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.
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