Blockchain technology and Telecom: definition and examples

Deutsche Telekom uses blockchain technology and participates in public blockchain networks. Together with its subsidiary T-Systems MMS, it supports blockchains such as Celo, Polkadot or Q. By doing so, the Deutsche Telekom subsidiary places great emphasis on the greatest possible sustainability: for the sake of the environment, it only gets involved in proof-of-stake networks ( see below). Both will continue to expand their activities in blockchain technology. After all, blockchain is one of the most important technologies of the future. It enables intelligent and secure applications and leads to a digital transformation for companies and society.

What is blockchain?

Blockchain is a distributed, public database and enables the Internet of Values. It stores transactions that can be viewed by any user. A blockchain gives people non-discriminatory access to a wide range of services. Their entries are grouped into blocks. The term “chain” comes from the chain to which transactions are added in chronological order. Blockchain networks are used more and more in business: in banks as well as in insurance and healthcare, in trade or logistics.

Why is the cloud a cornerstone of blockchain?

Deutsche Telekom provides infrastructure to operate and secure nodes (validators) in blockchain networks, for example. Open Telekom Cloud plays an important role because the majority of all blockchain nodes run on cloud platforms. Open Telekom Cloud meets the strictest security and compliance requirements. The cloud also enables the establishment and delivery of digital identities (Self-Sovereign Identity, SSI) via the Internet. Many digital services require verified and secure digital credentials.

Example: Blockchain in the financial industry

Probably one of the most famous examples of the use of blockchain is monetary transactions. It works like a cash book: if person A transfers money to person B, this information (data) is entered into a block. When a block is full, a new block is added. Each node (computer) in the network has a copy of the blockchain, so it knows the “balance” of each user and the entire history of the transaction. No banks are required for payment transactions. Payments are made with cryptocurrency as a digital means of payment. For example, for money payments without a bank account in decentralized finance (DeFi).
Example: Blockchain in the economy
The food, pharmaceutical or automotive industries use blockchain applications, for example, to track their supply chains. This means that counterfeits can be detected and combated more quickly. For example, pirated medicines put the health of patients at risk. They also affect the profits and reputation of the pharmaceutical company.

Diary of an apple in the blockchain

Germany grows around 191,512 hectares of fruit and vegetables. With the help of a blockchain, consumers can digitally check the paths of their food without gaps: from cultivation to transport and sale to the consumer’s table. For example, buyers of apples can use blockchain to find out about the farm, evidence of pesticides, harvest time, transporter, cold chain, delivery time or condition of the apples.

Staking
Staking means that users lend their purchased cryptocurrencies (coins or tokens) to the blockchain. By doing so, they secure the blockchain network and the transactions carried out over it as so-called validators and receive rewards in return. As a reward, stake users receive coins or tokens.

What does Proof of Stake (PoS) mean?
The Proof-of-Stake (PoS) approach defines which participant from a network is authorized to generate the respective block. The participant is determined using weighted random sampling. This mechanism is faster and more energy efficient. For example, money transfers on the Celo blockchain require 700,000 times less data than other cryptocurrencies. Celo even requires every service offered to the network to be CO2 neutral.

What does Proof of Work (PoW) mean?
The Proof of Work (PoW) approach, on the other hand, used for, say, Bitcoin, requires a relatively large amount of computing power. Many mathematical problems must be solved throughout the network to create a new crypto value (mining). This uses a lot of power.