Interview by Tom Lyons
Deutsche Telekom has been highly active in the blockchain space for quite a while now, which might surprise people. Can you tell us when you started and why?
Markus: We’ve been involved in defining Web3 since 2018, starting with our team in Berlin. Perhaps influenced by Berlin’s vibrant Ethereum community, we experimented with putting self-administered e-scooters on the blockchain back in 2018. It was too early for such an integration, and interest waned during the first and second “crypto winters.” However, we continued to work on blockchain topics, and today, Deutsche Telekom MMS runs validators for major blockchain networks.
Jens: We’re a cloud provider in Europe using our own infrastructure and helping blockchain networks in physical decentralization. Initially, we started by running oracles for Chainlink as our first major blockchain project. From there, we moved on to staking, particularly as early adopters of the Flow blockchain, where we ran some of the first Flow validators for projects like Dapper Labs and Top Shots. This early involvement created significant momentum. After staking, we further expanded our blockchain activities by transitioning into indexing. Overall, our journey has evolved from running oracles to staking and finally to indexing, each step contributing to our growing expertise and presence in the blockchain space. We are part of the Helium ecosystem, engaging in decentralized clearing and settlement with ClearX. Celo was our first strategic investment in a token, making us at that time one of the very few companies of our size to manage crypto assets.
What specific technologies is Deutsche Telekom focusing on and why?
Jens: To start, we run validators for major and minor blockchains, including Ethereum, Polygon, Celo, Flow, Q, Energy Web, The Graph, MutiversX, Aleph Zero, and so on. We support Chainlink’s oracle node network, enabling DeFi apps to access external data. That said, we focus primarily on EVM-compatible public blockchains, as we want to support building a new internet on open infrastructure.
Markus: At the moment, we focus on Ethereum-compatible platforms. We see Ethereum as the current standard, and enterprises are still grappling with the possibilities that Ethereum offers.
We’re particularly excited about what we’re building with Celo, a mobile-first blockchain and a future layer-two protocol on Ethereum that uses mobile phone numbers as identifiers on the blockchain for digital assets. This opens doors for us into the future of tokenized real-world assets, where users can send digital assets straight to mobile phones. Here we want to be a part of it.
You seem very committed to providing basic blockchain infrastructure services. Why?
Markus: What we’ve learned over the last few years is that our service provides a unique selling point. EVMs require decentralization for optimal functioning. It wouldn’t be ideal if all of Ethereum ran on AWS. So it is very valuable to have a second or even third credible option for cloud infrastructure.
Being a telecommunications company gives us unique advantages in maintaining high uptimes, which we also apply to running validators. This sets us apart from some other cloud providers, and it’s been good business for us. Notably, it establishes our credibility in the blockchain and Web3 communities, demonstrating our early and committed support for public, decentralized networks. This credibility will also be beneficial when we introduce future services.
Jens: First, running decentralized networks is in our heritage as a telecommunications company; it’s in our DNA. Second, we’re motivated by the uneven benefits reaped by big tech companies. Web3 provides an opportunity to level the playing field.
I see Web2 and Web3 as a natural progression in the development of the Internet. We’ve been providing infrastructure services for years, starting from phone lines and transitioning to the Internet. It’s essential for us not only to participate in future developments but also to guide them. This is why understanding how blockchain ecosystems and key elements like digital wallets function is crucial. That’s why we’re actively exploring what roles we can play in this evolving landscape.
What enterprise-level blockchain use cases are you excited about?
Jens: Currently, our focus is on assisting other companies in transitioning into the Web3 space. For example, with Celo, the mobile number acts as the wallet address. In the past, even storing an encrypted mobile number on a blockchain wouldn’t meet our privacy standards. So, we have to innovate and look into “one-click wallets.”
The future of mass-market wallets may not be MetaMask-only but rather wallets included in mainstream apps built by brands and companies. We want to make it easier for brands to incorporate wallets into their native applications. We’ve built a prototype that accomplishes this with just one click.
Markus: What we’ve discovered through our experiments is that digital ownership is integral to these new systems. One challenge for corporations is dealing with legacy systems when implementing new engagement schemes, which usually require substantial effort and cost. However, if these legacy systems generate something simple like a QR code, you can bridge that code to a blockchain. This allows you to introduce advanced features and gamification outside the legacy system while maintaining the ownership status on the blockchain. This approach of layering over legacy systems will significantly change the game, especially for Web3 use cases.
When talking to enterprise clients, especially those outside the Web3 space, do you find there is a growing level of understanding, or do you still need to educate people?
Jens: There’s still a need for education and explanation in this space. We have been working on this internally for quite some time. We’ve held sessions across the group and for senior executives. The need for education also extends to our B2B customers; the level of understanding varies depending on whom you’re speaking to.
Markus: Interestingly, the current ‘crypto winter’ has somewhat benefited us. When we started this venture two years ago, the landscape was filled with expensive JPGs. Many people wondered why they should care about concepts like blockchain, the metaverse, and NFTs, especially when they didn’t align with the interests of major players. So, this period has helped clarify and refine people’s understanding of Web3.
What unique and innovative decentralized business models do you see businesses exploring or adopting, and how do they differ from traditional models?
Jens: They are really a couple. For example, clearing and settlement is a promising decentralized business model, allowing parties to settle directly among themselves without an extra service provider in between. Decentralized physical infrastructure networks are also very interesting. Instead of only building out infrastructure on our own, telcos or infrastructure providers can additionally engage with users incentivizing them to set up network infrastructure. Is it a model that will fly in the future? No one knows for sure right now. But we think it’s important to try and understand how the mechanics can work.
Markus: And then there is the more colorful stuff, the loyalty programs, and so on. What is interesting is composability. There are so many opportunities. For example, we are working on a way to incentivize employees to do more online training, and we thought we could incentivize them by giving them reward tokens. That’s a simple enough idea. But what could these reward tokens be? It could be planting trees via an on-chain carbon offset protocol or digital rewards onchain. So you could mint a learning token that could be swapped into a carbon offset token. And because it’s on the same chain, it’s so easy to plug it all together. You do not have to build huge backends because this is natively part of the blockchain. Easy composability with the digital ownership backed in. That is one of the superpowers of blockchain.
Markus Schorn is a bestselling author and special adviser on emerging technologies and business models. He is an expert in digital transformation and innovation within various industries and revenue models.
Jens Herrmann brings over 18 years of experience in and passion for technology, business, and entrepreneurship to his work in blockchain, Web3, and the metaverse. His focus includes driving and advising for major advancements in telecom blockchain projects, data trends, and challenges in decentralization.