Disrupting the Telco Landscape, One Block at a Time
By John Calian, SVP, Head of T-Labs & The Blockchain Group, Deutsche Telekom AG
It is not always easy to distinguish the noise from reality when new technologies are introduced to us as both consumers and corporations. As an innovation leader, there is always a long line of people and ideas at the door, ready to convince me that we are on the verge of a radical shift in our telco business, and the next threat is around the corner.
One of the most prominent disruptors knocking on that door is blockchain, a type of distributed ledger technology (DLT), which is said to be on the path to fundamentally redefine nearly all business models. But what is really beyond the noise and how will it shape our industry in the future?
After a year and a half of research, development and knowledge sharing, we believe that this technology indeed has the potential to change our industry. This notion stems from three (3) hypotheses:
1. Tech diversity: DLTs are not ubiquitous but tailor-made for specific use cases—find the right one for your use case!
2. Use case focus: In our industry, DLTs will help to govern network security, network access, and add on services of IoT devices via tokens.
3. Strategic impact: DLTs will power the so called ‘Token economy’ which will change the economic rent distribution as well as the incentivization of current platform solutions.
We can look closer at each of these hypotheses and our current stance in detail.
One of the most prominent disruptors knocking on the door is blockchain, a type of distributed ledger technology (DLT), that is on the road to fundamentally redefine nearly all business models
And The Winner Is… Diversity!
A basic conclusion we have is that there will not be just one distributed ledger technology that wins, but in fact there will be many different technologies tailor-made for their particular domain.
We argue this way since DLTs are applied in myriad of different approaches, like storing data, handling financial transactions or managing identities. Each of these require fundamentally different features and DLT network architecture. Additionally, some particular use cases require millions of connected nodes communicating publically within milliseconds, while other ecosystems just consist of a few hundred nodes that exchange information privately on a daily basis. In summary, the diversity of these use case patterns is endless and so is the diversity of the DLTs powering them.
Why Blockchain, Telcos, and IoT is a Trifecta?
Applying this framework to our industry made us ask one question. Looking into both our near-term and mid-term future, there is a coming wave of IoT devices transacting in our networks, but are we indeed ready for this?
IoT Networks Must Achieve Higher Standards of Device Security
From a security point of view, we are clearly not. These new devices are being designed, manufactured, and released onto the market at a breakneck pace, and most often without thorough examination of the security threats they can pose.
In fact, the state-of-the art IoT security frameworks are highly centralized. Hence, they do not scale easily in a many-to-one nature while their centralized management represents a single point of failure for these ecosystems. Moreover, traditional IoT security methods tend to be expensive in terms of energy consumption and processing overhead.
Consequently, future IoT networks demand lightweight, scalable, and distributed security. Hence, we believe that distributed ledger technology has the potential to overcome aforementioned challenges based on its distributed, secure, and private nature.
The Token Economy Powered By DT
By integrating these aforementioned abilities, IoT devices become secure actors in the machine economy and create an ecosystem to store and transact tokens which in turn enable the so-called token economy.
The essential feature of a token-based ecosystem is that tokens have the potential to unify what are known as two separate functionalities today: ownership of shares as well as the ability to spend them on a particular utility or service.
Although seemingly unspectacular, this dual role of tokens is able to change the platform economy as we know it today. Why is that?
In a token-based ecosystem producers and users of a platform are rewarded for their participation— but unlike today’s distribution of economic rents, the transfer of value can be one peer to peer, rather than being directed via centralized intermediaries. The intermediaries tend to control the percentage of economic rents given to all parties, since they act as control points. In a tokenized economy, based on decentralized technologies, economic rents can be distributed directly, which will better reflect the laws of supply and demand and remove the need for intermediaries. Its early days, but exciting for trained economists such as myself!
In my opinion, these opportunities are arriving at the time to not only limit the severe privacy and security breaches of platform players like Facebook and Google, but more importantly to direct the economy of the future towards the real producers of goods and services. Our own business in telecommunications is going to be disrupted, and it is our duty to get ahead of the curve.