Distributed, Decentralized, Disintermediating
While still in its infancy with regards to proven capabilities and real-life adoption, blockchain technology remains one of the looming threats for a lot of traditional business models. Its ability to directly connect third parties which can engage in exchanges of assets, data or sharing of resources, blockchain is seen as a force for disintermediation. Removing middle layers in finance, real estate, data management, advertising, service sharing and so on will spell big trouble for companies that have made it their core business to establish themselves as a pillar of trust and act as intermediary for actors in the respective fields, in exchange for a premium that soon may no longer be required.
While telecommunication companies are seen mostly as infrastructure providers, they too are being challenged by blockchain, especially as they try and pivot their offerings to include synergistic digital offerings. For example, blockchain technology can allow people to monetize their unused bandwidth, mobile data cap or even SMS and phone calls, to create alternative communication networks that offer a cheap alternative to telcos, thus eating into their revenue. Another example is how the cheap and fast transfer of digital value enabled by cryptocurrencies make electronic payments settled on the phone bill pale by comparison.
Telcos in the Blockchain Age
The telco industry has systematically been challenged by emerging technologies which threatened its existence. Radio disrupted landlines, messaging disrupted phone calls, the internet challenged communications overall. Instead of trying to fend off the disruptors, telcos welcomed and integrated them, and are now thriving as a result. They successfully shifted from just telephony providers to being reliable infrastructure providers with several digital products & services baked on top.
So it’s no surprise that the telecom industry is welcoming blockchain with open arms. The value of the blockchain tech in telcos as already $46mn in 2018 and that’s expected to rise to $1bn by 2023. That’s partly thanks to early adopters, such as Colt and PCCW, who use blockchain to immediately settle inter-carrier services faster and cheaper, a move that has sparked interest in fellow GLF (Global Leader Forum) members which eventually lead to the creation of a global communications blockchain network.
Telefonica partnered up with IBM to properly record and track international call data such as origin, destination & duration, for increased traceability. South Korean telco providers joined Samsung to create a blockchain-based form of mobile identification. Carriers such as Vodafone and Iliad have taken a step even further and joined Facebook & others in operating the controversial blockchain-based cryptocurrency Libra.
These partnerships and exploration of how blockchain technology can help telcos increase their margins and pivot into new areas are just the beginning. Blockchain technology can provide competing telco operators with the means of sharing expensive resources like communications equipment or even the wireless spectrum, allowing very transparent pay-per-use scenarios that settle immediately.
As the newly released 5G standard becomes the norm, the Internet of Things revolution will become a reality, with almost any conceivable object soon being connected to the internet and sharing data. The inherent challenges related to the security and reliability of the plethora of data all of a sudden abundantly flowing from myriads of devices will also be tackled by blockchain technology, whose cryptographically immutable automation systems will ensure that all participants are protected and trustworthy.
A Push for Better Identity Management
One of the most interesting applications of blockchain technology will certainly be managing identity. Not only does blockchain offer advanced privacy features, but also allows for identity to be associated with value and assets in an unprecedented way. When stored on a distributed ledger, the identity information and associated data are only available to the owner, and can only be shared with their consent, with some interesting features such as zero-knowledge proofs allowing attestation without actually sharing any data, like for example proving you are a resident of a certain district without revealing your name or address.
In order to merge these advanced security features & potential new use cases with the convenience of using a smartphone, China Telecom is exploring a blockchain-enabled SIM card that will merge distributed ledger technology with the latest eSIM standard.
The SIM — Subscriber Identity Module — is a small chip of varying form factors that has a phone number & carrier associated with it. In order to change carriers or phone numbers, users have to swap between different SIM cards, which can be a nuisance for people and a limiting factor for systems using multiple IoT devices.
The emerging eSIM standard embeds all the features of the traditional SIM on a very small programmable chip. This allows phones and devices to seamlessly switch between service providers or even use multiple phone numbers simultaneously, without swapping a card.
China Telecom has recognized the opportunities provided by eSIMs and has begun work on a blockchain SIM-card based on this standard. The programmable memory area in an eSIM will be preloaded with blockchain functionality that allows users and devices to authenticate against blockchains.
Today, one of the hardest steps for newcomers to blockchain technology is understanding the importance of the private key – a secret code enabling full access to a blockchain account – and how to properly secure it, while also using it in a convenient way. Smartphones are very easy to use and popular, so embedding a blockchain-enabled chip and applications on them can likely be a major catalyst for blockchain adoption.
With a blockchain-enabled eSIM, the private key is automatically generated in the eSIM card and the phone can be easily used for blockchain-enabled authentication and transactions. The same features will be usable also by IoT devices, whose security is also of high importance, and who will also benefit from the reduced form size and power consumption of the new SIM.
Of course, as with any new technology, early adopters of the blockchain SIM should be aware of the trade-offs that the convenience of eSIMs can bring. The most important part is security, which on a remote programmable chip could, in theory, be compromised by a malicious actor even without having physical access to a device. Also important to note is that a recovery procedure for lost devices does not exist, so any funds in a Bitcoin wallet controlled with a blockchain SIM-card phone would be lost with the phone itself.
Early adopters will likely be open-minded businesses and consumers that are excited about the potential of new tech and know-how to mitigate some of their inherent risks and shortcomings. The marriage between eSIM and blockchain is however still in its early stages, as is blockchain technology itself. So there is plenty of time for blockchain SIMs to mature and offer connected people & devices with increased security & versatility while reducing device size, making them ready for the next massive technological leap that we are on the brink of.