An Introduction to the Bitcoin Platform and Technology Ecosystem

Our previous post covered the Bitcoin ecosystem. In this series we look at the technology platform ecosystem that has grown around Bitcoin.

The Original Bitcoin Core

Bitcoin was released by Satoshi Nakamoto in 2009 for distribution as open source under the MIT license. Satoshi left the project in 2011, and a distributed developer community continues to support the specification, addressing issues and working on improvement proposals. Several forks of the code have been used to create alternate crypto currencies or alt-coins. Bitcoin source also provides JSON RPC and REST APIs that enable integration into other platforms. 

Bitcoin has now grown into a global ecosystem of bitcoin developers and a worldwide decentralized blockchain node network. Bitcoin Core is the original Bitcoin interface that connected to the peer to peer network running nodes that maintain and mine the version of the full blockchain or block headers. Bitcoin core includes the full blockchain, wallet software, CLI/API and trusted peer to peer connectivity.  Even today using Bitcoin core wallet, users can transact in bitcoins without needing any other software.

What Bitcoin Platforms Offer

Bitcoin platforms have emerged as over the top solutions to enable businesses to build scalable infrastructure and provide services to an aggregation of day to day users and investors to transact in bitcoins. 

For example, Bitcoin platform providers such as payment processors provide interfaces or intermediate processing to manage some of the scalability constraints with blockchain such as those below -

• The blockchain can process  about 7 transactions per second.
• Merchants who receive a large volume of micro-payments may not find transaction fees viable.
• Public addresses make it possible to track movement of bitcoins. When multiple addresses are used for one payment, it is easy to identify that they belong to the same person. 

For everyday users who use bitcoins as currency, there is a growing list options in the form of online businesses that provide hosted bitcoin applications. The major players have built cross-functional platforms, some under open source licenses and have provided APIs and extensions. 

Hardware manufacturers have also rolled out applications such as ATMs, Point of Sale Terminals, USB wallets and smart Cards for Bitcoins. 

Some bitcoin platforms such as Coinbase are run as full service providers with solutions for the full cycle from wallets transactions, trading and fiat exchanges to payment processing. Others offer a partial menu of services while some like Bitpay offer targeted services such as payment processing. Platforms such as Coinbase are evolving into trusted third parties, making low transaction fees and speculation the only incentives for users. Others such as CoinKite or Kraken implement Bitcoin protocols to provide platform services without any internal bookkeeping and maintaining the trustless nature of transactions. 

The Bitcoin Platform Landscape

In seven years of Bitcoin, the landscape of third party solutions has been fragmented and volatile, as several platforms have emerged, grown and shut down all over the world. A number of promising start-ups have fallen by the wayside or disappeared entirely. The technology ecosystem is now maturing and consolidations are taking place, funded by venture capital and institutional investments in Bitcoin as well as growing mainstream adoption. 

However institutional investments and the growing scale of bitcoin transactions, are sometimes creating a pseudo-financial ecosystem for Bitcoin, that closely resembles the prevailing fiat payments industry and trading exchanges. 

Bitcoin Platform Requirements

Whatever its flavour, no platform can maintain its own version of the Bitcoin block chain or enable transactions without a wallet interface (there are some workaround solutions but they require the user to trust the providers and can have unfortunate consequences as users found in case of Mt Gox and the latest, Cryptsy).

We will expand on this idea when we look at different platforms. 

To understand bitcoin platforms, we also re-visit features of the Bitcoin network that differentiate it from other payment systems

1. The block chain removes the need for a trusted third party.

2. By using Bitcoin core, users can transaction in bitcoins directly.

3. User information is not required on the network.

4. The transaction time is not dependent on the value of the transaction.

5. Transactions cannot be reversed.

6. The block chain prevents double spending.

Many bitcoin users have lost money through hacking, losing wallets and giving custody to an exchange or wallet software that disappeared with their money. Users are not required to understand how the Bitcoin network operates but need to have some basic knowledge of how they can keep bitcoins safe (most people are not aware of how their credit cards work, but can track bank statements). 

Regardless of which platform they choose, users have to be aware that

• A bitcoin has to exist at a public address that is recorded in a block of transactions in the block chain which the global distributed public ledger.
• Users can spend bitcoins only by unlocking them from their public address. To unlock bitcoins, the spender has to digitally sign the transaction with a private key generated when they received the bitcoins.
• Private keys are stored in the user’s digital wallet.

While users and investors can transact in bitcoins like any other payment system using third party platform they have to deal with some trade-offs.

• Signing up with a third party requires sharing some personal data and financial details such as bank account information.
• Third party platforms bring into Bitcoin, the concept of trusted third parties and intermediaries. Users of off chain wallets and trading exchanges may have to trust the platform providers with their funds.
• Third party platforms charge fees for their service. Although bitcoin fees are currently low, this can change in future similar to prevailing financial services. 
• In the emerging and unregulated market of bitcoin trading, users have to bear all risks of volatility and loss.
• Exchanging with fiat currency requires following all compliance and taxation laws including sharing personal information.

Bitcoin Technologies

Bitcoin solutions are mostly built on Java and open source languages, and run on on desktop, web and mobile platforms. Mining has its own ecosystem ranging from processing hardware and rigs, mining pool software and even cloud applications are built for mining with dedicated data centers. 

In the next post, we explore the world of bitcoin wallets.

The Bitcoin Network and Payments Ecosystem

This post continues on from the introduction to Bitcoin into the Bitcoin payment ecosystem. This article assumes that the reader understands the purpose and working of Bitcoin and expands on the different participants in the network.

To those in the banking and financial system Bitcoin may seem to defy conventional rules for accounting, lending, reserving, taxation and regulatory requirements but it must be stressed that Bitcoin is not designed to have any built-in financial and regulatory controls nor book-keeping. 

Bitcoin is a peer to peer cashless (and trust less) system and by virtue of its stated objective is quite lean.  It is also one of the riskiest payment systems as users are anonymous and the network does not have regulatory approval. Consumers who participate in Bitcoin transaction and speculation do so, completely at their own risk.

Bitcoin users also include investors who use exchanges to speculate and trade in bitcoins. These users  not only have to accept all inherent risks involved with the fluctuations in bitcoin value but also that of unregulated exchanges losing or making off with their money. Bitcoin exchanges and banks are sometimes perceived as fiduciary investment platforms but it must be remembered that the system assigns no value to bitcoin.

A conceptual view of the Bitcoin payments ecosystem is shown in the diagram below. There are four major components within the Bitcoin payments ecosystem - core, wallets, exchanges and marketplaces. 

A conceptual representation of the Bitcoin payment ecosystem. Bitcoins are transacted through user wallets while the core performs the consensus validation on the blockchain, which also creates new bitcoins. Exchanges act as interfaces to the real world. Users can also transact directly.

Bitcoin Core 

The Bitcoin Core is the program that runs the consensus rules and ensures the integrity of the blockchain. The Bitcoin core enables the decentralization of Bitcoin. It can be downloaded and run as a thick client by users on node computers which then can work as miners and maintain the distributed blockchain.

For all practical purposes, Bitcoin network can be run and operated exclusively by its users who can mine and exchange bitcoins on the network by installing Bitcoin core.  

Computers that download the complete blockchain are called full nodes. Higher the number of nodes, the more reliable is the consensus and difficulty to tamper, exponentially higher. Full nodes all have the complete blockchain and verify new blocks. Six verifications can be treated as a consensus and the blockchain grows.

Core users have a number of incentives such as transaction privacy, faster tracking of their bitcoins, simplified interfaces and can use anonymity protocols to remove any IP identification.

A comparison on Bitcoin.org on privacy and security of transactions using Bitcoin Core versus platforms built on top. 

A global map of all bitcoin mining nodes on the Bitnodes website. Bitnodes is a service that tracks all reachable nodes on the network

As proof of work difficulty increased, mining pools were formed to combine resources and split block rewards among members of a pool. Mining pools offer an interface to allow multiple users to sign-up and contribute resources (CPU power, electricity) to run the Bitcoin core in exchange for block rewards which are shared by miners.

A demo account dashboard from bitcoins.cz, one of the first mining service (also known as Slush's pool).

Although the Bitcoin network does not require user identities, users expecting complete anonymity will find it difficult to do so outside the Bitcoin core.

Bitcoin Wallets

Bitcoin wallets are bitcoin address databases which have address keys of their respective owners. Bitcoin Core provides a wallet interface and has all the advantages of the core.

For consumers of the bitcoin currency, wallets are required to spend and receive bitcoins. Digital bitcoin wallets are also available in different forms such as mobile, desktop, web and hardware form. These are called lightweight wallets.

Bitcoin wallets are available in a variety of forms such as desktop, web, mobile and hardware (USB) wallets. Users can download and install wallets like any other application.

Wallet providers offer services such as mixing where coins are routed between different transactions so that it is difficult to associate a group of addresses with any one user. In this case, the wallet provider becomes an intermediary who will still know the source wallet. The bitcoin owner also has to trust that the wallet provider will not lose or spend their coins elsewhere.  

Bitcoin Exchanges

Bitcoins can be traded against or exchanged with physical currency on bitcoin exchanges. Bitcoin exchanges operate online and have been set-up all over the world.  Exchanges such as LocalBitcoins allow bitcoin buyers and sellers in a geographical location to contact one another and transact directly. 

Coinbase, one of the largest bitcoin exchanges looks like any other trading platform.

Bitcoin payments do not require user identification or information and settlements are made quickly (usually the next day). 

However, exchanges will have access to user information especially where bank accounts for handling physical currencies come into the picture. Exchanges can also be registered as money trading businesses and providing identity and verification is required to transact on such exchanges. 

Bitcoin Banks

Bitcoin banks have started opening that accept deposits primarily for investors in bitcoins as an asset class. They may make way for a bitcoin banking system although it is difficult to see what operations they can have apart from saving deposits at present. It will be very risky to make deposits expecting a long term return on investment (apart from speculation) or that bank reserves will be adequate or borrowers will be credit worthy.

The website of Bitcoin crypto bank, the world's first "real" bitcoin bank shows returns on investment

Bitcoin Marketplaces

Bitcoins are accepted by businesses all over the world. Bitcoin transactions can be made by in bitcoins which in turn can be redeemed on exchanges. Another model that has emerged is an escrow type marketplace, where bitcoin owners can spend bitcoins where only traditional currency is accepted or traditional currency holders can buy goods valued in bitcoins. The marketplace operator acts as an intermediary converting bitcoins into physical value on behalf of the parties involved. Not all marketplaces provide an escrow mechanism for buyers, but providers such as Bitify offer automated escrow as an added incentive.

Bitcoin marketplaces such as bitify and BitPremier show the proliferation of bitcoins in the economy. Note the buying power of bitcoins in the luxury segment.

Bitcoin Platform Ecosystem

Apart from the payment ecosystem, a complete technology ecosystem forms the backbone of Bitcoin and is responsible for its growth. This includes information providers such as Blockchain.info and BitNodes who use Bitcoin’s open API to provide services such as blockchain transactions and reporting. As more consumers start using the network or speculating on Bitcoin, they will be dependent on the open source community and solution providers to maintain the scale and integrity of the block chain.

The Bitcoin platform ecosystem will be covered in a separate post.

The Disruptive Innovation of Bitcoin

The many sides of Bitcoin the electronic cash payment network and bitcoin the cryptocurrency

Plastic (card) payments became mainstream over 50 years ago and digital payments, first introduced in 1990, for 25 years. Bitcoin, a revolutionary innovation in digital payments was introduced in 2009. The seven year old platform is a subject of much debate all over the world. 

Bitcoin  is a complex and innovative solution and there are many sides to it. Although spoken about as a currency, Bitcoin is actually a digital payments network which uses bitcoins as a currency. 

Confusing? This article is a simplified introduction to the Bitcoin network. For those just in on the Bitcoin and blockchain world, this may be a good place to start.

Purpose of Bitcoin: Digital Payment Network and Currency

Bitcoin is an innovative digital payment network. A bitcoin in the system is an electronically generated coin and has no physical existence. Its value and function as money depends on the existence of the network.

Bitcoins are used as digital crypto-currency for making online payments through the Bitcoin system anywhere in the world. All bitcoins in existence and their transaction history is encoded into a single public digital ledger called the block chain. A block in the chain is an encrypted timestamped transaction record. A block contains reference to preceding transactions and payment destination.

A bitcoin payment is recorded by creating a new block. This process is called mining in Bitcoin. A transaction block is created automatically and, simultaneously verified by a peer to peer network of computers which collectively maintain the distributed public ledger. A transaction is not completed unless all peers automatically reach a consensus on its validity. Any attempt to spend the same money again is automatically rejected based on consensus rules (accepting earliest transaction, longest chain etc.).

Bitcoin differs from other digital payment systems in that the public block chain removes the need of trusted third party institution such as a financial intermediary or clearing house to certify the transaction and prevent double spending. 

Bitcoins are not physical currency. Bitcoins are not recognized as "real" currency by many prevailing financial systems at present although this situation is gradually changing.

Bitcoins are used by their owners in the physical world for goods and services, and have become a part of the global economy. Businesses across the world accept bitcoins. 

Bitcoins are not backed by any physical reserve (commodity such as gold or prevailing currency such as US dollars). Bitcoins be converted into physical currencies and vice versa through bitcoin exchanges.

Bitcoin is not owned or issued by any central authority, government, financial institution or business. It is an open source distributed system without ownership. Bitcoin is managed and operated by a worldwide community of developers and users. 

The rate of supply and number of bitcoins generated is built into the system and cannot be changed. The Bitcoin platform is also designed to generate a finite number of coins and thus the currency is deflationary.

Bitcoins can be called the digital equivalent of gold.

Features of the Bitcoin System

A simplistic representation of how a bitcoin payment is made. The bitcoins are transferred from a payor address to payee address (addresses are usually stored in bitcoin wallets). Miners who add the new block receive transaction fees and bitcoin rewards. Miners set transaction fees while bitcoin rewards are generated from the system. Currently 25 bitcoins are awarded for every new block.

Bitcoin transactions are recorded on a single ledger and peer to peer payments can be made very quickly to anyone across the world. Transactions are recorded automatically by “miners” on the system who generate new blocks through a computing process called proof of work which is required to ensure that blockchain integrity is maintained (the process of mining and the rationale of proof of work will be covered separately).

The system is designed such that a miner generates the proof of work which others then verify through system based consensus rules. One miner does not necessarily mean one individual person. The overall process is designed such so that proof of work and up to six verifications can be completed in a period of 10 minutes after which the new block is added to the blockchain and the transaction is completed.

The ledger grows as new blocks are added to the chain each referencing the previous block. The very first block in Bitcoin is known as genesis block. The blockchain structure also prevents automatic charge backs or reversals of a transaction. 

Any person can send or receive payments using Bitcoin. Bitcoins move across virtual addresses generated by recipients for a transaction. Blocks in the chain are public and include the address and transaction value. There are no user identities in the system and participants remain anonymous.

The Tangible Value of Bitcoins

The Bitcoin payment system does not assign a unit monetary value to bitcoins. Bitcoins are not linked to or backed by prevailing commodities or currencies. There is a worldwide trading marketplace for bitcoins where coins can be exchanged for physical currencies. Bitcoin rates are driven by a mix of speculation and the organic growth of the system. Bitcoin trading dominates the headlines and will be covered in a post on the bitcoin ecosystem. As of start of February 2016, bitcoins are trading around $375 and have a market capitalization of $5.6 billion. There are over 15 million bitcoins in supply.

Bitcoin’s user base and transaction volume has been growing since its inception in 2009. Bitcoins have been used for physical goods and services since 2010.

In the section on Bitcoin myths, answering if bitcoins have no intrinsic worth, Bitcoin Wiki determines the intrinsic value of a bitcoin at $10,000 based on block chain application to electronic contracts and using electronic notarization fees as a measure.

The Innovations of Bitcoin

The idea of cryptocurrencies, distributed public ledgers and a computer based monetary systems had been in circulation since 1990s. The Bitcoin implementation is the most successful implementation of these ideas. Bitcoin has also introduced a number of disruptive innovations in the payments industry. The blockchain protocol is applicable to and can revolutionize contracts and record keeping. The economic principles behind the design of bitcoin have also made it an alternative asset class to government or central bank controlled fiat currencies.

Payments Innovation

A bitcoin payment takes places between two parties without a trusted third party required to certify and clear the transaction. The transaction is completed when the block chain is updated which is currently around 10 minutes. Bitcoin digital payments are the fastest means of transfer and have low transaction fees.

(Note that the Bitcoin protocol is not designed to scale inherently as volumes increase as does the block chain. Bitcoin's creator had made the assumption that computing capabilities will continue to increase in line with Moore’s law, to handle future requirements). 

Seller Protection

Bitcoin payments are non-repudiable meaning once a bitcoin is paid, it cannot be refunded by a system charge back or reversal. The only way to receive a bitcoin in a disputed transaction is if the seller actually pays back the buyer. 

Universal Digital Currency

A universal digital currency fits “naturally” into the digital payment ecosystem where transactions are cashless. A universal digital currency allows for low transaction fees and better portability in cross-border transactions.  

Double spending

A dishonest buyer can potentially make payments to more than one seller before the transaction is completed. Bitcoin removes this issue by the block chain, where only block can be added. Peers who generate blocks have to follow set rules of consensus on proof of work ensuring further integrity of transactions. 

Security

The Bitcoin block chain is computationally difficult to hack, destroy or tamper as a hacker would have to re-build the entire block chain to modify a transaction and all mining nodes would have to verify and agree on any changes. Bitcoin uses some of the strongest encryption techniques available today such as SHA256 algorithm in generation of the blocks, making them easy to verify but difficult to tamper, while bitcoin addresses use ESDCA public key cryptography.

Confidentiality

Bitcoins move across secure addresses in a transaction. A unique address can be used for every separate transaction. While addressees are public (in the block) only recipients who have the private key for the address can spend the bitcoins.  The system thus provides anonymity and confidentiality. If a user loses private key for an address, the bitcoins are lost forever. 

Bitcoin’s user anonymity has led to the (mis)use of bitcoins for transactions in illicit, illegal activities, which again has grabbed headlines and brought the system into conflict with governments and regulators across the world.

Bitcoin's impact on prevailing economic systems

Controlled Supply

The Bitcoin protocol is designed to generate a limited supply of coins, much like a natural resource. Bitcoin rewards (new coin generation) are halved every four years (or 210,000 blocks) by which estimates a maximum total of 21 million coins will be generated by 2140. One bitcoin is divisible into 100 million smaller units (the smallest unit is called a satoshi). 

New bitcoins are also not generated at a uniform rate. The level of difficulty to solve the algorithm for block chains is adjusted every two weeks or when 2016 blocks are generated. If demand is high, the difficulty is increased and vice versa so that time taken to add new blocks stays at the 10 minute average.

Bitcoin’s limited and automatic supply generation ensures it is a deflationary currency i.e. its buying power increases with time. 

De-centralized

Bitcoins are de-centralized and bitcoin value cannot be adjusted like fiat currencies controlled by central banks. This gives bitcoins an immunity from local and global events that can have major economic consequences. This includes (now frequent) bailout measures taken by central banks to "stimulate" economies and manage deficits by inflating currencies, eroding savings and creating future debt.

Alternative Asset Class

Bitcoins are increasingly being used as an alternative asset class in times of economic turmoil (such as Greece or war in Syria). Similar to gold, bitcoins are being treated by investors as a safe haven in times of economic instability.

Summary

Bitcoin's high valuations, existence outside prevailing financial systems, investments into projects that would seemingly do the opposite, its emergence as an alternative asset class, de-centralized nature, mysterious inventor, emergence of new cryptocurrencies are all topics of discussion across the world. 

The design ideas and working of Bitcoin are complex and fascinating and beyond the scope of this site to cover in great detail. Its constructs are designed to re-think how financial systems and economies operate. One can predict that the technology and ideas, and the creators of this system will have a major impact on the world.

The Bitcoin ecosystem and other cryptocurrencies to follow in future posts.

Bitcoin References
1. If you have to read only one article on Bitcoin, look no further than the original paper by Bitcoin inventor Satoshi Nakamoto.
2. Bitcoin Wiki is maintained by the bitcoin community of developers and users. It has separate sections on general descriptions, usage, technical specifications and FAQs .
3. Bitcoin.org the website originally launched by the Bitcoin creator, a go to resource for users and businesses. 

Anatomy of an Internet of Things Use Case

Use cases are an effective tool to describe how a solution concept will function to meet a user requirement and produce the desired outcomes. These days, Internet of Things (or IoT) use cases are everywhere, created to describe applications in different domains such as health care, retail, energy, logistics, transportation, cities and so on.

While there are numerous IoT use cases propagated everywhere, one wonders sometimes if various definitions are getting mixed up. When do RFID tracking solution or a personal fitness sensor become an IoT solution? What are the essential requirements of an IoT solution architecture?  And conversely, what user requirements does an IoT solution fulfil?

This article tries to understand the what constitutes an IoT use case.

The poster below is a lengthy use case diagram using Unified Modelling Language (or UML) to illustrate a generic IoT use case. The domain in this example is a smart home.  

For those not familiar with the UML notification, a use case diagram is a visual model used to develop business requirements. The diagram consists of actors (humans, systems) and use cases which are actions taken in response to input from actors. A thorough use case in requirement analysis consists of stakeholders, actions, responses, conditions, extensions (additional steps based on conditions), inclusions and so on.

For purposes of this discussion, the use case diagram is fairly straightforward consisting of actors and high level use cases under scope of an actor. Further this is a so called “happy path”, meaning an ideal world where every actor has a specific role, co-operates with one another, all connections and data are secure, and nothing goes wrong. Like a good use case, the description is non-technical and does not depict any system or technology.

And as a concluding disclaimer, this depiction is a conceptual representation only showing the actors that would need to come together to meet requirements of an IoT solution.  The goal is to understand through a use case model, the scope and boundaries of an IoT application and those of various components involved.  

Moving on to the example, the diagram shows a use case blueprint for a smart home. Instead of a single device, this illustration depicts a group of diverse appliances, which operate on a single home network. These devices are able to interface with a central application or controller that can manage them which is more a typical scenario (there is a proliferation of apps that are trying to solve the basket of remotes problem in consumer IoT by managing many home appliances through a single interface).

As the diagram shows, five actors interact with one another in the solution. The main (in true use case world only actor) is the human end user who installs and operates the solution to meet their specific requirement (dim lights, turn on heating, open doors, make coffee etc.). The other four are discrete constituent systems that deliver separate capabilities. 

Location is a key factor in IoT. The physical pervasive devices have a geo-location and a local network (or home bus) in proximity. The remaining actors – cloud, app and human owner/operator are location agnostic and can be located anywhere and connected via the Internet. 

Let us take a closer look at the different actors and their respective use cases.

Smart Device

The smart device provides the actual function with added intelligence for automation and learning. The device takes action when an input is received (e.g. turn lights on) or triggers an event (such as a door sensor signalling attempt to force entry). 

Next, the device has to report this information. It does so by discovering a local router which can receive and send messages by a short range wireless protocol such as Bluetooth, Wi-Fi or ZigBee. The smart device is earlier on boarded on the local network and it identifies and establishes a connection. 

An important factor required for meaningful communication is semantics which means there is some object level identification (device signalling it is a light bulb and not a thermostat) and thereby a context to the information sent.  A semantic model comes into play so that the message is given in its correct context e.g. temperature range for a fridge has different meaning from that of a thermostat, so it is important that the source is also known.

Finally, the smart device also listens to and responds to feedback and takes the necessary action (e.g. dim lights, heat on, lock door).

 Local Network 

A short range localized network is used to detect signal and data from multiple devices and route it, similar to an air traffic controller. This can be the home Wi-Fi router, device router or in some cases, if multiple client appliances belong to the same collaborative network (such as the AllJoyn^TM router service), a separate router which connects client devices on a bus and directs information via a single channel. The router then connects to the Internet gateway and connects to the cloud (via wired broadband, wireless 4G LTE etc.).

App

Apps refer to mobile apps installable on different platforms or web applications and can thus be accessed from anywhere. The application or app presents a user interface enabling remote management of connected devices. Apps are used to configure or on board a device and give it its virtual ‘avatar’ on installation. Apps provide a notifications and deliver dashboards on insights, with an underlying design to provide an intuitive and seamless user experience. 

Cloud (or IoT platform in cloud)

The cloud hosts the IoT platform that manages and acts on the digital inputs. The IoT platform in the cloud delivers core computing and storage capabilities. It manages the user accounts and ownership of information and stores data, configuration and preferences. Device information received can be integrated or analyzed with aggregated information from external sources (weather updates, emergency notifications, energy consumption). The cloud platform performs processing and analytics to transform machine communications into actionable and meaningful insights. It then presents this information to different channels such as mobile apps as per user preferences.

End User

The end user is the human actor who is using the connected ecosystem to meet their person(alized) requirements. In this diagram the human role is given a system like interpretation, simply to depict where human interaction/intervention is needed. As shown, a human (possibly a robot butler in the not too distant future) sets-up the various connected components and once this is done, manages everything remotely. 

Of course real life is slightly more complex. 

In Summary

A good approach is to define the use case the way it was intended in UML i.e. to elicit user needs and expectations of how a system would behave. This can be applied to potential requirements for consumers and industry. For example, what are the situations today in healthcare where it would be imperative to get information in real time, over a localized network (e.g. bio-hazard areas)? What kind of analytics can be produced (e.g. traffic patterns based on weather or public events)? Where is location an imperative and where it is not. 

By connecting these requirements, an IoT application should emerge as the solution.

A Starter Guide to the Internet of Things: Part 3

This is the third in the series “Starter Guide to IoT”. If you have not done so already and would like to being at the start, check out an Overiew of IoT in Part 1 and IoT Technologies and Issues in Part 2.

Part 3 looks at the roadmap for IoT in the next five years.

What to expect from IoT by 2020

At the start of 2016, experts are divided on 2016 being the breakout year for IOT versus continuation of the same old issues and both camps may be right. After all, thousands of consumer wearables are being shipped daily, building automation solutions being integrated in multi-million construction projects. and efforts to collaborate, standardize and capitalize on IoT will gain momentum this year.

On the other hands, there may not be an explosive growth in new solutions as big and smaller players focus on product development, integration and industry applications.

There are three distinct streams of efforts with increasing traction for IOT.

1. Scenarios for IOT applications

The current state of development is centered around identifying use cases for the next breakthrough IoT solution with a veritable arms race between competing technology companies, start-ups and businesses. 2016 is focused on furthering design and innovation with frameworks such as hackathons, academia and research partnerships sponsored by private technology giants, and incubation of start-ups. 

Government bodies are exploring the potentials and implications of smart cities. ITU, the United Nations agency that works to enable seamless ICT communications across the globe, has long established a Global Standards Initiative for IoT. GSI established a special study group in 2015 on IoT and its applications including smart cities and communities.

2. Standards and Architecture

One of the widely cited reasons for the slow growth of IoT is the lack of a uniform over-arching standards or a governing body that steer what is really global endeavour. While a universal framework may not appear soon, various industry and technology consortia have started investing in collaborative efforts to design standards specific to their scope.

Efforts are growing at multi-national, technology neutral/agnostic bodies and industry focus group levels. Computing hardware makers Intel, Samsung and Dell are among the founding members of Open Interconnect Consortium (OIC), creating open specifications for IoT applications. OIC is sponsoring the IoTivity project an open source software framework for cross platform device connectivity. The ZigBee Alliance that drives development of the ZigBee wireless standard  is working with the Thread Group on an end-to-end applications for IP-based IoT networks.  Object Management Group (OMG) has launched the Industrial Internet Consortium in 2015.  ISO and IEEE, are working on separate initiative to create reference architecture, frameworks and standards for IoT. 

3. Platforms and Solutions

Technology innovators and giants Google, Apple, Intel are leading the way in creating robust platforms for developers to roll out IoT solutions. On the other hand, proprietary solution providers and industry consortia are coming together to create solutions based on their protocols for industrial internet, smart grid and home automation among other.

The 2016 Consumer Electronics show was anticipated to be a showcase for many new IoT solutions. While many are in in the laboratory, new commercial applications appear almost every day in the smart mobile devices, home appliances, transportation, health and wearable technology areas. With 20-30 billion devices predicted to be on the connected ecosystem in five years, these verticals are bound to become synonymous with IOT in this decade.

The vision of IoT is coming to life slowly and can become a reality by 2020

There you have it, a starter guide that attempted to cover all about of the IoT trend. One can hope the optimistic predictions come true and the Internet of Things transforms the way we work, live and communicate across the globe.