Hi Hugo,
You correctly pointed out some important factors that greatly affect a service provider's blockchain strategy, and also an important omission on my part in the original post. Let me see if I can cover both.
The statistics you quoted are true, or even worse than quoted, for bitcoin. Bitcoin is by far the worst-case scenario among token currencies in terms of transaction cost and transaction time. Ethereum, for example, is order(s) of magnitude faster and cheaper, and about to become even more so. But regardless, you're right that time and cost are excessive (and capacity is inadequate) in comparison with existing solutions.
As you noted, transaction aggregation whether within a contract, with sidechains, or through intermediaries, will be important in reducing the overall cost of settlement, especially if micro-transactions are used e.g. to trade near-real-time SLA settlement for longer-term "bill shock".
I omitted to mention in the original post that I was assuming private, permissioned blockchains accessed by (business) members of an ecosystem or consortium, rather than permissionless blockchains like the publicly accessible Bitcoin and Ethereum. In such a scenario, transaction cost and transaction time are far less significant. To that end, the original demo of the Forum's blockchain sandbox at TM Forum Live! last May used a private Ethereum blockchain.
But one problem with that simplistic approach was that we were then dealing with "play money" - a private blockchain is faster and cheaper, but has no direct connection to "real" token currency that can be exchanged on the open market for fiat currency like dollars or euros. So we would have had to map the "play money" transactions to "real money" outside the blockchain, thus losing some of the advantages of smart contracts that deal directly and securely in a currency with which you could actually pay or be paid.
There are several ways, all more complex than the original demo, to deal with the real money / play money problem while still preserving most of the advantages of a private blockchain. Techniques to realize private blockchain transactions in a public blockchain include the use of inter-ledger protocols, and the use of smart contracts in a private blockchain to trigger smart contracts in a public blockchain. We will demonstrate at least one of those techniques in an SLA management context at Action Week Vancouver. In the meantime, I'll detail the initial demo in further posts here.
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John Wilmes
Director of IoE Projects
TM Forum
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Original Message:
Sent: 08-09-2017 03:56
From: Hugo Vaughan
Subject: Blockchain use cases for service providers
Hi John
I see a differentiation between cryptocurrency blockchain solutions and the IoT use cases.
The differences emerge once the competitive proof-of-work (mining, for the rest of us) is questioned. I cannot see IoT solutions being able to afford 1 GW of energy consumed by computers to prove 12 transactions per second. Bitcoin transaction costs are thus much higher than traditional banking costs, and if we use US average energy costs at 15 cents/kWhr, admittedly an exaggeration of mining energy costs, we get a cost of $5 per bitcoin transaction.
I am expecting a trusted intermediately to step into this gap. Perhaps a successful strategy would aggregate thousands of individual IoT transactions into one block chain super transaction, or perhaps we can license miners to lower the burden of proof-of-work for these transactions. In either case we can drop block chain transaction costs by leveraging trusted intermediaries.
While I agree with most of the benefits identified, I believe that disintermediating trusted partners is not neccessary for IoT block chains to be successful. I think trusted partners have a valuable role to play going forward.
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Hugo Vaughan
Crowd Frame Consulting Limited.
Original Message:
Sent: 08-08-2017 14:47
From: John Wilmes
Subject: Blockchain use cases for service providers
We're all seeing lots of tweets, posts and articles about blockchain, the distributed ledger technology that powers cryptocurrency protocols like Bitcoin and Ethereum.
Blockchain may support the key focal points of the Forum's IoE program: Monetization, Management and Trust (MMT).
What makes blockchain different from other enablers of MMT? Here are some key features that, taken together, differentiate it from other technologies:
- Works in a "trustless" environment: The distributed ledger performs the accounting and audit functions neutrally and reliably.
- Distributed ledger requires no intermediaries: Transactions can be conducted without the need for third parties like clearinghouses.
- Decentralized consensus ensures integrity: The negotiation protocol ensures that all participants see and approve a common view.
- Immutability prevents tampering: It is infeasible for a bad actor to change the distributed record in all locations.
- Near-real-time updates maintain consistency: Although transaction times vary, consistency across all copies of the ledger is quickly achieved.
- Verifiability supports auditing: Any participant can go back to any transaction at any time and prove its integrity.
- Timestamps & sequencing support chronology: The distributed ledger establishes the timing of transactions as well as their content.
- Scripted transactions support smart contracts: Blockchain enables the execution of coded "contracts" which are themselves part of the irrevocable record.
- Fractional currency for micro-transactions: The cryptocurrencies supported by blockchain allow extremely small financial transactions that re impractical or impossible with traditional settlement systems.
Below are some categories of use cases that appear to be of interest to service providers, based on the key features above.
I'll follow up soon with more details on recent work by the Forum in the Service Level Agreement (SLA) management space!
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John Wilmes
Director of IoE Projects
TM Forum
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