Why Blockchain is the Hot Topic at Asia’s Leading Event for Next-Gen Technology

It wasn’t even on the agenda last year. Ling Wu, Founder and CEO of TBCASoft, tells us why blockchain is taking the Shanghai Mobile World Congress 2019 by storm. Wu is the Chairman of the Carrier Blockchain Study Group (CBSG) Consortium, an initiative between TBCASoft and SoftBank to build a cross-carrier blockchain platform with leading global telecom operators. Editor-in-Chief Angie Lau sits down with Wu to discuss how every telecom company could be a bank and why 5G is critical to mobile blockchain adoption.

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Welcome to Day 2 of Mobile World Congress 2019 here in Shanghai. I am with Ling Wu — he is TBCASoft Founder and CEO, he’s also the co-chairman of the Carrier blockchain Study Group Consortium. So what does that mean? Well, Ling and the COO of SoftBank actually founded this consortium to think about blockchain, for telecoms.

It’s one of the hottest topics this year at Mobile World Congress in Shanghai, about how telecoms that link billions of people around the world with technology through one of these, how they’re going to engage with technology.

Now blockchain wasn’t even a thing that we were talking about a year ago here in Shanghai, amongst the telecoms and here we are today, a year later, and it is one of the hottest topics. Why? Well, I will let Ling explain exactly this consortium. What do you believe the promise of blockchain technology will be for telecoms?

Okay, thank you Angie.

So blockchain actually is a type of network, so the first implementation of blockchain is the Bitcoin. You see Bitcoin creating a network of communities that people can send Bitcoin to each other, and the goal is that they can reach everywhere in the world.

So thinking about telecoms, we’re providing a network of message transfer; originally making phone calls and then text. Right now we are talking about you have a new technology, you can transfer value.

So, again, it’s a network. The network has a network issue and the thing you need to do. Security, you need to identify the right person. You need to reach 5 billion people, mobile users in the world who can play the better job to define the fundamental technology to reach these people, telco.

Well, Ling you know it. I mean, you’ve been in the telco business, for how long?

For many, many years. I started with the e-commerce platform in 1993.

Okay, so then you have also seen telcos missing out on the value, on excreting revenue from the internet. They got pulled over by those who saw the technology, and then created messaging that was free and took that revenue stream away from telcos. What’s the opportunity today?

Okay, great, so telco together, they were distributed so they can send a message to the other side of the world. When the internet comes up, the new philosophy is the message transfer is free, so we send email for free, we don’t send… when I studied in the U.S., I still write mail and put a stamp on it.

Now, no people are doing that. I talked to my son, he said, “What is a stamp”, right? So, when the internet comes up, it’s difficult for telco to make the most profit of it, because the message is free… you need to use different methods to sell things like Facebook; they collect all the information for free, but they sell other pieces, telco by distributed difficult for them to do it so it’s difficult for them to take most of the profits from the new business, other than being a dumb pipe.

Now the network of blockchain is different. You have to be distributed. If someone says, “I run the blockchain, I’m Google, I’m running a blockchain everyone comes to me”, why? It’s a distributed ledger, who are you distributed with? telco by nature is distributed. Also, it’s highly regulated by the government, so they know how to work with the government for the things the government concerns. So one of the things is cryptocurrency. Cryptocurrency has a good future, but to be honest with you, there are certain concerns. In today’s technology, we cannot totally address this. 

So, how do we use blockchain and make the regulator comfortable? This is technology. You probably don’t have to jump into the cryptocurrency, yet, but you build these things together.

And we work with the regulators, so one of the reasons we do the consortium is we talk to regulators as a group, not individually for you to fight.

So that’s why we think it makes sense for us to work with the telco to build a network of blockchain first.

So in fact, you know Facebook, with the Libra project, took a lot of the hype, the excitement, created a lot of interest over the cryptocurrency, but in fact, the greater opportunity is quietly in the corner that you chair with the CEO of SoftBank about the promise of telcos really to pave the way for blockchain adoption. Where are you at right now?

Okay, so we started this concept in 2016. Actually, at that time I was talking to the CEO of SoftBank, Ken Miyauchi-san. In 27 minutes, he said, “Ling, this is very interesting, let’s do that together.” 3 years ago, when we talk about that, people don’t understand, there’s no telco that does any blockchain projects. At that time, they say “Oh blockchain, Bitcoin, no, no, no, no, we are not going to do that,” but you know, this year in MWC Shanghai, there’s so many different projects, and telco is doing that. So right now, and last week, the biggest news about blockchain is the Libra project.

I think the vision makes sense. They want to be globally accessible blockchains that is trusted by multiple parties.

So that echoed the concept we have been promoting 3 years ago, so we offer telco and options. You can do similar things, like what the Libra Association does, and we probably have different advantages to do that, so why don’t we work together?

I mean, I’m excited to talk to China Telecom. I just discovered that they’re doing blockchain SIM card. These are the type of projects that are actually happening right now, here in China and across Asia. Give us a little flavor of what we can see as consumers. If you’re going to be successful, we’re going to start seeing the launching adoption from telcos. What are we going to see the next time we turn on one of our smartphones? 

Okay, so early this year in January, we launched a very successful field trial between three telcos in Asia. So Angie, what they were doing is they are texting $5 to another phone.

So you’re texting $5 from your phone to my account.

So you have an account, maybe in Hong Kong Telecom. I have an account on T-Mobile, and I pay T-Mobile every month, but my account, so far is used to pay phone bills. Imagine, I text you $5, so my telco billed me $5 when I pay it, you got $5 credit.

So basically, you’re saying that every carrier today could potentially be a bank?

Why not? 

How does blockchain assist you with that?

Okay, great, before blockchain, the only way you can do that is you need to be a central clearing house, like SWIFT, like visa, which is very expensive to build, and all the regulations were built around the central clearing house because you have a single point of failure that is very dangerous, you accumulate a lot of money there, so you need to highly regulated.

At that time, there’s no single synchronized ledger, so you need to trust that one. You need regulation to build that trust, but blockchain is building that trust without that person. 

Technology, the technology is trust, it’s scaling trust.

We have a much more cost efficient way to build the trust among telcos without rebuilding another central clearing house, so the cost can go very, very low. The bank people think, “Oh, they are too far away, I cannot make money to provide my services,” so they do not want to do it. Their cost is very high. There are many, many costs including central clearing house, including the fraud. You must know that even SWIFT got hacked, 80 million dollars lost in the Bank of Bangladesh. So their cost is very high; they cannot provide the service to the unbanked people. But telco companies are providing telco service to the unbanked basically because the cost is so much lower. So we are thinking, we are providing another way, to lower the cost of the money transfer.

Who are the three participating in that project?

Softbank in Japan, FarEasTone Telecom in Taiwan, and LG Uplus in Korea.

So you basically linked Japan, Korea, Taiwan, altogether in blockchain. How quick were the transactions, what was the transaction speed?

Okay, so our block counts for every second. If you add end-to-end traffic, probably three seconds. You can finish a transaction within 3 seconds, but I told my partners 3 seconds is too long, we need to make it shorter. So that was a test; when we go to production we’ll have a dedicated network between telcos. Again, telco has the best ability to provide a high performance network.

Yesterday, we talked about… It is a technology that needs to be synchronized, so you need a very good quality of network.

The network is one thing, blockchain technology is one thing, but the promise of blockchain technology with telcos is, blockchain plus AI, blockchain plus AI plus 5G. Talk about that.

So Angie, AI has two parts: one is the algorithm, you have the algorithm to analyze the data. The second thing is data. When you do face recognition, you need to collect the data of the face.

The problem with the internet is, the internet creates an environment that generates a lot of data, but you don’t know how to trust the data.

When I was in college I would go to the library. It was difficult to get information, but most of the information I got from the library, I could probably trust.

Now, my son doesn’t go to the library. He just Googles.

And you know, the information you Google from the internet may not necessarily be true. 

That’s right. It’s quite painful for me as a journalist.

So, when we are creating gigantic (amounts of) information, the trust level is actually going down. If you have AI that uses untrusted data, it is garbage in, garbage out. It’s difficult for artificial intelligence to tell… 

To distinguish right now, at least. I mean people are working on it.

But that’s very difficult, the source of the truth. How do you know? When I check my profile, I see many Ling Wu, they put my picture. You are more famous, I think there are a lot of Angie Lau. 

So which one is right? I think that’s the problem. We are losing the trust between each other.

The trust is the issue, and the blockchain can make the quality of data higher. If you can trust the data then you can trust the output of the AI. 5G make the communication more efficient, and then we create more trust in data that will help AI. So I think other than the algorithm, the quality of the data determines who can win AI, and blockchain plays an important role.

And 5G also plays an important role for blockchain, because of the speed of 5G, and potentially helping the consensus cycle of blockchain. It could potentially help proof of work, proof of stake, and potentially sharding which is trying to reduce the latency rate. What is the promise of 5G for blockchain there? In terms of the speed?

So Bitcoin uses proof of work. The main reason Satoshi made it proof of work is: he wanted to reduce the communication frequency.

Before you find a block, do some computations, for on average, 10 minutes. So when the computer’s speed increases, it makes the problem tougher. You don’t communicate as frequently as possible; he wanted to reduce unnecessary traffic. When we have a high quality network, meaning high throughput and low latencies, we can actually communicate in a different way.

So proof of work and proof of stake are not necessary; there are many different ways to build a consensus. So if we have higher speed, we can use much, much more efficient ways to build a consensus without any proof of work or proof of stake. So byzantine fault tolerance is one of the ways. You don’t need to prove anything, but you need to communicate. 

Is that what you are working on right now, with Softbank?

Yes, so in this industry, there are many, many consensus algorithms. Only a few of them need proof of something, but it is not required.

Explain the science behind your consensus, versus everybody else’s.

We actually did not invent it, it was a public domain called byzantine fault tolerance. You know the Byzantine Generals Problem? 

Yes.

We are generals. We want to attack together, we want to make sure you attack. 

But how do I know the spy isn’t telling you something and telling me something else, how do we coordinate?

How do I know you received my messages? How do you know I received your messages? That’s the Byzantine General’s Problem. So it’s a kind of consensus, when we are two generals, we need to build a consensus, we want to attack at this particular time. It’s the original consensus; there’s a way to pass the information, but that mechanism needs a lot of communications.

Satoshi wanted to avoid the communication, so he invented proof of work. But once you have the luxury to communicate, “Hey, Angie are you really this one? Oh yes, yes, I confirm.” then it’s easier to get consensus without having to prove anything. So we can choose the algorithm, but (one that) doesn’t burn electricity for nothing. Leverage the network, don’t waste energy. Right now Bitcoin society, I think it’s a good concept, but the one thing I don’t like about it, is that they burn too much electricity. It doesn’t have to be burned, but once we define it that way, it’s difficult to change. So I do believe in the world of blockchain. There are a lot of ways we can improve with new technology, new methods to build consensus, and I think telco plays a very important role.

So there’s a lot of platforms right now, and too many protocols to probably mention, you probably know them all. How are you working with the developers with those who are in the blockchain technology space, who are pushing the evolution of technology forward? Are you talking with these developers? Are you talking with these different protocols to think about how you could work even together?

Very good questions, Angie. Before I founded this company I was in an e-commerce company for 16 years. That company was established in 1993. That was the first one to do e-commerce. We were very successful for the first 7 years. We created a 26 billion dollar business and then after the internet bubble actually we did not we lose it, so we learned a lot of reasons, and lessons. I told my developer, “you need to be open.” I don’t have the ego to want to prove my algorithm is right. There is no right algorithm; there’s only an algorithm that fits into today’s environment. The algorithm that worked 2 years ago may not necessarily the best algorithm today, same thing tomorrow.

Especially for blockchain, it’s in a very early stage, the back in 1993. When we were doing e-commerce, Amazon was not there yet. But there’s a lot of information that technology changed. So, I tell my developers, “You need to be very open. Don’t love your design. There are many, many smart people out there. Don’t believe you can outsmart other people. The only difference is, can you have an open mind to see other people’s intelligent work other than ours. Then you’ll be successful.” So they are always very open.

So the concern might be, okay that sounds great and all, telcos very powerful, decentralization, be open-minded, but this is still either a closed industry where you’re figuring out your own way to leverage your own network using blockchain technology, but it is still closed within the industry, or do you become open source?

Okay, in reality we use a lot of open source stack. I don’t want to create an IP that’s a closed door.

What we tell our member carrier is: it’s a new technology, I know you are very busy, you need to spend a lot of money for 5G different things, you need someone to spend 24 hours a day helping you to choose the best technology and amount that, of course we build something IP. When we are building a big network like that, we need to have some invention.

Either you do your own, or you know what, we have a group of people that share the information with you, listen to your feedback, we help you to make the choice. So that’s why the consortium is founded. So someone needs to be dedicated to spend 100% of the time on that.

Are you working with specific protocols right now?

We use different protocols.

Like who?

Hyperledgers. Also, IBM did a very good job in many different things.

But look, it’s powerful right. 6 billion people with one of these in their hand, blockchain technology can really, I believe, return economic power back to the individual. But there’s a role to play for telcos as well. You’re not everywhere, there are spots even in America and around the world where people have zero access to networks. So how do you try to bridge this digital divide? And do you have a responsibility as a group, and as a consortium to do so?

What we are doing is, we let telecoms know that other than the existing services, you actually can provide value added services. So we let them know that when you provide a reachable, ubiquitous service, you can make more.

So the telcos are incentivized.

Yes. Right now, I talked to several CEOs of telecoms. We talked about 5G. How long until you can get the return of 5G? Some telco CEO told me they haven’t gotten the 4G investment back yet.

So they need to invest a lot. What we tell them is, other than traditional services, there are other opportunities where you can increase your chance to make profits. So you can provide a service to reach somewhere you’re not reachable. And let’s go back to Zuckerberg project. I think it is a very good project, but however, can they reach someone who has no access to any communication service. They cannot. I can not solve the problem, that’s telcos expertise. What we were doing is building another network so they can fully utilize the asset they invested in. As a result, they can provide a service to the people.

So you’re talking evolving IoT to VoT, the value of things. Really, this is the potential we are talking about.

You are right, I like VoT, very good.

What is your prediction for blockchain?

I think this trend is not going to stop. I see a dramatic difference between 2017 and now. The first time I attended MWC in Barcelona, telcos were getting it. We want to provide the services so more people and more blockchain application builders don’t worry about the chain. They just focus on building the application. That telco and TBCA working together to build this network, network of blockchain so we can provide a service for everyone.

Ling Wu, this was our first conversation together on Forkast.News and it certainly won’t be the last. So fascinating, so exciting, and it’s only the beginning. Thank you so much for joining us here in Shanghai, and thank you all for joining us. I’m Angie Lau, until next time.