchain bandwagon has rolled on, and now it is the turn of the telecoms community to clamber aboard. Less than a decade from its inception, the humble blockchain is spoken of as: • The way to automate the sale of public Wi-fi or mobile data access; • The future of roaming management; • The answer to the streamlining of OSS and BSS processes by making them cheaper and faster; • The entire basis of tomorrow’s internet of things (IOT); • Powering the smart cities of the future,
controlled and operated by carriers.
It is too early to say with any certainty which, if any, of these outcomes will come to pass. In August 2015, US carrier Verizon put money into a start-up that has been developing connected data modules to allow industrial assets to act as autonomous agents.
At approximately the same time French player Orange launched an initiative it called Chainforce which is looking into a number of blockchain use cases.
Electronic health records
And early in 2016, Emirati carrier du established a pilot programme to facilitate the secure transmission of electronic health records in the UAE via blockchains.
“Orange believes the use of blockchain technology could be useful in opening up new service areas,” says Nicolas Demassieux, senior vice president with Orange Labs Research. “Multiple use cases are being studied today, as diverse as healthcare and banking, in the interests of improving our services and proposing new ones to our customers. As a major network operator, Orange has a role to play as an active blockchain node.”
Demassieux freely admits that, while he fully believes in the disruptive potential of blockchain, the technology is at a very early stage of its development – with a lot still to be learned.
“There is much work to be done around both the technology and its ecosystem,” he concedes. “The issues that must be overcome include the inherent complexity of a decentralised system for end users, the protection of sensitive data in a system accessible to everyone, its governance, as well as data storage challenges.”
In these primary phases of its evolution, it is probably vendors and not carriers that have the real heavy lifting to do.
Luke Sully is associate partner of IBM’S Blockchain Security Services division and an early and enthusiastic proponent of the technology. He says the technology has the potential to completely reimagine how business networks function, given its ability to reduce both the friction and the cost in transactions.
“If you envisage a long and complex supply chain where data is being moved and everybody has a copy of that data, there is a sequential order to how things are updated,” he explains.
“If you take that long line and put it into a circle with the same data in the middle, then all the data is distributed and shared easily. As information changes, everything is updated. You can see immediately how that provides some interesting value propositions and use cases.”
Sully says network operators have every reason to buy into the technology’s future, and points to significant blockchain effort around machine to machine and the collaboration of things.
“It is useful when you have a big and complex network where information needs to flow quickly,” he says. “There could be many assets on that network sending out data, perhaps planes, washing machines or cars, and blockchain can provide a degree of autonomy for those elements to communicate and transact. It has the features of an enabling function in the internet of things.”
Another telco use-case Sully identifies around the area of customer transfer, removing friction as customers move between providers: “Imagine two or three service providers participating in a network with customer data as the ledger,” he says. “How much time and cost would be saved if telco B could access the customer data from telco A so they could move across quicker? There’s currently a lot of friction both in the telco back office and in the customer experience side too.”
Sully, like Demassieux, is sanguine about how early the industry is on the journey to real life blockchain deployments: “There’s a long curve in how it’s going to develop, but we’ve already moved away from ‘here is a great solution, let’s find a problem’,” he says.
And there will be bumps along the road: “There are both some philosophical challenges and some technology hurdles that blockchain will have to get over first,” Sully warns.
“You’re looking at inserting blockchain into existing infrastructure, and that presents a number of integration challenges. Plus a service provider will be subject to regulatory requirements using a blockchain as they will with any other kind of database. Much will therefore depend on the kind of information that you will hold or pass along that blockchain,” he says.
“You will need to worry about sensitive data, particularly with a lsrge number of other participants on the chain. There are security challenges too – but a number of additional security elements are built into blockchain as well. It is about completely reimagining how a business network functions, so it will be a huge opportunity and a challenge too.”
Enrique Velasco-castillo, senior analyst with the research division of independent analyst firm Analysys Mason, says it is far too early to pick out any blockchain leaders, given that meaningful standards have yet to be established.
“The whole architecture of a blockchain still has to be tested by the industry, and some consensus formed about how the technology will be deployed, either by individual operators or as part of consortia,” he says.
Security issues, he believes, have yet to be properly understood: “The way in which these services operate can leave them open to a series of potential attacks,” he says. “Security concerns have to be further explored, and it is very early days for that.”
He points out that breaches have already happened – most notably involving venture capital firm DAO which was hacked and robbed of more than $60 million worth of digital currency.
He agrees that IOT is one of the most attractive blockchain use cases. But Velasco-castillo warns about the hype. “There will be a long process during which we will find which of the various use cases that are being talked up are actually appropriate for blockchain.”