by Srinivas Konteti and Roop Singh
Blockchain is creating a buzz in the market, and rightfully so. Why not? It’s one of the revolutionary technology inventions after the Internet revolution of 1990’s and SmartPhone revolution of late 2000’s. Undoubtedly, some of the startups and enterprises are already on their way to disrupt markets. They are leveraging this new invention by way of doing proof of concepts, building prototypes, and looking to reimagine and reinvent some of their business processes using Blockchain.
In this article, we would first define Blockchain as to level set our shared understanding, then delve into some of the key use cases where Service Providers could benefit by using Blockchain.
Take a glance here to learn basics about what is Blockchain, and why does it matter?
What is Blockchain?
So to recap, in a simplistic term, “Internet is to Information, [as] Blockchain is to Digital assets”. It works in a “trustless” ecosystem where an encrypted transactions can be exchanged through an untrusted network. . It is a shared, distributed database ledger, where transactions are recorded and committed to the chain of blocks, once validated by the nodes on the network of nodes.
Companies have an opportunity to create Blockchain Business Networks with business value chain partners, exchanging assets and transacting through Blockchain Networks through an agreed upon defined consensus mechanism. This consensus mechanism determines precisely how the transactions will be validated and the new blocks created. As opposed to a public blockchain, like Bitcoin or Ethereum, in a business network, the participating companies have the onus and responsibility to define this mechanism.
How Blockchain works? A high level view :
- Sender sends the transaction to a Recipient
- The transaction is validated by the nodes on the distributed ledger by way of consensus mechanism
- Once the transaction is validated, it is added to the new Block in the chain
- Transaction is sent to the recipient
Business applications can be viewed using the model below:
Locus of Authority: This dimension map shows whether any node can join and participate in the network. Is someone’s permission and approval required to join this network? That would make it a permission based network. Or could one merely download the correct open source available software and participate in the network. That would then be public network, for instance, Bitcoin blockchain network.
Locus of Storage: This dimension map is the mode of data storage and validation.
Centralized – Data is stored in databases.
Decentralized – Data is stored amongst many nodes. It is then validated (using cryptographic algorithms) and transferred from one node to another, hence forming a chain of blocks of data. Somewhere between the two extremes of completely centralized and fully decentralized, we find the distributed network.
As an enterprise, the choice on each dimension can be made based on the application’s strategic purpose and its use case.
- Permission-based (Ex: Everledger): Each of the participants has a unique identity and policy to access transaction details.
- Permission-less (Ex: Bitcoin): Doesn’t maintain identity of the participants nor offers privacy
- Private (Ex: Everledger Business Networks): Each of the participants in the Business Network have a defined and known identity and access control is enabled through private/public crypto keys.
- Public (Ex: Ethereum Blockchain Network): Participants in the Network are pseudo-anonymous or fully anonymous, and anyone can join and send transactions.
So how is this relevant to an enterprise?
Organizations or consortiums that set up a private blockchain may set up a permissioned network that will place restrictions on who is allowed to participate and also what type of transactions they are allowed to perform. One of the key benefits of a private blockchain is that only the entities participating will have knowledge and access to the transactions. We find a number of B2B use cases in this top right quadrant. We find B2C use case implementations of blockchain tending towards the bottom right quadrant.
As email was the one of the first applications to be built on protocols we now know as the Internet, so is Bitcoin is the first, perhaps the simplest, application to be built on the foundation of protocols known as the Blockchain.
One may think of Blockchain based technology stack as an Operating system – wherein Blockchain handles the integrity, storage, consistency, transparency and security of the transactions – while applications leverage Smart Contracts to execute the business logic to support the business functionality. While traditional centralized databases are susceptible to fraud, cyber attacks, human errors and security breaches, in which which entire business network can be compromised, Blockchain is an immutable, decentralized, shared, and distributed database ledger.
*A state based view is embodied and propagated by Dr. Gavin Wood of Ethereum. Read yellow paper here. The full scale Operating system view is also productized by EOS, in a different way than Ethereum’s view. Read more about EOS as Blockchain Operating System here.
Blockchain builds trust through the following attributes:
- Consensus mechanism to validate the transactions. Each participant in the distributed database maintains a replica of a shared append-only ledger of digitally signed transactions through a protocol referred to as consensus. This can potentially remove the concerns with single point of failure, fraud, and control by a single entity in case of centralized databases.
- Asset Provenance is maintained throughout the life cycle of the assets.
- Assets are Cryptographically secured, tamper proof, and highly impossible to manipulate the blocks, using hashing functions. Manipulating a transaction in a block is highly impossible as it needs to match the Hash that was used to create the Block. Also, it needs majority consensus, the same need to be replicated across the nodes.
- One may use Smart Contracts in the application layer, to encapsulate business logic that can generate specific events upon predefined conditions. These are sometimes referred to as self-executing contracts that can be converted to code, stored and replicated on the blockchain. This has the potential to help the industry transition to software defined contracts that execute automatically without the need for human intervention.
- Its Immutable ledger – Each block in the blockchain builds upon its predecessor (a timestamp and a link to a previous block). The cryptographic secured nature of these blocks makes it hard to alter information in the existing blocks. In essence, one could say that blockchains enable the creation of permanent data that is locked in time.
- It’s a Shared ledger and provides transparency among the participants of the business network.
Blockchain is out of Beta
, reports: when the discussions at Davos, Switzerland for the annual meetings of the World Economic Forum, are dominated by global impact of Blockchain, we can clearly claim its out of beta. Inline with the hype these days, we have people approach us to insert blockchain in their business operations. We wish we could. Alas, not all use cases are a good fit for Blockchain. Any use case that has multiple business partners involved requires automated trust and needs some form of agreed upon consensus mechanism, which would typically form a good use case for Enterprise adoption of Blockchain.
Reimagining use cases with Blockchain
We view blockchain’s deployment to four worthy ends:
- Replace of old legacy technology stack. Reduce technical debt.
- Automate disparte, inefficient processes residing in multiple legacy systems, tethered to databases.
- Reinvent and reconfire partner relationships across your supply chain. Deploy a shared layer of trust.
- Enable new business models to respond to evolving consumer behaviour and expectations.
Here are a few questions to ask for determining genuine Blockchain applicability:
- Is the business process cross-departmental and cross organizational?
- Is there trust issue among transacting participants?
- Do you have intermediaries that needs to intervene in the process? Do they add true value? Could they possibly corrupt the data?
- Does the data require periodic reconciliation?
- Is there a need to improve traceability or audit trail?
- Do you need real time visibility of the current state of the transaction?
- Can business process be improved by automating certain processes?
- Does the process demand scalability, resilience,security, and availability?
As incumbent companies grapple with an emerging ecosystem of crypto/blockchain driven ventures, they are discovering the potential for blockchain. As a new class of companies show how this technology is revolutionizing business models, incumbents need to respond before it’s too late.
Tales have been written about lack of innovation within large enterprises. Incumbents need to be nimble, innovate, and perhaps cannibalize their own business models, or else they just might be trapped in their own chains and become obsolete. A new world of possibilities is here, you just need the eyes to see it.
Incumbent Telecom enterprises have appropriate use cases that can benefit with Blockchain. Adoption of Blockchain could bring some significant efficiencies, cost benefits, and new revenue streams for the CSP’s, some of the benefits can be categorized in the following areas of interest:
Core Business Operations
- Supply Chain, Procurement and Vendor Invoice
- Blockchain technology can disrupt Procure To Pay business processes and, more importantly, provide huge operational benefits in terms of speed, greater security, transparency and decreased workload by facilitating the exchange of information right from processing vendor master agreement, allowing for catalog in purchase system, loading contract into the repository, allowing vendors to submit e-invoice, create and approve requisition, fulfilling PO, process invoice, resolving any invoice exceptions, process payment, issuing payment and e-audit capabilities.
- Blockchain provides a trusted platform of distributed ledger between suppliers and Service Provider. Service Provider and suppliers can see an overview of the chain from the original purchase order through the invoice or delivery and thus reduce dispute costs. This not only enables transparency between the parties but also reduces the arbitration.
- Business contracts on Blockchain is a potential use case, where in entire contract lifecycle (contract agreement) between the supplier and consumer can be managed leveraging Blockchain and smart contracts which automates and provides transparency at various stages of the process, including invoice generation upon meeting the contract agreement.
2. Digital Asset tracking
- Blockchain can act as a single source of truth for all or any sellable assets, automatically tracking every change to the asset lifecycle, so it is auditable, trustworthy, and transparent. Tracking starts when the asset is ordered till it is disposed.
Operations Support System
- Subscribers and Service Providers can enter into a micro payment contract, simplifying pay per usage contract through autonomous Blockchain based transactions between the device and the access points.
- Number Portability
- Today it takes several days to port a phone number between the parties (donor and recipient) and the time lag varies depending on if it’s a wireless or wireline. Blockchain, with its distributed ledger and smart contracts, could release the phone number within hours.
- Smart SLA Management
- Blockchain enabled SLA management between the Service Providers and Vendors could increase transparency, efficiency, speed and accuracy. Use Case with the smart SLA management could be between Service Providers and their Customers or Service Providers and their Vendors, wherein their payments systems and SLA’s are defined in the smart contracts. As and when SLA are met or deviated, the smart contracts automatically executes without human intervention thereby increasing the speed, accuracy and efficiency.
Business Support System
- Identity as a service
- The blockchain offers the promise of a trusted record that can reduce fraud and bring efficiencies. Some industry experts say that over the coming years, it could be used to control identity information in a more secure fashion. Today, majority of the organizations and within these organizations have siloed Identity management solution, that can benefit with Blockchain. Not long ago, Equifax with its centralized database solution has been hacked and impacted 143 Million identities. There is a strong case for decentralized identity management solution with Blockchain. Companies like Civic, Uport and Sovrin have taken the lead in developing such identity management platforms. As their products mature, we’ll see a wide scale adoption of use empowered, self sovereign, and self service identity as a defacto model for future business applications.
- Virtual Identity
- New revenue streams could be generated by offering blockchain identity management services to subscribers and business partners. Service Providers could provide their subscribers with an “eSim” or an app that creates unique virtual identities for each subscriber, which are encrypted and stored in a blockchain, and which subscribers would use to automatically authenticate their identities when visiting partner websites. For example, a virtual identity stored in a blockchain using an app could be used by a subscriber to sign into Facebook or Gmail on a mobile device. The benefit of such services is that the subscriber would not need to continuously provide his or her personal details to different service providers in order to create new accounts and complex passwords. The virtual identity stored through the app could be provided to numerous partner websites and apps as a unique identifier;
- Micro payments
- Service Providers could use blockchain technology to implement micropayment-based business models for digital assets (e.g. for the purchase of digital products and service such as WiFi, HotSpot, music, mobile games, gift cards or loyalty points). Service Providers may incur lower transaction costs and increase the speed of processing, compared to transactions that involve cash, debit or credit cards or cheques;
- Device/STB Asset tracking
- In general, CSP’s lose revenues due to lack of proper traceability of their assets such as STB’s/SmartPhones, Blockchain can act as a single source of truth for any or all assets (tangible/intangible), automatically tracking every change to the asset lifecycle (activate, deactivate, upgrade, swap, return, cancel), so it is auditable, trustworthy and transparent. Tracking starts when the asset is ordered till it is disposed. This use case has potential to reduce operational cost to the service providers and improve customer satisfaction.
- Billing, Invoice, Reconciliation and Payments
- Phone calls or transactions initiated on the network through mediation can be recorded on Blockchain. Call duration and End of calls are recorded on Blockchain as immutable transaction.
- Fraud Reduction
- It is estimated that the fraud costs Service Providers USD 40 billion each year, Blockchain based products and service can be designed to reduce this risk.
- Identity fraud can occur when an individual uses false identification to obtain services (e.g. a physical sim card). Blockchain’s inherent public key cryptography capability can be used to link a smart device to the owner’s identity. By implementing blockchain technology, a phone-generated public key could be broadcasted instead of an International Mobile Subscriber Identity, which would be used to identify and authorize the device and individual. This would keep personal information more secure as all private information would be encrypted in a private key known only to the device owner
- Roaming and Settlements
- Automatic trigger of contract between home operator and roaming partner using smart contracts
- Reduce cost for Service Providers by completely eliminating 3rd party clearing house process
- Auditable information for verification, validation and reduce the cost of disputes and arbitration
- Effective identity management across the CSP’s to mitigate the roaming and subscription fraud
- Mobile calls initiated on the network through mediation are recorded on Blockchain. Call duration and End of calls are recorded on Blockchain. Based on the smart contract, the charges are set and payment is recorded from Home to Roaming partner. As such role of Clearing House and Settlements are obsolete.
Business Value Add Services
- New Revenue Opportunities
- Vending Machine with eSIM: When the consumer pays for the product through mobile payment, Service Provider collects the revenues and distributes the share to the vending machine vendor and supplier. The record of each transaction in the blockchain provides a trustful and immutable record to each participant on the ecosystem
- Customer loyalty program
- Service Providers could use blockchain technology to implement micropayment-based business models for digital assets (e.g. for the purchase of music, mobile games, gift cards or loyalty points). Service Providers may incur lower transaction costs and increase the speed of processing, compared to transactions that involve cash, debit or credit cards).
- Digital Rights Management and Royalty Tracking:
- Today’s DRM solution is complicated and siloed between publishers and consumers. Blockchain can provide an transparent and decentralized layer to streamline the process end-to-end, providing transparency to all the participants with royalties automatically distributed based on the smart contracts, reducing the piracy issues and increasing authenticity.
- Programmatic Advertising:
- Digital media is set for major transformation with Blockchain, as there are many use cases for Programmatic Advertising in improving efficiency and reducing fraud. Payment reconciliation between the Publisher and Advertisers, Data Syndication, and Monetization of the 3rd party data set and reducing Fraud, besides reducing disputes between publishers and advertisers, reliable and authentic ad-send information, streamlining billing and invoice processing.
Major worldwide service providers are increasingly investing in blockchain development and implementation by entering into partnerships or collaboration agreements with technology companies and investing in funds dedicated to blockchain technology research and development. Providers, both incumbent and startups, who take advantage of this new technology and innovate themselves are going to reap the benefits on the outset, while the slackers will lose to their competition and their business will be disrupted. Get on the train or you will be left on the track!
So which use cases is your organization looking to reinvent with Blockchain? Please do drop a comment.
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