TM Forum are supporting the Monetizing IoT conference series. In this recent blog, Craig Bachmann – Chair of the Open Digital/IoE steering group – shares his thoughts on the use of blockchain technology to facilitate the monitization of IoT.
Will blockchain unlock IoT’s trillions?
We’ve all heard the mind-boggling predictions about the Internet of Things (IoT): For instance, Cisco estimates that there will be 50 billion devices connected to the Internet by 2020, from trash cans and parking spaces to streetlights and cars.
When it comes to revenue potential, the predictions are promising too. IDC suggests that by 2020, IoT market revenue will be $7.1 trillion, while McKinsey predicts an annual $11.1 trillion in economic value by 2025.
However, the big challenge is coming up with a set of solutions that can scale fast enough and affordably, to handle trillions of dollars’ worth of transactions, many of them for very small amounts, as well as maintain security and privacy expectations. This is a key part of the IoT monetization challenge: How can businesses quickly identify revenue-generating opportunities and execute on them?
Enter the blockchain
Alex Tapscott, co-author with Don Tapscott, of Blockchain Revolution, is quoted as saying, “The Internet of Things needs a Ledger of Things. It needs a way to score what’s talking to what, who owes who money, and reconcile all of that.”
This highlights many of the issues TM Forum recently outlined in our Internet of Everything Roadmap of Challenges whitepaper, created collaboratively with the TM Forum Open Digital Steering Group. The challenges identified include finding effective ways to monetize IoE services, ensuring security and privacy, partnering and business model innovation.
Blockchain technology could offer an answer to these. Wikipedia defines a blockchain as “a distributed database that maintains a continuously growing list of data records secured from tampering and revision…Each block contains a timestamp and a link to a previous block.”
Blockchain is best known for its use as the public ledger for bitcoin transactions but it has many applications beyond this – from transparency in the food chain to reinventing banking and transforming the energy industry.
There are big opportunities for communications service providers too. Analysys Mason outlines nine areas where telecoms operators could deploy blockchain technology. These include use cases for internal BSS/OSS processes (such as billing, eSIM provisioning and number portability databases) and value-added services. They could include micropayment-based business models for digital assets, including music, mobile games, gift cards and loyalty points. This plays into the ability to innovate with new business models for digital services – essentially enabling the multi-sided platform economy.
The Internet of Everything is a series of micro-transactions from sensors, devices, people, places and locations. Through enabling smart contracts (which automatically check and enforce agreements), blockchain could be the answer to handling the transactions, and implementing and enforcing service level agreements on the fly to ensure everyone in the ecosystem is paid, for example.
And as well as making it simpler for everyone in the ecosystem to be paid, blockchain could also unlock new business models. As Cisco’s Amy Cortese points out, “every blockchain-enabled device could function as its own microbusiness”.
As the number of IoE devices grows, so does the data they produce – in many different formats – and the challenges of managing it. Blockchain offers the potential to provide the solution for recording the data and also ensuring it can’t be changed. As it is by its nature secure and transparent, blockchain should also go a long way to solving security and identity issues related to IoE, although careful thought is needed around implementation regarding privacy.
The power of the platform
Through a number of inter-related trends, platform business models are allowing communications service providers to compete with digital native counterparts like never before. In their book, Platform Revolution, Geoffrey G. Parker, Marshall W. Van Alstyne and Sangeet Paul Choudary, explain:
“The platform provides an open, participative infrastructure for these interactions and sets governance conditions for them. The platform’s overarching purpose is to consummate matches among users and facilitate the exchange of goods, services or social currency, thereby enabling value creation for all participants.”
Who better to provide this glue? Communications service providers are already putting all these pieces together – managing communication between different parties, creating customer interfaces, billing etc. And unlike the other service providers, those providing communications are constantly connected to customers, giving them a unique opportunity.
The next step is crucial
The next step is exposing those internal support system platforms to partners and customers in a dynamic, on-demand way to enable almost instant mashed-up services. Open APIs will be a big part of this and blockchain is set to be a key enabler too. This is in terms of optimizing internal processes, providing an audit trail and opening up opportunities in key areas that are ripe for disruption by platform-based business models – from digital health to smart city applications and connected cars.
Blockchain is becoming a key part of the work we are doing with members to build the technical foundations for a platform business. This work will kick off with a number of proof of concept Catalyst projects to prototype and test ideas fast. Interested in getting involved? Get it touch.