trust in the mobile internet of things

Trust in the mobile Internet of Things

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Trust in the mobile Internet of ThingsEnhancing cellular connectivity in a billion devices through blockchain

By Antonio Gonzalo Vaca & Sandra BeckerJune 2016

Disclaimer: this White Paper is issued for information only. It does not constitute an official or agreed position. The views expressed are entirely those of the authors who declines all responsibility for any errors and any loss or damage resulting from use of the contents of this White Paper. The authors also decline responsibility for any infringement of any third party's Intellectual Property Rights (IPR), but will be pleased to acknowledge any IPR and correct any infringement of which it is advised.


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Introduction

The Internet of Things is a promise. A liquid world where all devices are interconnected and communicating. Regarding mobile connectivity, e-SIM is the technological response from the cellular connectivity industry: An embedded hardware connectivity piece, ready to fit into everything.

It foreseeable that the day-to-day management of all these billion lines along all our devices’ lifecycles (typically years) will represent a great opportunity for integrators and connectivity aggregators, and at the same time an amazing threat of disintermediation for traditional operators.

But there is still one card to play. Due to recent technological advances we can put the operators back into the driver’s seat for connectivity. Embracing blockchain, operators can place the user back again in the center of the ecosystem, while regaining user’s trust for all connectivity management.

Through three parts, this whitepaper will present the forecoming problem, the proposed solution and the products that will be enabled by it, whose only purpose is to help connect things with users, allow multiple new services to flourish, and finally simplify the Internet of Things for everyone.

“Embracing blockchain, operators can place the user back again in the center of the ecosystem, and regain

user’s trust for all connectivity management.”

Introduction


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About the Authors

About the Authors

Antonio Gonzalo VacaStrategist, intra&entrepreneur, product guy. I love to understand different businesses, markets and explore new gentle ways to shake the world.Studied engineering, specialized in Sound and Image, chose Marketing for Master and now feeling curious about UX and blockchain. Joining the dots of the Internet of Things in Telefonica, looking for ‘the next big thing’.

Founder of Ethereum Madrid.

https://es.linkedin.com/in/antoniogonzalohttps://twitter.com/antoniogonzalo_

Sandra BeckerEconomist with more than seven years of experience in statistical modelling for various market research institutes in Germany, UK and Spain. At the moment responsible for the training program of data visualization and blockchain technology at the Big Data consultant firm SynergicPartners.

Founder of Ethereum Madrid.

https://es.linkedin.com/in/sandra-becker-b847b831

https://es.linkedin.com/in/antoniogonzalobecker-b847b831

https://twitter.com/antoniogonzalo_

https://es.linkedin.com/in/sandra-becker-b847b831


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Contents

Introduction

About the Authors

01 Device EvolutionConnecting the next billion devicesA more complex environmentForgetting about the userA trojan horse for operators

02 Follow the White rabbitA trusted system for a trustless worldHow does it look like?A user-centric system Operators managing connectivity. As always.

03 Enabling a brighter futureTrue big dataRecommendation enginesPublic subscription auctionsConsumers as producers

Conclusion

Appendix

Contents


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Device Evolution

The Internet of Things. A catchy name for what is a natural evolution of devices. They have been connected since the dawn of Internet, and thanks to Moore’s Law, they are now smaller, more powerful and even more willing to share the data they process to other devices and to their owners.

The Internet of things is called to change society and the way people interact with their surroundings, in any conceivable way. But Internet of Things is much more than making machines ‘talk’. It defines new relationships with the physical world; when we start making things intelligent, it’s going to be a major engine for creating new products and new services.

Wearable gadgets, smart appliances, and a myriad of data-sensor devices will need to perform more functions with sufficient processing capacity. And a some of them will need to have built-in, stand-alone cellular connectivity.

How many things are going to be connected? Hans Vestberg, CEO of Ericsson, predicted in 2010 that the magic number will be 50bn devices for 20201; and this number has been floating around business forecasts like an Internet meme ever since. Any IoT player has to agree or raise it even further. Different analyst sources, from Gartner to Morgan Stanley2, already made their own predictions from 17bn to 75bn devices by 2020.

No matter the final absolute number, according to GSMA, by 2020 30% of all cellular connections will be IoT devices, an estimated gross 2,0 bn SIMs3. SIM-based connectivity still has a bright future ahead.

“It defines new relationships with the physical world; when we start making things intelligent, it’s going to be a major engine for creating radical new products and new

services”

Device Evolution


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Device Evolution

Connecting the next billion devicesThe new connected devices fostered by Internet of Things technology, leads to a change in the paradigm of traditional removable SIMs. There are multiple use cases asking for a new solution:

• Sometimes the SIM cannot be inserted easily• Devices might not be accessible• Environmental conditions: temperature, vibration, humidity…• Country/operator might not be known or might need to be changed afterwards

Recent developments and technology evolution pushes the industry to evolve SIMs to a new standard, consistent with the M2M solution and interoperable between different suppliers.

Telcos have an asset at hand for the future

connected devices, the e-SIM. It is a traditional SIM physically integrated into the device - it cannot be removed, and it is designed to ensure connectivity and security for users. The GSMA is currently leading the industry towards a common standard to ensure interoperability. Final details on the e-SIM operating model are being finalized by OEMs, network operators, SIM vendors, and the GSMA.

The e-SIM is based on a hardware secure element, there is no product or service that implements a SIM card entirely in software, providing:

• Identity: authenticates the subscription (customers) and the network, granting access to the network regardless of the device.• Security: stores the private keys and in-formation required for secure communica-tions. The information cannot be accessed without the right credentials.

Beecham Report: Benefits Analysis of GSMA Embedded SIM Specification


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Device Evolution

When a consumer purchases a service package from a specific operator, the operator profile is downloaded and saved onto the SIM memory. If a second operator package is purchased afterwards, both operator profiles are downloaded and a swap could be implemented between both operators. e-SIMs give device’s owners the ability to compare networks and select service at will— directly from the device.

This solution is currently being deployed mainly to large accounts and customers that require large deployments. Due to its purchasing power, these accounts have prime access to the communication providers, making it easier to agree to service terms and tailor the offer they demand.

However, for consumer users, those without an IT department to take care, adding frictionless connectivity to their devices (e.g. wearables) require a further evolution from the current system designed for consumer devices.

A more complex environmentThe actual specification of the GSMA for the e-SIM has several weaknesses and threats, both from a technological and from a business standpoint:

• Since SIM vendors have their own OTA (over-the-air) platforms, it would not be difficult for other players to enter the mar-ket to compete with the GSMA’s spec-ification. They may offer new interfac-es, external M2M (machine-to-machine) compatibility and faster time to market.

• GSMA’s specification is complex and cost-ly: There are multiple interfaces required (13) compared to the proprietary alternative (2).

This complexity is due to the enhanced se-curity provided by the GSMA specification4.

• New standards: soft SIM, a non-physical SIM card. Achieving an international stan-dard for this is likely to be even more chal-lenging than for e-SIM.

Of course, the GSMA specifies the architecture, but does not hold a database of all e-SIMs deployed worldwide, or the servers to make the shift; that is each operator’s cup of tea.

In a consumer e-SIM environment, customers will obtain either a device that is not associated with an operator or one that has been pre-provisioned. In the former case, they will be required to select a provider, and in the latter, they may have the option to do so. In both cases, a Universal Discovery Server5 plays a pivotal role, as it is responsible for establishing the link between the device and the profile-provisioning units.

Consumers would most likely prefer that an independent party be responsible for operator-profile discovery to ensure that all available profiles in a market (with no restrictions on tariffs and operators) are presented without commercial bias.

“e-SIMs give device’s owners the ability to compare networks and then select the service at will— all from the

device.”


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Forgetting about consumer’s UXThe first challenge consumers may face is that they will encounter a multi-option world they are not prepared to manage. To successfully adapt their device’s connectivity in this coming uber-connected world, consumers will have to understand and take into account:

1. Current operator2. Contract length3. Physical coverage4. Roaming requirements5. Connectivity properties a. Speed b. Size c. Frequency d. Security e. Priority6. Regulatory constraints

And this scenario will replicate for every single connected device we own. Multiple lines, different operators. Across the globe.

How is each user going to manage 00’s of SIMs at once? The GSMA proposal does not take into account the user experience (UX) for the process, the interface. It implies contacting both

MNO’s (Mobile Network Operator) interfaces: MNO donor, that will presumably obstacle the losing-a-customer process, and MNO receiver. This problem is so complex that today regulatory arbitrage is needed, with all the costs and systems associated. And it takes days.

Furthermore, who will be accountable if the connectivity goes South? Is the manufacturer the main responsible if it stops working, or is that the fault of the operator whose profile is working? Is it the service provider which packaged and downloaded that profile, or the software vendor(s) involved? Should users blame the retailer - or worse, a second operator if the failure occurred during a switch-over to a new profile? Who pays for the diagnosis, or for replacing the whole device? What happens if data is lost?

The simple answer for operators will be ‘no worries, we are taking care of all lines’. But that means a lock-in not everybody is willing to accept.

This situation will be completely overwhelming for the vast majority of the consumer market; but there are third parties that will rise and offer to solve all this inconvenience, providing a seamless experience: connectivity integrators and aggregators.

A Trojan horse for operatorsIt is not hard to imagine a scenario where Apple, Samsung, Amazon, Google, Facebook, etc, will leverage their customer base and relationships to broker connectivity for everyone. Integrators (embedding connectivity - hardware side) and aggregators (brokering connectivity - software side) are two faces of the same coin.

This has already (silently) happened. The Kindle 3G is a good example of a hardware product

Device Evolution


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where connectivity is embedded, but the operator is not ‘shown’ to the consumer. In fact, the consumer doesn’t really care: books and services are purchased and downloaded without the need of WiFi. Amazon manages everything, the price, the roaming agreements and the download quota per user.

Google’s Project Fi is one step further: connectivity as a service6. No matter the place, no matter the coverage, no matter the bandwidth (even WiFi!). A network of networks: one number across networks and devices - they manage all the operator’s comes-and-goes, and it is Google’s cup of tea to find the sweetest spot for each user. And with all the information they hold, they clearly can. Of course, connectivity is negotiated wholesale to operators beforehand leveraging the vast Google’s user base, further reducing operator’s key indicator, the precious ARPU (Average Revenue per User).

e-SIM brings this scenario much more closer. By easily swapping contracts between network operators, operational costs are greatly reduced and no physical involvement is needed. Churn is therefore expected to increase. It opens a new management service focused on the final customer; in the last two years, there have been emerging new players8 that are starting to see

the product that drives the business behind it: connectivity discovery servers.

This looks like the fastest way for operators to be automatically disintermediated and finally commoditized.

Of course, it is foreseeable that operators will strongly react against this new environment, setting all kinds of obstacles and barriers to maintain the role of ‘key holder’ for all e-SIM contracts:

• Opening e-SIM interfaces and profiles only to a pre-agreed number of operators, virtual or non-virtual (partners)• Generating new technical barriers of entry (profile compatibility)• Making slower the overall process, de-laying profile delivery, keeping credentials hidden, etc.

There are great chances that 3rd party arbitrage measures will be needed to ensure a minimum quality of service, exactly in the same way it happened with consumer’s main mobile phone numbers.

This is not a frictionless ecosystem.

In the next section we set the basic principles to build a feasible model that might benefit con-sumers while keeping operators in the center of the connectivity ecosystem.

Device Evolution


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Follow the white rabbit


Between operators, we face a situation that resembles the traditional game theory example, the prisoner’s dilemma9: two completely “rational” individuals might not cooperate, even if it appears that it is in their best interests to do so.

Multiple initiatives are taking place to prevent other stakeholders to intermediate the relationship with final users. However, intermediators are moving fast, as well. And unfortunately for operators, convenience is king. It is a battle that they will lose, unless they provide a more convenient solution for the user.

The solution lies, unexpectedly, in giving away the control so that the value for intermediators is diminished.

A trusted system for a trustless worldThe answer lies in creating a system where the final user is strongly back in control. A system that the users can always trust, where the contract’s switch is easily accessible, resilient, and always available (even in the future), no matter third parties. A place where SIM contracts are liquid; that is, subscriptions ‘flow’ from one operator to another in a seamless way, while keeping the user always in control.

Due to recent advances in technology, it is now feasible. This scenario can be recreated by a distributed open ledger for all connectivity contracts, based on an open source blockchain platform, such as Ethereum. A system where

all subscription profiles are defined, listed and assigned. This way, anyone with the proper cryptographic credentials can order a subscription change from one operator to another.

The system will benefit from the blockchain properties:

• Transparency: anyone could see all the contracts and trace all connectivity ‘swaps’• Resiliency: enforced by operators, assur-ing unhackability• Immutable: accountability and definitive actions

A to make it even more appealing, it is an inexpensive solution: The cost for operators implementing and running the universal ledger is shared among all parties enforcing the transactions, and tends to zero.

“This way, anyone with the proper cryptographic credentials can order

a subscription change from one operator to another.”


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How does it look like?It is important to highlight that the proposed system does not interfere with the GSMA standard for interoperability; moreover, it is a complement. We are describing a public ledger where contracts and connectivity lines information is written, from all operators, from all geographies. The so-called by the GSMA ‘Universal Discovery Server’.

The SIMs that include this system are platform-agnostic: we assume that interoperability in profiles is already agreed (for instance, following the GSMA standard) but the user do not want to contact both parties to establish the switch.

Today, in order to switch a line from one operator to another, we run multi-centralized networks with multiple interfaces and databases, that have to be maintained and audited, in real-time. Typically, regulators hold a technological system to ensure that the user’s rights are enforced, auditing and connecting to different interfaces from different operators.

Instead, by using a decentralized ledger to store all contracts and SIMs associated, the database is shared among all players and the user only has one simple way to change operators. He owns the private key, so he always knows how to change (by writing on the ledger). And due to cryptographic properties of blockchain, he always holds control, no matter third parties.

In this scenario, we ease the user journey, share the costs along all nodes, and allow new innovative services to flourish.

From a SIM perspective, the journey to a switch will go through the next steps:

1. All SIMs are created with a master profile, completely agnostic. It uses a master blockchain-only APN to communicate when in doubt, from the master profile.2. Once the SIM detects a new MNO request, looks in the Blockchain for information: “who should I be with?”3. In the Blockchain it is previously written the basic triplet with ID-SIM-Operator and



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new length of the contract.4. The SIM verifies the authenticity of the register before using it (runs a signature verification process). Once verified, calls the operator for registration “ID, Location, can I log in?”5. The operator looks in the blockchain for validation, verifies against his own records and opens the HLR for the SIM number.6. The secondary profile is downloaded and then the SIM is connected.

Initially there are three types of transactions in the system:

1. Origin: the first transaction is signed by a private key provided by the manufacturer.2. Connection: a transaction to indicate who should the SIM start to connect to.3. Switch: a transaction to indicate who is the new owner and must provide a new credential.

From a customer perspective, the user has a public MNO1 address that is linked to the SIM, and a private key to manage the switch to a new operator. All he has to do to swap to a new operator is sign with the private key a switch transaction to a new MNO2 address, that will provide a new private key once the process is successful.

All the ownership of process, and therefore the e-SIM ownership, lies in a private key that is given to a customer. That is, a password. All he has to do to change from one operator to another is sign a new transaction, and no one can delay or obstruct the process.



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A user-centric systemThe proposed ledger provides several benefits to final users, taking them back to the center of the ecosystem:

• One single place for connectivity: Every connectivity contract will be managed in one single place with independence of operator, country and device. The simplicity of this management is tied to a third party application (yes), that can read and write in the blockchain and associate this contracts to a validated user’s ID. But this application is just a front-end, and can be evolved without altering the core properties. As a metaphor, it is the equivalent to a ‘wallet app’ for the bitcoin network.

• Unconditional lock-out: the costs for changing from one operator to another are strongly controlled. Nowadays, all costs are directly proportional to the replacement of the plastic SIM. The user/consumer knows how costly it is to change, providing a sense of control. However, being dependent of third party platforms (SIM vendors), profile agreements (Operators) or the device (Manufacturers) to swap contracts, this costs might change in the future. There is great possibility to be tied to their own agreements, and the future service costs will go hand-by-hand. This is undesirable. So, with a distributed ledger controlled by none (and everyone) where the process is non-dependent of the players, this sense of freedom is automatically restored.

• One stock unit - forever. Devices’ lifespan is longer than the usual connectivity contracts, but there is no need to stock different e-SIMs to hold different profiles. When buying one e-SIM, it will adapt to the forthcoming profiles, no new hardware will be required, and will not be dependent on the final will of an operator that may close business, or a device manufacturer that will go bankrupt.

Operators managing connectivity. As always.For operators it translates into customers looking back at the m for connectivity:

• Defensive Measure: To begin with, the aforementioned action against potential intermediaries. The brokering value to swap between contracts are pushed to this front-end application, that could be implemented by anyone. By doing so, there is no simple way for device manufacturers to leverage on customer’s base or operator’s technical inefficiencies to obtain a better price, since anyone could potentially broker all contracts at a minimum cost.

• No Subscription Management Cloud: The Universal Discovery Server is no longer required, the cost of implementing and maintaining a digital ledger between all operators tend to zero. Once implemented, just small changes are required to keep the system up since the verification and transaction’s costs are shared. As a simple analogy, the cost of maintaining the transactions in the bitcoin blockchain verified is shared between all miners, keeping a 6$Bn market running. These costs are basically electricity fees once the mining equipment is amortized.

“Every connectivity contract will be managed in one single place with independence of operator, country and

device.”



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• Extreme scalability: the system is designed to scale from day one, future-proof, to millions of users. In fact, the more distributed it is, the more robust and resilient it becomes. And regarding efficiency, one of bitcoin’s main controversies, using a

Proof-of-Stake instead of Proof-of-Work10 mechanism, such as in Ethereum’s Serenity release, it is assured that there will be no attacker to hold half of the computing power or stake (both economic barriers) required to manipulate the system.



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Enabling a brighter future

Finally, but most importantly, the data. The richness of having all the data stored in one place makes way to new additional services.

The following section explains four examples of different services that could be enabled on top of this connectivity ledger.

True big dataUnderstanding customers’ choices and behavior without cut-offs: Currently our KYC (Know Your Customer) data basis is limited to tracking consumers’ behavior for as long they our customers. There are several services we are currently building from these data: We know when they don’t sleep but surf in the internet, we know that they like writing WhatsApp when using public transport, we know when they switch to have better conditions in their holidays, etc.

What we don’t know is, how, our customers, behave once they left us and switch to another operator; and the other way round, we don’t know what are the mobile usage habits of customers that are about to become our new clients. This new and true KYC data, which is available on the blockchain based e-SIM connectivity network, gives operators the possibility to track, analyze and therefore understand customers’ needs from a meta perspective. We get the bigger picture, which means the whole history of customer behavior data.

The New Data helps identifying “operator hoppers” and understand the reasons for this behavior, helping us in the detection of the loyal and constant AAA clients across all operators.

New client Modelling: Better prediction means less churn means less costs. Big Data and Machine Learning approaches have made predictions as close to reality as they have never been before. But having access to information about competitors’ customers’ behavior, would on the one hand bring churn predictions to a new level of precision and on the other hand create a new of type of predictions, the “new customer” predictions: Not only “knowing” when one of our customer is about to leave our company, but also detecting those that are about to become a new Operator’s customer, can be crucial to target and personalize marketing, communication and product offers.

Both approaches, improved churn modelling as well as the new customer modelling, translates into enormous cost reduction and additional revenue.



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Recommendation EnginesWhile the blockchain based smart-contract offer gives back the freedom to the users in choosing the operator they want, it also challenges them in making the right decisions. This, not only once but depending on changes in their behavior, their location and their needs, customer are forced to make these difficult decisions on a frequent basis.

In order to survive in this complex “data-driven” world and cope with the information overload, users will search for orientation provided by a partner they can trust. This partner must be independent because only in this case the one and only focus will be to find the best solution for the user and not to please any other external players´ needs. A solution offers so called recommender systems, which are also described as one powerful and popular information discovery tools on the web.

Highly personalized data as provided by the blockchain SIM connectivity network can feed

into the creation of well-defined recommendation algorithms in order to provide the customer automatically, constantly and in real time with the best options. For instance, when travelling we can ask (and automate) the recommendation engine which is the connectivity profile chosen by people with similar behaviours around.

As in the nearer future recommendation engines won’t be a nice to have when making a decision about which phone, book or lipstick to buy or what, where and with whom to do on a Saturday night; will be a must have to survive in a world of information overload and making (and automating) the right decision in the right moment at the right time, which can be best served by an independent first class Recommendation Engine taking into account data of the blockchain connectivity network.

Public subscription AuctionsEven further, provides an extra layer of horizontal control for anyone’s connectivity, that may lead to new marketplaces; nothing prevents the user



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to auction his own availability -pulling an offer- or operators reaching potential customers -pushing a new one-:

Push: All operators could see the full history of the user and generate a tailored offer to better match his needs. And push the offer when the contract expiration date is near, and always if the user allows to. Of course, the more data the user provides, the better the fit and the offer.

Pull: the user, knowing he is a good reliable customer and with a certain behavior configuration, can stablish a Dutch auction where the price will only be improved for him. Some operators will improve the offer, some may not. But the user will have the power to choose.

Both approaches are a radical swift from the business-by-obscurity approach, where the less the user is aware about consumption, the better. This is one clear way to regain trust from consumers.

Consumers to Producers

Finally, an even further application could be the re-use of communications spectrum by the consumers, always leaving trace and accountability in a blockchain. For instance, when a user loses connectivity because of physical or contractual problems (i.e. roaming), he will be keen to swap his non-working line to any available lines from devices around with proper connectivity, and regain access for a controlled (physically or temporary) period of time.

Existing local users may offer their connectivity capabilities for this user in-demand and have peace of mind due to the fact that they will regain their capabilities once the contract is

finished.This peace of mind will exist because the contract is enforced in the blockchain. These contracts could be easily implemented in the Ethereum platform.

Operators will be able to deliver this service without deploying a single new network tower, and will optimize network usage.

Even further, in situations where connectivity is problematic due to physical limitations of the network (such as sport events), there is a possibility of ‘uberization’ (or ‘airbnb-zation’) of the service: the price for connectivity could be directly dependent on the physical availability and it could be modulated accordingly.

In this scenario the final users will work as, de facto, connectivity providers.


“The future is already here — it’s just not very evenly distributed.”

- William Gibson


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Conclusion

This approach solves the problem for operators, radically changing the rules of the actual game. It is highly likely that, with the current evolution of SIM standards, operators will not be able to retain control and lose relevance as connectivity owners in front of final customers. Not because of technological reasons, but for convenience ones. Convenience is king, and users will just head to simpler offerings.

The only way to regain control of connectivity it is to, unexpectedly, democratize the access to it.

By doing so, all the value and convenience that the intermediators could provide is automatically diminished to a simple front-end.

And from the new data stored in this particular blockchain, new services can emerge. Not only to provide insights for better churn modelling, the obvious, but to enable innovative use cases and empower users too. And by doing so, transform and enhance the Internet of Things in the liquid, transparent and better world we all expect and hope for.

Conclusion


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Appendix

1 Gigaom 2010: “Ericsson CEO Predicts 50 Billion Internet Connected Devices by 2020” https://gigaom.com/2010/04/14/ericsson-sees-the-internet-of-things-by-2020/

2 Gartner: 25 billion devices http://www.gartner.com/newsroom/id/2905717 Business insider: Morgan Stanley: 75B http://www.businessinsider.com/75-billion-devices-will-be-connected-to-the-internet-by-2020-2013-10

3 GSMA Cellular M2M forecasts http://gsma.com/connectedliving/wp-content/up-loads/2016/09/GSMA-Intelligence-Cellular-M2M-forecasts-2010-2020.pdf

4 “China says GSMA Specification is too heavy” - Beecham Report: Benefits Analysis of GSMA Embedded SIM Specification

5 “Universal Discovery Server (…) link between the device and the profile-provisioning units.” - McKinsey: E-SIM for consumers: a game changer in mobile telecommunications http://www.mckinsey.com/industries/telecommunications/our-insights/e-sim-for-consumers-a-game-chang-er-in-mobile-telecommunications

6 Google’s Project Fi - https://fi.google.com/about/experience/

7 Tony Webster - Project Fi https://www.flickr.com/photos/diversey/25109932164

8 Globetouch (Founded 2014) - “Our custom-built operation and business systems can provide seamless portals” http://www.globetouch.com/services/operation-business-support-services/

9 Prisoner’s dilemma - https://en.wikipedia.org/wiki/Prisoner%27s_dilemma

10 Proof of Stake Vs Proof of Work: https://www.cryptocoinsnews.com/bitcoins-future-proof-of-stake-vs-proof-of-work

11 Blue Sphere Background designed by Starline - Freepik.com

Appendix

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