At TM Forum Live! in Nice (May 15-18), Pierre Blanchard of PRB Advisory, will chair a panel on ‘The role of blockchain and smart contracts in strengthening the IoE economy’. Here, he looks at the potential value of this emerging technology.
For several industries exploring how emerging technologies could change the game in their space, blockchain is one of their major priorities for investigation and testing. Beyond the buzz and the hype, there is a common perception that blockchain (which has been made famous to the general public as the technology underpinning the virtual currency Bitcoin) may have a strong impact on the shape and pace of development of the internet of everything (IoE).
In that context, some communications service providers (CSPs) have already engaged in a deep-dive into this technology in relation with their IoE and digital services ambitions. Orange’s investment in the blockchain start-up Chain is just an example of this move in our industry. In a recent report, TM Forum identified blockchain as one of the five top technologies to watch for IoE.
Blockchain in a nutshell
While the concept has been widely shared across our communities, and a short definition is necessarily incomplete, it is probably helpful to try to summarize, in simple terms, what the key components and features of the technology are.
In a nutshell, blockchain is a data storage and transactions recording technology, supporting a distributed ledger which is secure, incorruptible, transparent and without central control. Validation of the transactions and their integration into a block of the chain by crypto-economic consensus (a combination of cryptographic and reward process) is a key element of the technology. Blockchains can be either public (open to all, such as in the case of Bitcoin) or private (under restricted access).
Business benefits of the technology for IoE
At a high level, many of the potential business benefits of blockchain technology are relevant to IoE:
- Replacement of trusted third parties at a significantly lower cost: Most IoE digital services will incorporate several players and will fly only if and when there is an end-to-end service provider ensuring seamless integration between the different components of the service. To a certain extent, a blockchain can play this role instead of — or as a support to — a trusted third party. And, for the group of providers underpinning the service, it might be easier to jointly build such a blockchain rather than agreeing on an end-to-end trusted provider.
- Automation of contract execution through smart contracts: Smart contracts (i.e. software applications with embedded business logic reflecting a material contract) are one of the applications enabled by blockchain technology. In the IoE context, where interactions between things and parties will be highly complex, smart contracts can be an easier way to handle this complexity, and therefore could be key for the development of some IoE digital services.
- Security and privacy: All players in the IoE space see security, including cybersecurity and privacy, as major challenges — both for the delivery of the services and for gaining clients’ trust. In that view, blockchain-embedded security features can be a powerful enabler to guarantee data integrity and drive IoE adoption, especially when it relates to transactions between things, which will be part of some IoE services.
- Traceability: For many supply chain applications, traceability, underpinned by trusted data, remains a hurdle which applies to both objects and transactions. Blockchain technology brings a real breakthrough in traceability performances, allowing for a secure autonomous supply chain that can make IoE solutions scale.
Ongoing pilot projects and proof of concepts
Beyond the strong engagement of the financial services industry with this potentially very disruptive technology for them (in areas such as cryptocurrencies, cash transfer and digital payments), there are also a number of pilot projects in other industries which are very relevant for IoE and CSPs.
In the energy space, the driving blockchain-enabled application is related to the development — underpinned by new regulations — of local microgrids, allowing neighbors to share private production and usage of solar-panel-generated electricity. In this context, blockchain allows the building of a peer-to-peer energy trading platform which is secure, without the need for an electricity company as a trusted third party. Such pilot projects are ongoing in places such as Brooklyn, New York and Lyons, France. More broadly, the potential of the opportunity has resulted in the creation of a specific blockchain-based crypto-currency, SolarCoin.
Most of the transactions in the real estate industry involve several middlemen, including brokers, notaries, government bodies, insurance companies and others. This is an area where the introduction of blockchain would highly disintermediate transactions. A major bank in Europe is carrying out several pilots to test a blockchain app to support commercial real estate transactions.
These are just two examples of ongoing pilot projects which reflect the excitement in several industry sectors about this potentially game-changing technology.
While immature to date, the technology will likely become pervasive across the IoE landscape. In spite of the many initiatives around blockchain and a consensus on the likely disruption that the technology will trigger in the IoE space, most of those who invest in the technology understand that it is still in its infancy, with many questions around scalability and security (e.g. the hacking of The DAO last year), as well as around the challenge of the high energy consumption of blockchain infrastructures.
Nevertheless, whatever the pitfalls and the hurdles, blockchain is likely going to be, step by step, pervasive across the whole spectrum of IoE digital services. It is therefore crucial for CSPs to accelerate the exploration of the technology in order to materialize their ambitions in the IoE space. And because CSPs have got the background, the technology knowledge and the people, they are best placed to spearhead this move.
Blockchain will be the theme of one of the panels I am chairing at TM Forum Live! and seeing the impressive list of panelists, I am really looking forward to engaging in a content-rich and maybe sometimes controversial debate about how blockchain can be game-changing for IoE. I hope many of you will be able to join us.
TM Forum Live! takes place May 15-18 in Nice, France. Find out more at www.tmforumlive.org