Un-chaining the Telecom with Blockchain

By Rachna Tyagi, Senior Leader – Technology Projects, BT (British Telecom), Gurgaon

Blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.

Blockchain is a DLT concept (Distributed Ledger Concept). The distributed ledger database is spread across several nodes (devices) on a peer-to-peer network, where each replicates and saves an identical copy of the ledger and updates itself independently.It gives an open, decentralized network to use. Powered by consensus algorithms every involved party gets a fair distribution and secure transactions. Security is accomplished through cryptographic keys and signatures.

Why is Decentralization so important?

For enthusiasts of blockchain, you will hear a lot about the decentralized aspect of it. What makes this so appealing is that it makes the blockchain impervious to censorship, tampering, or corruption.

Because it uses a peer-to-peer network, copies of the ledger are stored in many different locations, and unless you manage to track down every single one of them (Bitcoin is estimated to have over 35,000 nodes in its P2P network), you can’t destroy it. As well, because so many different, independent nodes are keeping track of the ledger, modifying it in an untrustworthy way won’t go very far because all the other nodes will disagree with that transaction and won’t add it to the ledger.

This is a huge part of why so many people believe blockchain technology is the future of currency, and why it is being adopted in industries other than cryptocurrency.

Benefits:

1. A blockchain’s ‘enabled’ trust improves coordination between various partners, due to a shared view of transactions and liabilities. This in turn permits the elimination of third parties, resulting in cost savings.
2. Facilitates a single view of data instead of the need for consolidation across various disparate systems. Also allows for reliable audit trails due to the history of all transactions being available in the ledger.
3. Implementation of smart contracts in roaming and other cases allows for near-instantaneous charging, thus leading to improved revenue assurance and fraud reduction.
4. Potential to facilitate new business models for revenue generation for Communication Service Provider who are looking for new avenues to increase both top and bottom lines.
5. A blockchain can act as the ledger that enables, for example, an M2M economy to prosper based on the common platform available, in which M2M transactions can be recorded. It can thus act as the enabler for an IoT ecosystem.
6. Improved Security – One of the biggest pain points of the CTO is around system and data security. Security is one of the core propositions of a blockchain-enabled system, and hence very relevant to a CTO.

Industry Application

The practical consequence is for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer.

Starting off with simple cryptocurrencies like Bitcoin it has now expanded to the new level of aspects. Industries such as banking, healthcare, insurance, supply chain and telecommunication can increase their efficiency using this new technology.

How Can the Blockchain Upgrade The Traditional Telecommunication Industries?

For the last years, traditional telecommunication industries are facing hard times due to the commoditization of the services and consequently lower revenue and profitability rates. To address new era customer needs, upgrades are a must.

To better compete with other companies and to increase the overall revenue, it’s necessary to utilize any new technology.

That being said, this sector is already on the verge of a great reformation, moving slowly toward to total digitization and virtualization. That’s why adding blockchain into the whole scheme may open up future doors of opportunities.

Blockchain may be able to deliver a broad variety of applications across the telecom industry, and the technology has the potential to significantly impact CSPs operating models.

There are several areas in which blockchain can help telecommunication operators to build new value:

Preventing Fraudulence

Telecoms suffer significantly because of fraudulence schemes every year. It’s one of the biggest reasons for reduced revenues. According to a survey, 38.1 billion dollars get lost due to fraudulent schemes. To prevent this, companies can use the security level of the blockchain ledger.

To deal with identity fraud, companies can use the blockchain to verify every individual’s identity. Not only that, but they could also, link their devices to the identity on the network. There is already a similar project in the process; however, the new system is a bit different. In this scene, if somehow the identity gets compromised, it will only affect intermediate devices linked to it, not the overall network.

Another big problem is the roaming fraud. This will get sorted out using permissioned blockchain instead of a public one. Every operator that allows roaming can connect to that environment.

So, if an individual meets specific rules, then a smart contract can be executed to settle the costs.

Managing Identity of Users

Any telecommunication company can add an identity management system with their already existing features. Managing identity would allow them to help users manage their Id’s across, applications, devices, and organizations with only one single password.

As the authentication process in a properly implemented of blockchain is reliable and flawless, using this scheme would be so much easier. A user will contain a master key, and with that, he/she be able to verify their identity in any digital presence.

This can be an excellent opportunity for the telecommunication organizations to grow and spread their realm. A few examples would be Marriage certificates, driver’s license, passports, etc.

In fact, there are already some projects in process in the ID2020 project. The intentions are simple, to give 1.1 billion people a secure and reliable identity management system.

IoT Factors

IoT factors include security in the data transmission and provide a secure channel among sensors and machine. Telecommunication deals with sensitive information all the time. However, data getting leaked is a typical scenario for them.

It’s one of the basic DDoS attacks. That’s why implementing a blockchain network getaway in the project could give the machines a trusted environment where they can communicate with each other.

This digital control will make IoT more scalable by verifying and connecting two data centers. So, no rouge devices can hack into the system from now on.

However, only using blockchain won’t solve the issue. Collaborating with new technologies and merging all of them would give a much safer environment.

5G

5G technology implementation is another example to potentially benefit from the blockchain to streamline processes. To realize the 5G promise of ubiquitous access across various networks, CSPs will need to handle heterogeneous access nodes and diverse access mechanisms.

Mobile Payment

Now with digitization, people are able to pay bills using their mobile phones. However, this new feature has some significant flaws and that’s giving a hacker a chance to scheme innocent people and take their money.

Telecom organizations can use blockchain technology to streamline this process and get rid of any third party intruders.

Generic Challenges

Naturally, every new technology comes with its share of challenges and blockchain is not an exception to that. Any company would have to deal with its scalability issue,internode performance issue& Hacking.

Key vulnerabilities are mentioned below.

The 51% rule (attacks)

Susceptibility to 51% attacks is inherent to most cryptocurrencies. That’s because most are based on blockchains that use proof of work as their protocol for verifying transactions. In this process, also known as mining, nodes spend vast amounts of computing power to prove themselves trustworthy enough to add information about new transactions to the database. A miner who somehow gains control of a majority of the network’s mining power can defraud other users by sending them payments and then creating an alternative version of the blockchain in which the payments never happened. This new version is called a fork. The attacker, who controls most of the mining power, can make the fork the authoritative version of the chain and proceed to spend the same cryptocurrency again.

One thing driving this trend, he says, has been the rise of so-called hash-rate marketplaces, which attackers can use to rent computing power for attacks. “Exchanges will ultimately need to be much more restrictive when selecting which cryptocurrencies to support,”.

Smart-contract bugs

A smart contract is a computer program that runs on a blockchain network. It can be used to automate the movement of cryptocurrency according to prescribed rules and conditions. This has many potential uses, such as facilitating real legal contracts or complicated financial transactions. Another use—the case of interest here—is to create a voting mechanism by which all the investors in a venture capital fund can collectively decide how to allocate the money.

Decentralized Autonomous Organization (DAO), was set up in 2016 using the blockchain system called Ethereum. Shortly thereafter, an attacker stole more than $60 million worth of cryptocurrency by exploiting an unforeseen flaw in a smart contract that governed the DAO. In essence, the flaw allowed the hacker to keep requesting money from accounts without the system registering that the money had already been withdrawn.

As the hack illustrated, a bug in a live smart contract can create a unique sort of emergency. In traditional software, a bug can be fixed with a patch. In the blockchain world, it’s not so simple. Because transactions on a blockchain cannot be undone.

There are fixes, of a sort. Though they can’t be patched, some contracts can be “upgraded” by deploying additional smart contracts to interact with them. Developers can also build centralized kill switches into a network to stop all activity once a hack is detected. But for users whose money has already been stolen, it will be too late.

The only way to retrieve the money is, effectively, to rewrite history—to go back to the point on the blockchain before the attack happened, create a fork to a new blockchain, and have everyone on the network agree to use that one instead. That’s what Ethereum’s developers chose to do. Most of the community switched to the new chain, which we now know as Ethereum. A smaller group of holdouts stuck with the original chain, which became Ethereum Classic.

Nevertheless, hundreds of valuable Ethereum smart contracts were already vulnerable to this so-called reentrancy bug, according to Victor Fang, cofounder and CEO of blockchain security firm AnChain.ai. Tens of thousands of contracts may contain some other kind of vulnerability, according to research conducted last year. And the very nature of public blockchains means that if a smart-contract bug exists, hackers will find it, since the source code is often visible on the blockchain.

Buggy contracts, especially those holding thousands or millions of dollars, have attracted hackers just as advanced as the kind who attack banks or governments. In August, AnChain identified five Ethereum addresses behind an extremely sophisticated attack that exploited a contract flaw in a popular gambling game to steal $4 million.

Can the hackers be defeated?

1. AnChain.ai is one of several recent startups created to address the blockchain hacking threat. It uses artificial intelligence to monitor transactions and detect suspicious activity, and it can scan smart-contract code for known vulnerabilities.
2. Other companies, including Tsankov’sChainSecurity, are developing auditing services based on an established computer science technique called formal verification. The goal is to prove mathematically that a contract’s code will actually do what its creators intended. These auditing tools, which have begun to emerge in the past year or so, have allowed smart-contract creators to eliminate many of the bugs that had been “low-hanging fruit,” says Tsankov. But the process can be expensive and time consuming.
3. It may also be possible to use additional smart contracts to set up blockchain-based “bug bounties.” These would encourage people to report flaws in return for a cryptocurrency reward, says Philip Daian, a researcher at Cornell University’s Initiative for Cryptocurrencies and Contracts.
4. BT- The U.K.’s largest internet and telecoms provider has been awarded a patent for a proposed cybersecurity measure aimed at protecting blockchains.

In the patent, awarded on Oct. 31, British Telecommunications PLC (BT) outlined a method designed to prevent malicious attacks on blockchains-outlining a way to limit who can commit transactions to the system through user-specific profiles. The blockchain’s underlying code would then be able to automatically reject transactions which do not match the pre-described accounts.

One example use case outlined by the patent includes “majority control attacks” (also called “51 percent attacks”), where a hostile force with more than 50 percent of the total computing power tries to control a blockchain network.

According to the patent:

“Despite the architecture of blockchain systems, malicious attacks present a threat to the security and reliability of blockchains.”

When an attack is detected, the system will automatically stop conducting transactions, preventing even a majority attack from being effective, according to the patent.

The patent further cites include distributed denial-of-service (DDoS) attacks, which are designed to completely overwhelm a miner with an excessive number of transaction requests.

BT does not address how it would deal with such attacks, however it does state that “it would be advantageous to provide a mechanism for detecting and mitigating threats to blockchain environments.”

While the patent discusses the method of verifying transactions through the energy-intensive mining process employed by digital currencies like bitcoin, BT notes that the process is unrelated to the patented system.

Ending Note

The challenge here is not a technology anymore, but a business will and consensus which need to materialize between operators.CSPs would do well to work together to enable the full realization of the benefits, just as many of the global financial institutions are currently doing (e.g. in the R3 Consortium).

Working in a silo will limit the potential of blockchain,as disintermediation, robustness, and the need for trust at the intersection of many stakeholders drives real value. Organizations such as the GSMA, which represents the interests of many mobile CSPs globally, could equally take a more active role in exploring and promoting blockchain use cases in the industry.

Companies such as Orange and Verizon, amongst others, have already invested in startups in the blockchain area to explore the synergies and potential use cases. Many more players are researching potential use cases in-house.

It is time for everyone to agree on a unified approach to enable meaningful realization of benefits.

Blockchain technology comes with a lot of scope for telecom organizations. However, they would have to make some massive changes to thoroughly estimate and add it to the whole equation.

CEO relevance –

Embracing blockchain will compel the CEO to comprehensively rethink the CSP’s strategy with regard to various stakeholders, since new business models could thoroughly disrupt the existing telcom value chain.

CFO relevance –

Chief Financial Officers at CSPs are looking for possible avenues for reducing costs and improving the bottom line in a highly regulated and competitive market.Blockchain has the potential to help facilitate just that.

CMO relevance –

Chief Marketing Officers would primarily benefit from the ability to introduce new offers to the market at a faster rate than previously possible, enabled by the modularity of a smart contract.