Mar 19, 2018

Blockchain and the Mobile Industry

With almost no industry untouched by blockchain-mania, what opportunities does the technology hold for the mobile industry? Recognizing the issue, the GSMA has begun to explore the applicability of its Mobile Connect, identity management proposition. And, at this year's Mobile World Congress, several mobile network operators (MNOs) bandied together to launch a collaborative approach [1].


Before investigating the mobile eco-system opportunity, let's begin with a brief definition. Blockchain is a technology for distributed databases that support multiple writers. In the context of payments, its early use-case, individuals performing payment transactions are 'writers' to the database (or ledger). In practice, the database exists as multiple copies in a distributed architecture, which gives rise to the notion of a decentralized system that no single entity (i.e. individual Central Banks that issue legal tender) controls.


Now, let's look into the case of two individuals conducting a payment transaction. Their action becomes a new record in the (logical) ledger, subject to a verification process. Managers of database nodes, who hold a copy of the (physical) ledger at a given moment in time, compete with one another to verify the new record as quickly as possible; the first to achieve this gets a reward.

Upon verification, the new transaction becomes the next record in the updated ledger which propagates across the distributed architecture. By design, this arrangement avoids having a central authority to perform the verification, which is one reason why it appeals to users who are wary of the role of Central Banks and policing oversight. The fact that verification can occur at any one of the distributed nodes ensures the integrity of the system of anonymous users; of course, this is subject to the absence of dominance and/or collusion among node managers.

This illustration of a decentralized payments system is not the only situation where blockchain, or distributed ledger technology, is applicable. There is much talk of using blockchain to track the provenance of high-value jewelry, to manage sensor data in smart cities [2] and as a method for inter-organizational record keeping in areas ranging from cargo containers to financial instruments.

The common attributes among these application areas relate to:

  • disintermediation (i.e. where individual parties don't trust one another to share a single database without a trusted intermediary). A central intermediary might over-engineer a database solution leading to higher operational costs and potentially higher barriers to participation for smaller firms; a blockchain alternative would rely on a higher level of participation (fewer restrictions on participating) to drive economies of scale and deliver lower transaction costs. 
  • a diminution of confidentiality in the sense that all transactions in the distributed database are visible to participants. Even if the identity of participants is masked, successive entries in the database are visible to all participants and hence open to analysis for competitive gain. In a supply chain situation, for example, participants could monitor transaction frequencies (indicator of production and sales), transaction relationships (proxy for market share analysis) and order quantities (supply- and demand-side capacity indicators) if the details of individual transactions are exposed. This example illustrates a blockchain-type of solution functions rather like a 'leaky-database'.

These two characteristics encapsulate the blockchain trade-off for users; how much do parties wish to gain from disintermediation but at the cost of confidentiality? These characteristics determine the range of practical application opportunities [3].

When we consider the application of blockchain to the telecoms industry, it is difficult to see large-scale disruption of existing operating models. This is because the industry has long-established supply chains and, in 3GPP, a well-functioning and transparent institution that fosters innovation and technology standardization. It is also an industry with a several decades of delivering cost reductions from scale economies. This limits the scope for blockchain to disrupt the established order.

As a solution for processing transactions, it will take some time for blockchain-type approaches to reach the scale and price-points of existing telco-sector clearing houses and (centralized) authentication services. And, that is without factoring the blockchain verification process [4] which constrains its applicability for near real-time and ultra-high volume applications.

This means that the telecoms industry needs to look to other sectors of the economy to develop markets and business opportunities. The GSMA's Mobile Identity proposition shows how the industry might provide a large-scale, enabling technology that other blockchain eco-systems might use. Another possibility is to provide trusted data on blockchain operational dynamics, highlighting instances where the distributed system becomes concentrated in the hands of a small number of verifiers, for example.

The industry could explore ways to position itself as a value-enhancer for social media and other OTT types of platforms. Consider Facebook's difficulties, stemming from numerous untrusted information end-points and a centralized vetting system that is susceptible to manipulation. Might there be a role for blockchain or alternative verification and record keeping transparency?

New ways of applying blockchain-type technologies are more likely to succeed than efforts to create outsider-led, decentralization substitutes that seek to disrupt established business relationships and trading models. However, mainstream telcos don't seem inclined or well-equipped for this kind of challenge [5].



[1] LG Uplus, Etisalat, KT, Telefónica and PLDT to Support the Carrier Blockchain Study Group From

[2] Nokia - Blockchain for smart city service - https://onestore.nokia.com/asset/201997/NOKIA_Sensing-as-a-service_Solution-paper_EN.pdf

[3] Avoiding the pointless blockchain project - https://www.multichain.com/blog/2015/11/avoiding-pointless-blockchain-project/

[4] Blockchain.info - Average Confirmation Time - https://blockchain.info/charts/avg-confirmation-time

[5] Stick or twist? Operators split on whether non-telco services strengthen their hand - https://eurocomms.com/features/analysis/12921-stick-or-twist-operators-split-on-whether-non-telco-services-strengthen-their-hand


Image credit: Kelli Tungay via unsplash.com 

12 comments:

  1. 20 March 2018 update

    On the 'leaky' nature of blockchain.

    Child abuse imagery found within bitcoin's blockchain - Researchers discover illegal content within the distributed ledger, making possession of it potentially unlawful in many countries.

    https://www.theguardian.com/technology/2018/mar/20/child-abuse-imagery-bitcoin-blockchain-illegal-content



    ReplyDelete
  2. 17 Jan 2019 update

    A few suggestions from IBM on the applicability of Blockchain and Distributed Ledger Technologies

    To determine whether your use case is a good fit for blockchain, ask yourself these questions:
    - Is a business network involved?
    - Is consensus used to validate transactions?
    - Is an audit trail, or provenance, required?
    - Must the record of transactions be immutable, or tamper proof?
    - Should dispute resolution be final?

    https://developer.ibm.com/tutorials/cl-blockchain-basics-intro-bluemix-trs/


    ReplyDelete
  3. 5 February 2019 update

    Useful article on the impact of intermediation on value chains in the finance sector and how distributed ledger technologies could reduce administrative costs and speed up settlement times.

    "Open access to transaction and settlement blocks scares many while even more insiders worry about scalability".


    Source ideas come from 'Finance vs. Walmart: Why are financial services so expensive?, Thomas Philippon'

    https://www.ft.com/content/a532c131-5e1b-327e-8d88-416507523cb4

    ReplyDelete
  4. 18 June 2019 update

    Vodafone and Iliad get involved in Facebook's Libra currency initiative.

    FT Alphaville dissection behind paywall.

    "This is just one of a series of Alphaville posts on Libra coin, which we are calling Breaking the Zuck Buck, in which we will seek to show how nonsensical, pointless, stupid, risky, badly thought-out and blockchainless the whole thing is".


    https://ftalphaville.ft.com/2019/06/18/1560849057000/Facebook-s-Libra--blockchain--but-without-the-blocks-or-chain/


    ReplyDelete
  5. 17 July 2019 update

    World Economic Forum and Accenture study on Building Value with Blockchain Technology


    http://www3.weforum.org/docs/WEF_Building_Value_with_Blockchain.pdf

    ReplyDelete
  6. 12 Feb 2021

    A Taxonomy for Distributed Ledger Analytics
    DOI Bookmark: 10.1109/MC.2020.3017466

    Over the past decade, blockchains and distributed ledger technologies have rapidly evolved. With increasing transaction volumes and the proliferation of decentralized applications based on smart contracts, a need for a deeper understanding arises. We structure the field that we term distributed ledger analytics.

    https://www.computer.org/csdl/magazine/co/2021/02/09353516/1r8kscUejh6

    ReplyDelete
  7. 14 May 2021 update

    Microsoft is shutting down its Azure Blockchain Service. Six years after its initial launch, Microsoft's Azure Blockchain as a Service is going to be shut down this September.

    https://www-zdnet-com.cdn.ampproject.org/c/s/www.zdnet.com/google-amp/article/microsoft-is-shutting-down-its-azure-blockchain-service/

    https://docs.microsoft.com/en-us/azure/blockchain/service/migration-guide




    ReplyDelete
  8. 14 May 2021 - a delayed update

    Evidence-Based Blockchain: Findings from a Global Study of Blockchain Projects and Start-up Companies

    Abstract
    Evidence-based applications of resources remain one of the greatest challenges faced by governments, businesses, and policymakers. The United States Government Accountability Office (GAO) evaluated ten large programs, which together cost more than $10billion/year,through randomised control trials –the highest standard of evidence-based practice(EBP)[1]. The evaluation found that nine of them had ‘weak or no positive effects’ on their participants. Many programs were not evaluated at all[2]. In January 2019, U.S. President signed the‘Foundations for Evidence-based Policy Making Act’ into law [3]. A USAID (US Agency for International Development)study looked at 43 blockchain projects and companies claiming to have solved various problems using distributed ledgers [4]. The study found that almost no company was willing to share their results and MERL(monitoring, evaluation, research and learning)processes [5]. Other observational data revealed that 80–90% of blockchain-based token offering projects failed to deliver on their promises[6], a prediction also made by Vitalik Buterin, the founder of Ethereum blockchain, in 2017 [7].


    https://jbba.scholasticahq.com/article/16795-evidence-based-blockchain-findings-from-a-global-study-of-blockchain-projects-and-start-up-companies

    ReplyDelete
  9. 13 January 2022 update

    Nobody Cares About Decentralization - They Just Want To Get Rich

    Bloomberg’s Parmy Olson wrote a pretty good piece about web3 based on Signal founder and cryptographer Moxie Marlinspike’s extremely long evisceration of a core problem of decentralized blockchains - that they’re not decentralized at all and has big, nasty privacy problems.

    The long (and man, it is long) and short of what he’s saying is even though these are “decentralized” products, they have to operate on the regular non-decentralized web.

    https://ez.substack.com/p/nobody-cares-about-decentralization

    ReplyDelete
  10. 14 Feb 2022 update

    There’s very little evidence for blockchain, it turns out

    Naqvi, Naseem, and Mureed Hussain. 2020. “Evidence-Based Blockchain: Findings from a Global Study of Blockchain Projects and Start-up Companies.” The Journal of The British Blockchain Association, September. https://doi.org/10.31585/jbba-3-2-(8)2020.

    https://jbba.scholasticahq.com/article/16795-evidence-based-blockchain-findings-from-a-global-study-of-blockchain-projects-and-start-up-companies

    ReplyDelete
  11. 27 June 2022 update

    On the Dangers of Cryptocurrencies and the Uselessness of Blockchain

    https://www.schneier.com/blog/archives/2022/06/on-the-dangers-of-cryptocurrencies-and-the-uselessness-of-blockchain.html

    ReplyDelete
  12. 30 June 2022 update

    Are Blockchains Decentralized?

    The following are the key findings of our research. They are explained in more detail in the remainder of the report.

    ● The challenge with using a blockchain is that one has to either (a) accept its immutability and trust that its programmers did not introduce a bug, or (b) permit
    upgradeable contracts or off-chain code that share the same trust issues as a
    centralized approach.

    ● Every widely used blockchain has a privileged set of entities that can modify the semantics of the blockchain to potentially change past transactions.

    ● The number of entities sufficient to disrupt a blockchain is relatively low: four for Bitcoin, two for Ethereum, and less than a dozen for most PoS networks.

    ● The vast majority of Bitcoin nodes appear to not participate in mining and node operators face no explicit penalty for dishonesty.

    ● The standard protocol for coordination within blockchain mining pools, Stratum, is unencrypted and, effectively, unauthenticated.

    ● When nodes have an out-of-date or incorrect view of the network, this lowers the percentage of the hashrate necessary to execute a standard 51% attack. Moreover, only the nodes operated by mining pools need to be degraded to carry out such an attack. For example, during the first half of 2021 the actual cost of a 51% attack on Bitcoin was closer to 49% of the hashrate.

    ● For a blockchain to be optimally distributed, there must be a so-called Sybil cost. There is currently no known way to implement Sybil costs in a permissionless blockchain like Bitcoin or Ethereum without employing a centralized trusted third party (TTP). Until a mechanism for enforcing Sybil costs without a TTP is discovered, it will be almost impossible for permissionless blockchains to achieve satisfactory decentralization.

    ● A dense, possibly non-scale-free, subnetwork of Bitcoin nodes appears to be largely responsible for reaching consensus and communicating with miners—the vast majority of nodes do not meaningfully contribute to the health of the network.

    ● Bitcoin traffic is unencrypted—any third party on the network route between nodes (e.g., ISPs, Wi-Fi access point operators, or governments) can observe and choose to drop any messages they wish.

    ● Of all Bitcoin traffic, 60% traverses just three ISPs.

    ● Tor is now the largest network provider in Bitcoin, routing traffic for about half of Bitcoin’s nodes. Half of these nodes are routed through the Tor network, and the other half are reachable through .onion addresses. The next largest autonomous system (AS)—or network provider—is AS24940 from Germany, constituting only 10% of nodes. A malicious Tor exit node can modify or drop traffic similarly to an ISP.

    ● Of Bitcoin’s nodes, 21% were running an old version of the Bitcoin Core client that is known to be vulnerable in June of 2021.

    ● The Ethereum ecosystem has a significant amount of code reuse: 90% of recently deployed Ethereum smart contracts are at least 56% similar to each other.

    https://assets-global.website-files.com/5fd11235b3950c2c1a3b6df4/62af6c641a672b3329b9a480_Unintended_Centralities_in_Distributed_Ledgers.pdf

    ReplyDelete