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How Service Providers Might Use Blockchain

Blockchain, one of the most discussed technologies today. Many companies across industries believe they'll benefit from this emerging technology, including communication service providers. The big questions for them are around the financial return and trust.

Blockchain Basics

Blockchain, which is a foundation of cryptocurrencies like bitcoin, provides a way to structure data. It's a coding breakthrough, consisting of concatenated blocks of transactions, that "allows competitors to share a digital ledger across a network of computers without need for a central authority. No single party has the power to tamper with the records: the math keeps everyone honest," as described in this Fortune article.

Blockchain is anticipated to lower costs. It's also expected to deliver trust, security, transparency, and control across participating members in the transaction process. As three major benefits, it allows the ability to:

  • Streamline internal processes, including interaction with suppliers and other providers, resulting in lower costs, faster throughput, and improved experiences for all players
  • Develop services in support of identity management, mobile money, and digital access transactions, for example
  • Collaborate in business ecosystems, including the Internet of Things (IoT), providing trust, security, and transparency for all transactions

Blockchain for Service Providers

Service providers can offer smart contracts for streamlined billing, retail, wholesale, service management, and supply chain management. These can result in the ability to identify visiting subscribers, prevent fraudulent traffic, and reduce the number of claims.

As discussed in the IBM Institute for Business Value report, "Reimagining telecommunications with blockchains: from concept to reality," 36% of 174 communications service provider executives surveyed, said they are considering or actively participating with blockchains. Additionally, 41% of the providers surveyed said blockchain could support their enterprise strategy by assuring data quality and accuracy, and 46% said they've invested in blockchain to develop new business models.

The benefits the provider sees from blockchain can translate into benefits for the enterprise. Stronger security is the most important benefit, as shown below, followed by the ability to develop business models that can increase revenue and profit. The last two benefits deal with keeping up with the competition and being first to market.

(Source: IBM Institute for Business Value report)

Blockchain for the Enterprise

Most (87%) of the provider executives surveyed said that the customer/enterprise is an important participant that will influence the provider's ability to move forward with blockchain technology. The enterprise's experience is a major consideration in designing the provider's processes. In addition, 76% reported that regulators will play a key role. Blockchains will need to comply with existing and future legislation, such as those aimed at data protection. Facilitating agreements on standards was recognized by 72% of the respondents, indicating that industry consortia are important to their blockchain projects.

Enterprise benefits that could result from provider use of blockchain include:

  • New digital services other than IoT
  • Flexible contract agreements
  • Rapid response to change requests
  • Payment by blockchain
  • Ability to collaborate in IoT and other business ecosystems as a peer and trusted partner

Is It Safe?

As with any technology, blockchain comes with some limitations, barriers, and concerns about trust.

Mike Orcutt, associate editor with MIT Technology Review, tackled the blockchain security question in an April article, "How secure is blockchain really?" While the "whole point of using blockchain is to let people ... share valuable data in a secure tamperproof way, ... even the best designed blockchain systems can fail in places where the fancy math and software rules come into contact with humans, who are skilled cheaters, in the real world, where things can get messy."

Orcutt pointed out a variety of creative ways to cheat and ways to subvert the blockchain, such as:

  • "Accidentally" using tried-and-true cryptographic tools in ways that aren't secure
  • Gaining control of one of the communications nodes and fooling it into accepting false data
  • Breaking into "hot wallets," which are Internet-connected applications for storing private cryptographic keys
  • Exploiting quirks in smart contracts

Blockchain seems like a good idea. But it hasn't been tested on a large scale. Would you want to be an early adopter on a large scale that ends up failing?

Related content:

  • Making Sense of Blockchain, Bitcoin
  • Blockchain: Coming to Your Telecom Future
  • Avaya: Think Cloud... & Blockchain, IoT, and AI