With technology changing at blinding speeds, businesses often struggle to understand what is real and what is hype. Blockchain – the technology behind Bitcoin and other cryptocurrencies – is one such technology that offers a lot of promise but is rarely understood. 5G is yet another great technology that claims to revolutionize how we connect and communicate. But do these two innovations have anything in common? Together can they provide a better economic value to businesses?
David Walsh, one of the finest technologists, investors, and business leaders has spent over the past 30+ years, successfully disrupting and innovating technology across a wide range of markets including Automated Trading Systems, Financial Extranet, and Embedded Cloud Communications. He has built, scaled, and sold companies from start-ups to global enterprises, generating over $3B of cumulative gains.
SUMMARY
- The whole blockchain technology is a distributed ledger that provides authentication and an authority that confirms transactions.
- The beauty of the distributed ledger is that it is impossible to hack.
- Somebody has to validate the transactions that flow between the networks, and blockchain is an excellent technology to confirm validation.
- Wireless communications are more than buying spectrum and radios and deploying overlapping networks. Blockchain with 5G can improve network operations by federating access in a way that eliminates overlapping networks.
- If you have connectivity and you have a way of intelligently tracking something, you have the means to transact.
- 5G provides reliable connectivity for tracking assets that are moving around with today’s mobility.
HOW HAVE YOU BEEN ABLE TO OPERATE ONLY THROUGH YOUR PHONE FOR PAST FEW MONTHS?
Four months ago, I decided to come shelter at home because the Tri-state area in New York got hit so hard by COVID-19 that I literally didn’t want to take any chances, especially my wife has some health conditions and I was like, ‘okay, I guess I’m just not going back to work.’ What I decided at that point is to see if I could completely live without a desktop or laptop and purely off my smartphone. I have to say, it’s been great! I’m completely mobile. I do everything online. I’m averaging between 6.8 and 8.3 hours of screen time a day on my mobile. I’m not lugging things around. I’m not packing things up, not turning things on and off. I’m not closing windows, opening windows, and I’ve really organized my phone and all the apps that I need, whether it’s banking to pay my bills, you name it, I have everything. I’m even able as a financial guy to look and review spreadsheets and PowerPoints, and I’ve been doing tons of communication, like, unified communications, whether it’s “Go-Tos” or “Teams” or “Zooms,” and it’s all worked really well. I don’t think I’m going back. I’m sure I’ll use my laptop from time to time, but for the most part, let’s use the phrase, “I’ve cut the cord.”
WHAT IS HAPPENING IN CONNECTIVITY & COMMUNICATIONS SPACE AND HOW DO YOU SEE IT CHANGING?
The two interesting technologies mentioned here are blockchain and 5G, but where’s the intersection there? Where in the Venn diagram is the overlap or crossover? Both technologies are getting a lot of airtime. With any technology, there’s smoke before there’s fire. We are still waiting for the fire, but if there’s undeniable smoke in both of these areas. Now the question is whether the smoke is going to lead to a fire. I actually think it’s the smoke that’s going to lead to the fire because what’s driving these technologies is going to be things that can transform how we live, how we do business, how we improve basic things like health and our work life.
Whenever you have things that nicely line up like that, you tend to see things move along and become successful. When I look at the whole blockchain, it got such a great lift from cryptocurrency, because you need something to validate technology, to get it rolling. Often it becomes something different. It evolves over time. That’s what we’re seeing now. You can argue about whether cryptocurrency works, but there’s $180 billion of Bitcoin out in the market, and every day you hear about new Bitcoin users, like Starbucks is now accepting Bitcoin. You can buy Bitcoin. You can use the Bitcoin in vending machines. Every day you’re seeing the blockchain being exercised more and getting validated. [Download now: The 2-minute takeaway from this conversation]
That validation is giving lots of other areas of the market, whether it’s healthcare, finance, or the telecom sector, the confidence to say, ‘okay, if this has worked in the cryptocurrency market, why can’t it work in our markets that need to go digital? You’re seeing a natural curiosity from the carriers and the telecommunications industry to look at this technology that was very successful.
But why is it successful? It has some key attributes. This whole blockchain technology, the distributed ledger, which provides authentication or authority. It’s peer to peer. That’s the beauty of it. In other words, today there’s always somebody sitting in the middle of the transaction providing that function. Like in a bank. Between every transaction, you have an authority where you can appeal if anything goes wrong. If you could eliminate that and allow the network itself to provide the trust, you can flatten out the ecosystem.
This is what the blockchain can do; it can flatten out all these supply chains and just eliminate enormous waste. In the case of cryptocurrency, somebody had to validate that a transaction happened. The distributed ledger, which is impossible to crack, it gets even more challenging every day. It’s distributed, it’s timestamped, it’s irreversible. These characteristics essentially can provide the trust that parties need to facilitate commerce. This blockchain technology can be applied to any form of commerce. There are certain applications that are better suited than others, but this is definitely going to have something that has wide appeal. That provides our circle around blockchain in our Venn diagram.
We do know 5G is coming – there is no question about that. Whether it lives up to the hype is hard to know, but 5G’s ability to provide higher speed alone is a big enough killer app to drive 5G forward. So we put our circle around 5G and see where the interconnection is.
WHAT IS YOUR PERCEPTION ABOUT SECURITY BEING AN INTERSECTION POINT OF BLOCKCHAIN & 5G?
There’s this Venn diagram that has more than just one thing. There’s going to be a lot of things that fall into it. Just by the nature of the spectrum that will be used, it is higher frequency, which means you can go faster, but you can’t go as far. We all want to go faster, but the issue is you can’t go as far. That means, we have to build out these networks further into the edge of the planet. I’ve seen some estimates that say that we’re going to have five times as many radios or base stations out there to build out 5G.
The first thing, if you assume that is correct, is you’re going to have a lot more base stations. You must connect those base stations with fiber because you’re going to be hauling more data to provide the footprint and coverage that you need. The first thing that one might conclude is, ‘Does it make sense for every wireless company to go out and overbuild each other?’ It might have made sense with 1x, 2G, 3G and LTE, but does it really make sense for every carrier, like for T-Mobile, Verizon, for AT&T? Does each one of us need to replicate the identical network, or will these carriers begin to share?
If the answer is that they begin to share the infrastructure, there is a huge use case for blockchain, as somebody must validate the transactions that flow between those networks. Instead of them building all their endpoints, and you always registering to your network service provider, you just go to the strongest signal. Then you have peering considerations that would be massive and perfect for a blockchain type technology.
If I were a CEO of, say Verizon, I’d be more inclined to look to partner more like the wireless carriers did back in the 90s where they roamed on each other’s networks more frequently. It’ll probably go more to a peering remodel, but for the traffic between the two networks, somebody has to be an authority. Why not the network? Do we really want to introduce an unnecessary clearinghouse when the network can perform that function?
The first thing to remember is that you’re not just going to be connecting and federating 5G networks, but why not Wi-Fi networks? Some of the largest concentrations of users are in people’s homes, hospitals, hotels, and that traffic needs to be federated.
As these networks federate, it is a perfect opportunity to use blockchain as the validation infrastructure to perform the necessary micro-transactions. Every time traffic moves between network A and network B, all the CDRs (charging data record) are all sent out to multiple servers on the distributed ledger. That way any disputes can be resolved quickly. You get rid of fraud because you have a digital identity. There’s one use case right there that I see as a big opportunity. I just call it peering and roaming amongst the 5G and Wi-Fi operators who are going to want to federate.
LET’S GET TO KNOW MORE ABOUT THE USE-CASE YOU MENTIONED.
I really think there’s a use case because if everybody is buying spectrum and building radios, they’re just not going to have enough space on rooftops and to be able to do it. It’s an intergalactic waste of Capex. The challenge is that these carriers have always built these new business cases with the claim, ‘we’re gonna invest in spectrum and radio etc. and make this colossal investment to drive up ARPU.’ However, ARPU has never risen, as a result.
Network Operators are going to have to find more efficient ways to deploy their CapEx, but they can’t do that at scale unless there’s a trusted infrastructure to do it. Otherwise, there’s going to be too much cost in managing the roaming relationships the old way. But with the new way of blockchain, they’d be highly efficient. I’m pretty excited to see if that takes off.
For the second intersection, let’s take IoT. I’ve seen some projections, like there’d be 18 to 20 billion devices by 2022. It’s not only that there’s going to be a lot more radios out there, there’s also going to be a lot more devices out there. With this order of magnitude, just think of how many of these are going to be IOT devices? They’re going to be managing things like smart cars, businesses like Uber and Lyft, etc.
I just tracked this the other day. I’ve got multiple cars and all this kind of stuff, so it’s not like I don’t have transportation. But my family used around 346 Uber/Lyft rides last year. That’s just one family!
Uber and Lyft use virtual fleets, and they all need to be tracked. Why do they need to be tracked? At some point they’re not only going to be cars that are driven, but also going to be self-driving cars at some point. Once they become self-driving cars, they will have intelligence that says, ‘go fill up the gas tank’ or ‘it’s time to go to the carwash.’ All these things can be scheduled for the intelligent devices.
This is a whole another opportunity for blockchain to be that digital engine for all of these transactions, not just me getting a Lyft/Uber ride, but for them to manage their fleet of assets. Asset tracking takes on a whole new level, as all of these transactions need to be validated. They need to be stored. That’s yet another perfect application and think about us, how important it is to have a digital identity now. Every device is going to have an identity. Before you can transact, you have to know who you’re dealing with. This is where blockchain can play a really important role. As devices grow and shift from being just human people with a human digital identity, to the identity of a device, so that a device can now transact, the volume of transactions is going to skyrocket. That lends itself for yet another peer to peer clearing infrastructure for transactions on these mobile networks.
WHICH MIDDLEMEN ARE WE ELIMINATING USING THE BLOCKCHAIN?
It depends on what you’re doing. In the example of autonomous cars, the car is going to do the transactions with lots of different people. One type of transaction is between me and an Uber or Lyft. I’m getting a Lyft and I’m being charged. Another transaction could be, I need to pay EZ Pass for my utilization. And the other transaction could be, my fleet is “open” and I’m going to allow another network to use my fleet. Now you are into something different: you are transacting between two different networks. Who’s going to provide this security? Who’s going to provide the comfort and the trust? If I have a fleet of cars, I could be leasing to Uber, Lyft, or to a lot of other people, And my car could just be floating around between multiple different operators.
Who’s going to clear all those transactions? In other words, I think about this Uber model taken to the next level or Airbnb taken to the next level. All of these business models have the assets that are already out there, it’s just providing greater utilization and flattening out the supply chain.
Think about this: Uber don’t own cars today, so why would they own them in the future? I just might put my car out on the road and let the different operators use it. Think about the transportation business when it comes to train boxcars. When you see that train, you’ve got box cars from all kinds of different owners of those box cars. They’re being placed by different people and tracked by different people. Same thing could happen in the transportation space. Anybody could buy our own autonomous car and put it out for anybody to use. But somebody got to be able to track all those transactions and clear them. Either a third party needs to do it, or a network itself. I would argue that the network could be more efficient at it.
When Amazon got in their fight with FedEx because FedEx did not want to deliver paper products because it was not profitable, Amazon bought cars and leased them to drivers. What’s ultimately going to happen is people are going to put their fleets out there for use by anyone. That car could be used by twenty different sources during a day. As long as there is a network that provides the trust and I get paid, I do not care who is using my car or truck.
If you have connectivity and you have a way of intelligently tracking something, you can then transact with it. If you can transact with a distributed ledger that has trust, you can create all kinds of business models out of assets that are already out there. It is about sharing any asset more efficiently to flatten the supply chain and optimizing the use of things to eliminate waste from down time.
WHY CAN’T WE DO THIS WITH 4G? WHY ONLY 5G?
I’m not saying it’s binary. A lot of IoT things are fine with 4G because they’re so low bandwidth, it’s like reading a power meter at your home. It’s so low bandwidth, it’s infrequent that it needs to be monitored. It rarely goes down. I don’t think you need a 5G network for that. But if you have assets that are moving around and transacting a lot, then you do. That’s where the promise of 5G comes in. There’ll be plenty of IoT applications, like people tracking all kinds of things that don’t involve a lot of bandwidth. Those things have already taken off. There’s just an untold amount of IoT applications out there that are working fine on 4G, but there’s a lot of stuff that can be enabled if you have a deeper, faster, broader network.
DOES 5G BRING VALUE TO BLOCKCHAIN IN A WAY THAT IT EXPEDITES NEW USE CASES?
I believe that there’s going to be a lot of blockchain modifications. Blockchain is over to kill in some cases for certain applications. First, it’s not necessarily built for speed, but you can overcome that. If you look at how long it takes to process and validate a transaction on cryptocurrency Bitcoin transaction, that can take minutes, that’s not going to be particularly useful to replace, let’s say, a retail credit card network that JP Morgan or First Data runs. You can do it just by taking the risk. You swipe the credit card, the transaction is not going to settle for another 10 minutes and you’re taking the currency risk in that timeframe, which is fine and a way to get around the inefficiencies of confirming trust. Trust requires work and proof of work, and proof of work is solving puzzles that takes compute time and power.
What I already see is some software companies that are out there, that are using the block chain structure, but they’re streamlining it so that they can make it more cost effective for certain types of applications. Because mining is fine for cryptocurrency because, if you look at one coin, today it’s worth $9,000, but there comes a point where the heaviness of the blockchain as it’s used for cryptocurrency won’t work for lighter applications. I already see companies that are modifying the blockchain code, taking the best pieces of it and streamlining it. You’re going to see a lot of modifications like that. People are going to call it “blockchain” because at the core of it, it’s going to function like blockchain. In reality, it’s going to be a version of blockchain.
HOW DOES 5G PLAY A ROLE IN EXPANDING THE DISTRIBUTED LEDGER NETWORK IN SUPPORTING THE EFFICIENCY AND IMPROVING THE EFFICIENCY OF BLOCKCHAIN PROCESSING?
The beauty of the distributed ledger is that it just makes it impossible to hack. Look at how Bitcoin is today; every day, the ledger gets bigger and bigger, and there’s more compute power, more miners hooked up to the network. It’s getting geometrically more difficult to hack each day. It’s very, very secure. That’s what provides the trust that you need to be able to eliminate the middleman. That element of the protocol of Bitcoin is really important, but the question becomes, at some point how distributed of a ledger do you really need? At some point, once you get to “it’s impossible to hack,” does it make sense to make it even more difficult to hack? Companies have streamlined the blockchain protocol so that they can make it more cost efficient, reduce latency in terms of transaction times.
IF YOU HAD TO TAKE AN INTERSECTION OF 5G & A BLOCKCHAIN TO LOOK FOR AN APPLICATION TO INVEST IN, WHAT WOULD THAT BE?
I like peering because it’s going to be imperative that networks interconnect, and the traffic between the networks is going to grow because the end points are going to expand. To me, that’s some really fertile ground. You’re going to have some wind at your back. We know more devices means more traffic. We know more radios means more connectivity. We know that when the carriers connect with each other, there’s going to be more traffic and somebody’s going to have to play the middleman. And the network is the most efficient middleman in the market and that’s blockchain.
I like it a lot. I also like the digital identity game. Somebody who manages digital identity, both for individual people and smart IoT devices, I think that’s going to be some fertile ground.
I also think somebody’s going to blow up the portability market. There’s no need for a third party to be the authority in portability; that should be peer to peer. Like if I want to change my phone number, I should be able to just instantly change my phone number, and it should be completely transparent. I think that somebody’s going to disrupt portability by using blockchain. Those are some of the areas that I’m looking at.
I also think a big area for blockchain and also 5G is going to be in financial services, because people are going to be mobile. The whole clearing and settlement process which still takes way too long from when I do a trade until I get confirmation. I should be able to do a trade and get confirmation instantaneously, and I should be settled with my money in the bank within a minute, but it still takes days. That is going to get flattened out and improved. Those are just some areas that I could see some value add.
HAVE YOU SEEN ANY INTERESTING APPLICATIONS THAT CAUGHT YOUR ATTENTION THAT ARE ALREADY IN PLAY?
I haven’t. The only investment I’ve made in the blockchain space is in the mining space. I’ve seen a lot of other applications, but I haven’t made the investment yet. I’m still waiting to see the killer app. I’ve seen lots of stuff that is nice and there’ll be successful business, but will they be transformational? I’m not sure. I like to get involved in things I really believe that could completely be a game changer.
Every day somebody is launching a new blockchain based business, but I know that I like the comfort of cryptocurrency because it’s working and it’s growing. If you’re going to invest in cryptocurrency, I like the idea of being a miner because you’re at the bottom of the pyramid, nothing works unless mining works. Somebody has to be there to verify the transactions, otherwise there is no crypto market.
A lot of people are investing in companies that are making wallets, and a lot of people are investing in the pooling operators. There’s a lot of investment, but I like the space I’m in which is at the bottom of the pyramid.
There’s a lot out there, and I’m looking at these opportunities daily. There’s a lot of creativity being used. There’s two ways to apply blockchain: either you go in and disrupt an old market, or you create a new market. I think that there’s going to be money in both, but the people who find the new markets much like cryptocurrency, that’s where you’re going to see the unicorns.
The blockchain technology and wireless technology will penetrate in our lives without us even knowing. Just like AI did – a lot of people don’t even realize that it is AI. Blockchain will find its way too in our daily lives. In all of this, the network is the most efficient middleman and the idea of creating a collaborative economy of digital assets is the future.
