Use Cases for Internet of Things or IoT on Blockchain: Analysis of Three Prototypes

In the previous article we covered a high level overview of blockchain and IoT taken together. In this post, we will take a closer look at three use cases for IoT on the blockchain, through different prototype implementations from three different technology companies.

Two in the list are start-ups Slock.it and Filament while one offering is from technology giant IBM.

An interesting fact is that they all have Samsung in the mix; either as partner or as investor.

Use Case: Fully Autonomous Rentals with Slock.it’s Ethereum Computer

Technology Stack: Ethereum, Ubuntu, Wireless Protocols, Swarm/IPFS for storage

Partners: Samsung, Canonical, RWE, Microsoft

We have covered Slock.it’s DAO in this series, aimed at bringing into production by 2017, a solution called the Ethereum Computer that will allow autonomous rentals on the Ethereum blockchain.

Slock.it envisions a disintermediated rental or sale use case applicable to any object such as accommodation, real estate spaces, smart devices or even spare resources such as wi-fi routers or disk space. Slock.it’s proposition for the Ethereum Computer is to bring blockchain technology into every home by activating a "Universal Sharing Network".

The role of the Ethereum computer is to act as a blockchain hub for IoT enabled devices in the vicinity. A conventional smart home hub such as Samsung’s SmartThings is designed to allow different smart objects to communicate with one another and also, function as a central controller for multiple objects. Smart home hubs are not designed for billing or payments use case.

The Ethereum Computer on the other hand, allows connected devices to communicate with the blockchain and negotiate billing smart contracts. On payment of a digital token fee, the device unlocks for use.

First demonstrated at Ethereum Devcon 1 last November, the company, in partnership with Canonical and Samsung, demonstrated a working prototype of the Ethereum Computer at Mobile World Congress in 2016.

Slock.it’s implementation at MWC consisted of a full Ethereum node on Snappy Ubuntu Core, with the complete Ethereum stack of Homestead, Mist and Whisper protocol integrated with Samsung’s Artik IoT platform. The prototype operated door locks and smart lights which were activated by completing a payment transaction on Ethereum.

Other use cases that Slock.it has described are autonomous self-renting electric vehicles. Slock.it has also partnered with RWE, a German energy company for a solution using Ethereum Computer, that will allow electric vehicles to charge from smart sockets making payments via the Ethereum blockchain. Another more futuristic use case is micro-transactions, where connected vehicles can recharge at a smart traffic light, using an embedded Ethereum Computer hub and Whisper protocol for communication.

Use Case: Machine to Machine Supply Chain for Smart Home with IBM and Samsung’s ADEPT (Autonomous Decentralized Peer-to-Peer Telemetry)

Technology Stack: IBM BlueMix, Telehash, Ethereum, BitTorrent

Partners: Samsung

At CES in January 2015, IBM and Samsung unveiled a proof of concept that demonstrated a decentralized IoT framework called ADEPT, using peer to peer messaging, file sharing (such as device logs and marketing videos) and blockchain. IBM describes the outcome as “device democracy”.

In the ADEPT prototype, three smart home use cases for self-sustaining devices using these protocols were implemented.

A smart washing machine was able to negotiate smart contracts to order detergent refill, place repair service order for a fault part under warranty and also collaborate with other devices on energy usage.

Billing and payment transaction and contract terms were made via Ethereum blockchain, while TeleHash was used for device to device communication and BitTorrent to exchange files such as diagnostic logs and marketing videos.

The value proposition of device democracy is to give security and privacy back in the hands of the user through trustless, peer to peer encrypted transactions between machines with blockchain at the core.

Use Case: Decentralized Industrial IoT networks using Filament’s Distributed Sensor Transactions, or DIST

Technology Stack: Filament Tap, Bitcoin, BitTorrent, TMesh (low power mesh networking), Telehash, JOSE (JSON Object Signing And Encryption contract management protocol)

Investors: Bullpen Capital, Verizon Ventures, Crosslink Capital, Samsung Ventures, Digital Currency Group, Haystack, Working Lab Capital, and Techstars

Filament is an industrial IoT solutions provider that provides drop-in decentralized wireless and radio mesh network technology to connect devices such as low power sensors. Filament has integrated its technology with Bitcoin blockchain and Telehash messaging protocol, with BitTorrent for file sharing. Describing these combined protocols as device independence in their "Declaration of Device Independence" Filament brings data sharing and micro-transactions to industrial IoT. TeleM uses Filament’s stack to create a mesh network of distributed devices on the fly.

At O’Reilly Solid Conference held in June 2015 in San Francisco, the company demonstrated use of their solution by connecting multiple Taps sensors at different locations in the Fort Mason venue. Conference participants could access information such as noise levels and ambient temperature, to identify quiet zones, using Filament’s sensor as a service payments model.

Filament’s Taps work as trans-receivers connecting low power physical assets over short range wireless or over long range radio frequencies upto a distance of 10 miles. The Telehash protocol is used for secure encrypted communication between two endpoints.

Filament uses the Bitcoin blockchain for secure device registration and identification. In addition , Filament has also built pennyback, an over the top application on the Bitcoin blockchain that will be used for micro-transactions for exchange of value, through use cases such as billing and selling data for analytics.

What Is The Meaning Of Internet of Things (IoT) On The Blockchain (IoT+Blockchain)?

What is  "IoT+Blockchain"?

Since 2010, IoT or the Internet of Things was being talked about as the next big thing in digital disruption. Then, along came Bitcoin, a "libertarian experiment", which introduced blockchain to the larger unsuspecting world. Now blockchain technology is also talked about as the next bigger thing. 

Naturally many people have thought hard about the effect of combining IoT with blockchain that is enabling some use cases for IoT applications on the blockchain.

IoT: A Distributed Network of Pervasive Objects

The first series of posts on this blog include a three part starter guide on IoT. To summarize, IoT is a distributed network of pervasive everyday objects which have a digital computing identity and IP address. Devices share and receive information via public or private cloud. IoT applications and data are centralized.By making use of localized wireless technologies and aggregation of data, millions of devices such as sensors can be used for IoT applications from wearables to smart homes, scaling up to smart grids and smart cities. 

Security Concerns are the biggest threat to the growth of IoT

The progress of IoT is hampered by two major challenges – security threats and lack of universal standards. Security and privacy are some of the biggest concerns with consumer data located on a centralized infrastructure.  Hacking or malicious attacks on embedded devices makes the possibility of large scale man made catastrophic attacks a possibility. 

Blockchain: A Decentralized, Disintermediated, Trustless Ledger

The blockchain on the other hand is a decentralized database and exists as many instances of the same version in a peer to peer network over the Internet. The best known blockchains Bitcoin and Ethereum are both public and use cryptography to authenticate and authorize transactions. 

Transactions are confirmed based on a consensus method which adds new blocks which are accepted by all participating nodes. Using the blockchain, trustless peer to peer transactions are possible without the need for a trusted third party which removes the dependency on a central provider or intermediary. 

The (public) blockchain is not only decentralized but it also enables disintermediation. 

Further as the blockchain grows as well as the peer to peer network, security issues such as hacking or malicious attacks to get control over the network reduce exponentially. The Bitcoin blockchain has never been hacked in seven years of operation. 

Blockchain Technology Needs to Improve Transaction Scalability by Several Orders of Magnitude

Blockchain security comes at the cost of transaction throughput. New transactions can be included at block confirmation times which in case of Ethereum is twelve seconds. Lowering the time for consensus can result, among other things, in many side chains, compromising the security of the blockchain. 

Use Cases

By combining smart devices (location/context aware) with the decentralized, disintermediated blockchain, a next level of smart contracts is possible which can enable machine to machine interaction, moreover in a secure model. 

Payments or exchange of value are the most critical smart contracts in the real world. Using IoT application on a blockchain can enable a smart contract that uses a payments use case to control a smart device or vice versa. IBM and Samsung’s proof of concept ADEPT, based on IoT and blockchain technology, had a washing machine make a detergent refill order transaction on the Ethereum blockchain. Slock.it on the other hand, have invented the smart lock which opens doors based on rental payment confirmation on Ethereum.

Another variation of the payments use case is to control access to smart vehicle based on owner identity (see our article on provenance). If the vehicle is rented or leased, access will be provided as per terms of the contract which can include time, add-on features and revert control on contract expiry.

The Roadmap for IoT on the Blockchain

IoT applications on the blockchain is relevant to some use cases, although the combined stack will not make sense in every situation. 

The blockchain addresses the security issue. One solution to scalability is private blockchains, which bring in the centralized authority (such as the Ripple Consensus Ledger which moves cross currency transactions in 5 seconds). Trusted intermediary is not a showstopper in many consumer and contract use cases (e.g. buying insurance on a rental). Another option is to bring in the peer to peer blockchain within the participating devices or local blockchain hubs such as the Ethereum Computer from Slock.it.

The eventual architecture is likely to be a hybrid of cloud based device management and peer to peer  smart contracts on the blockchain. 

Slock.it and The DAO

Slock.it's "The DAO" which is in the process of creation through a token stake presale for investors , can launch a new trustless sharing economy powered by digital locks operated through smart contracts on the blockchain. Image Source: Wikimedia Commons, Willh26 (Own Work), CC-BY SA4.0

Introduction

We recently covered the Digix DAO and pre-sale. In this month, another highly anticipated DAO creation via token sale is in progress. “The DAO” launched by Blockchain+IoT start-up Slock.it, has gone live on the Ethereum blockchain on April 30, 2016. 

Slated to run for 28 days with no cap on token, the sale has raised over 1 million ether or $10 million. “The DAO” which is getting created is a yet to be branded Decentralized Autonomous Organization that can be thought of as a decentralized VC to fund blockchain+IoT applications on the (Ethereum) blockchain.

Slock.it

Slock.it is a German “Blockchain+IoT” solutions start-up firm formed in Germany in 2015 by some of Ethereum project team members and IoT technology evangelists, Simon Jentzsch, Christoph Jentzsch and Stephan Tual.  

Slock stands for Smart,Safe and Secure lock, a physical object with digital identity which can be operated via a smart contract on an Ethereum blockchain. Slock.it has a potentially hugely disruptive smart contracts innovation on their hands. The concept of "slocks" can revolutionize the peer to peer sharing economy that has created intermediary tech unicorns such as Uber and AirBnB. 

At the London Ethereum DevCon in November 2015, the Slock.it team demonstrated a proof of concept of a “slock”. 

The solution illustrated a disintermediated rental contract use case by wirelessly opening a digital smart lock upon executing a payment transaction on Ethereum blockchain. The solution works by assigning a digital identity to the lock, a Decentralized app or dapp on mobile that opens the lock and checks for payment on the Ethereum blockchain. We will cover the details of Slock.it’s smart lock solution and their proposed Ethereum Computer offering in another post. 

By successfully combining IoT and Ethereum blockchain stack, Slock.it proved that a decentralized and trustless sharing economy can be made possible in the digital world, applicable to everything from Uber, AirBnB to renting wi-fi routers, unused spaces all through a secure digital covenant. 

DAO Re-visited

One of Ethereum’s early successes are using the concept of DAO as a crowdfunding channel. As we saw in the Digix DAO posts, a Decentralized Autonomous Organization can be created as a smart contract on the blockchain. 

A DAO creates a virtual decentralized business entity that is governed by its owners. DAO’s are not legal entity at present, as there is no legal or regulatory framework on treatment of DAO in the physical world. Ownership in a DAO is represented through DAO specific digital tokens which are like owner equity on the blockchain. 

Tokens represent voting rights which are in proportion to the owner’s stake (in tokens).  Tokens are purchased in exchange for ether. DAO’s are formed through presale of tokens to raise ether funds which are deployed similar to capital investments and operating expenses for the DAO projects. 

Owners use the token rights to vote on project ideas, investment proposals and participate in governance decisions such as hiring or firing management and execution teams. 

Token holders can earn return on investment in two ways. They can trade their tokens in exchange for ether or other cryptocurrencies or fiat or, earn agreed returns from the DAO earnings. 

Slock.it's DAO Framework

The Digix DAO was centered around development of the Digix gold backed asset exchange platform on Ethereum. 

Slock.it’s DAO  is a framework that has taken a completely disintermediated approach. In the words of Stephen Tual, co-founder of Slock.it, a DAO is a disruptive application to crowdfunding channels such as Kickstarter. The Slock.it team donated a complete DAO framework with source code and all, that anyone can use to build a DAO model for their business. From this framework, the Slock.it team has deployed “The DAO” . 

“The DAO” Construct

“The DAO” funds and token owners will form contractual relationships with any third party service provider that have proposals and smart contract applications for blockchain+IoT use cases. Thus ,“The DAO”, in context to the current pre-sale will work as a blockchain+IoT start-up incubator for the benefit of its members. 

Slock.it have submitted their proposal to be hired as contractor to build their blockchain+IoT offering which includes the Ethereum Computer.Another proposal is coming from a firm, Mobotiq for a solution that will enable fully autonomous self renting electric vehicles. 

In DigixDAO, the owners retained 15% ownership and the right to create their proposals. Special badge holders had the right to vet proposals. 

In “The DAO”, Slock.it has added an oversight layer to prevent a 51% malicious attack through curator roles – these are experts in their field (cryptocurrency, Ethereum, IoT technologies) who will perform the role of reviewing proposals and code and curating the contractor list for the benefit of the DAO. Curators can prevent any one actor from gaining control over all or majority of the DAO funds in interest of their proposal. Curators can also be hired or changed based on voting.

“The DAO” Creation

The Slock.it DAO is currently running from April to May 30, 2016. Under “The DAO” tokens for the DAO are available for public purchase on the Ethereum blockchain for a month’s time. 

Unlike Digix DAO, there is no cap on investment. Instead token presale costs will increase in tiered fashion. Investors in the first two weeks will receive 100 DAO tokens for 1 ether. This amount will go up linearly and eventually rise to 1.5 ether for 100 tokens in the last four days. 

Slock.it The DAO token sale progress on the website daohub.org

At the time of writing the DAO has raised, over 1.4 million ether or $13 million USD within 3 days of opening. Given the explosive potential if the technology takes off, many investors have taken an active interest in the DAO.