While blockchain is often discussed within the framework of cryptocurrencies, it can be integrated into many technologies in multiple fields and can be useful in areas ranging from smart contracts to supply chain transactions and telecommunication services.
In this article we examine what blockchain is and how it can be put to use, especially within the telecom sector.
Introduction to blockchain
A blockchain consists of a growing list of records. These records are called blocks. Blocks in a blockchain are added in chronological order. Each block is linked with the previous block using cryptography. Each block consists of the following components:
- A timestamp – This is the date and time that the block was created.
- Transaction data – These are the contents of the block containing information about the transaction that took place at the time of the timestamp. (We’ll talk more about transactions in a moment).
- A cryptographic hash of the previous block – This is a hash that is produced from the contents of the previous block. This essentially links each block to the previous one, creating a chain.
Every time a new block is added to a chain, a cryptographic algorithm is run on the previous block, the result of which is stored in the newly created one. This process ensures the integrity of the previous block, which in turn verifies the integrity of the previous one to that block, all the way back to the initial block, which is called the genesis block.
This process has several advantages:
- Resistance to modification – Any block within a chain is essentially verified by the hash that exists on the next block in the chain. If any block undergoes an unauthorized change, this will immediately be detected since the hash in the subsequent block will no longer verify the changed block. In order to validly change a block, all subsequent blocks must also be changed with new hashes being generated. This is extremely difficult to do covertly, keeping in mind that blockchains can be many hundreds of thousands of blocks long or even longer.
- Managed by distributed networks – Blockchains are typically managed by peer-to-peer networks in a distributed manner and can be used publicly. Blockchain nodes collectively adhere to a particular protocol to communicate and validate new blocks.
- Decentralized – By decentralizing the management of blockchain, several risks of more traditional arrangements are mitigated such as:
- Peer-to-peer blockchain networks lack centralized points of vulnerability that attackers can exploit
- There is no single point of failure
- Every node in a decentralized system has a copy of the blockchain
- Data quality is maintained by massive database replication and computational trust
- No centralized "official" copy of the blockchain exists, and no particular user or node is trusted more than any other
All of these factors contribute to making blockchain transactions permanent and unalterable. Thus, it is a secure, trustworthy, and valid transaction recording scheme.
Initially, blockchain was introduced for use with cryptocurrencies. Cryptocurrencies, such as Bitcoin, are digital currencies that can be used to purchase goods or services. The problem with a digital currency is the fact that, like any other digitized item, you can copy it as many times as you want and use it over again. In the world of cryptocurrencies, this is called double spending.
To solve this problem, a method had to be found to create a permanent and unalterable ledger, or record of a transaction, so that someone who spends a particular cryptocurrency will not be able to spend it again. In other words, blockchain will ensure that spending one unit of a cryptocurrency will cause your digital wallet to record a withdrawal of one unit, and the receiver's digital wallet to have a deposit of one unit. Neither the spender nor the recipient will be able to alter their wallets. The completed transactions become permanent and unalterable, thus ensuring the integrity and uniqueness of each unit of cryptocurrency.
Shared public blockchains provide this very mechanism.
Some additional applications include:
- The use of blockchain in the food supply chain allows retailers and consumers to track meat and other food products from their origins to stores and restaurants using a trustworthy supply chain record.
- Smart contracts that can be partially or fully enforced without human interaction, as they do not require a trusted third party. Blockchain introduces the required trust for such contracts.
The blockchain process
The following diagram illustrates how the blockchain process works.
- A transaction is requested by a device.
- The transaction is sent to a peer-to-peer network that consists of nodes that manage the applicable blockchain, as described above.
- The network of nodes processes the transaction, as well as validates the user’s credentials and the transaction itself. A verified transaction can involve:
- Smart contracts
- Supply chain transactions
- Other records that require permanence and immutability
- The transaction is stored in a new block within the blockchain, along with a hash that is calculated based on the contents of the previous block.
That newly created block along with the whole blockchain is stored in a distributed manner on the peer-to-peer network, with the aforementioned safeguards in place, which ensure that the transaction, which is publicly accessible, maintains integrity across all interested parties.
Blockchain applications in telecommunications
Blockchain as a technology is almost always implemented in conjunction with other technologies to deliver this unalterable and permanent ledger of transactions. Applications in which blockchain and telecom work together include:
- Mobile communication networks – Cellular network providers can benefit from blockchain, especially when it comes to features and operations that include:
- Roaming via automatically verified smart contracts
- Phone theft prevention, by storing unique device/SIM data on a blockchain
- Mobile number portability can be streamlined by using blockchain on a single network from which all service providers can review and act on requests for portability
- Fraud prevention can be drastically reduced by mitigating against identity theft and toll fraud.
- Smart contracting can be very useful for any telecom service, be it internet connectivity, telephony, or cloud services of any type. Automation and safeguarding of internal processes can be ensured in areas such as billing and supply chain management.
- Micropayments are also a great use case for blockchain, since it can be used by telcos to enable payments for OTT services such as payment wallets, music applications, games and others. By also introducing user-to-user money transfer services, positive revenues can be generated for a telecom service provider.
Here we have covered just a few of the innovative ways in which blockchain can be leveraged for use with telecom services. There’s still a lot of room for developing new and creative services that will streamline processes while ensuring the security and permanence of transactions.
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