Is Blockchain the savior of IoT?
A year ago, multi-national Bosch launched its new programmable sensor device and programmable IoT prototyping platform, the Cross-Domain Development Kit (XDX), in partnership with IOTA thrusting the combination of blockchain technology and the Internet of Things back into the spotlight. With an estimated 30 billion connected devices out in public by 2030, a new way to handle IoT devices and how they connect and communicate will be required. The traditional centralized networks in wide use today will go into overload, cause security havoc, and run at a snail’s pace. This will have a major impact on what is expected to generate $11.1 trillion to the global economy by 2025.
What complicates the scalability of IoT is how information is shared and at what level. This, along with device-specific security measures, interoperability between networks, and legal, compliance, and regulation of devices, requires a level of sophistication that is planned on overtaking the industry in the near future – blockchain.
Most people in some fashion have heard of Bitcoin – the digital cryptocurrency that is all the rage – but has not ventured into that somewhat mysterious world. Blockchain is what makes it work and provides it security in an unregulated market. It is essentially the digital ledger that all cryptocurrency users use for tracking transactions and associated data. While purchasing Bitcoin, all transactions are recorded into a decentralized database and automatically updates and contract related changes. The decentralization allows the transaction records to be added to the digital chain instead of a paper document ledger. This helps maintain a consistent score in all locations while being encrypted makes it next to impossible to tamper with.
While the financial markets are using this technology in the wild west of cryptocurrency, it is and for a good reason. Online retailers, for example, are researching it to handle product purchases and delivery more efficiently and securely to stem breaches that have troubled retailers such as Target and Home Depot. Energy companies, on the other hand, see advantages in clearing out the cumbersome trading and clearing systems in a complex market scenario.
Several companies are working on a variety of blockchain platforms focusing specifically on the IoT landscape with IOTA being the most known creating a platform that provides a transaction settlement and data transfer layer specific to IoT devices
There is potential in leveraging smart meters at the beginning of blockchain ledger, creating a distributed grid that enables the power companies to sell excess energy in the open market, effectively cutting out the middle man and lowering energy costs. LO3 Energy, a Brooklyn, NY startup, is currently testing this on its microgrid of solar panels. By leveraging blockchain technology, excess energy helps provide real-time demand and load-shedding. Nevertheless, the biggest challenge in scaling this is the current energy regulations and Government policy.
Additionally, leveraging blockchain can help large international manufacturing and retail companies manage their supply chain, such as, sustainability certificates and origin of materials, by verifying the process automatically and issuing instant certifications, speeding up delivery and process which can effectively reduce their total product chain carbon footprint. This helps in developing Environmental Product Declarations (EPD’s) for products or components made or sold at retail. This plays well with any company's Life Cycle Assessment (LCA) data collection in compliance with ISO 14040/44 by building a blockchain ledger where a product’s environmental data can be stored and tied to its financial data, allowing the data to be machine-readable on demand, accelerating the process and reducing errors or omissions based on the decentralized nature of blockchain.
On a more local scale, blockchain technology can be tied to IoT sensors within a building, campus, or region to drive energy efficiency even higher as well as protecting a company’s critical infrastructure from potential hacking and disruption. Additionally, this type of distribution can also help a company revive faster after a natural disaster as the stored assets are located across many locations in a perpetual and instantaneous redundancy. Blockchain strategies also have the potential from an asset management perspective, monitoring computer, security systems, audiovisual, lighting, or other systems within a building or collection of buildings from a theft management, as well as usage and power management side to control the carbon footprint of these systems along with informing operations and capital purchase decisions.
The use of smart contracts in blockchain networks will allow much of this to happen in the IoT space by functioning in a secure and autonomous arrangement by creating agreements that execute only specific tasks. This autonomy is what will allow for greater automation of routine tasks, less expensive transfers, and improve scalability. As a security feature, these smart contracts will prevent third-party overrides, avoiding unauthorized access to the data through the decentralized networks. This will also improve speed and reliability by using the peer-to-peer basis for data transfer.
Several companies are working on a variety of blockchain platforms focusing specifically on the IoT landscape, with IOTA being the most known creating a platform that provides a transaction settlement and data transfer layer specific to IoT devices. Other players in this space, including Hyundai Digital Asset Company (Hdac), VeChain, Waltonchain, and Streamr, are all looking at the same issues with a bit of their own proprietary special sauce that each make them unique. These and others will eventually need to have enough commonality that interoperability won’t bog down the industry; otherwise, we just wind up with several isolated decentralized networks unable to communicate, which could put the brakes on innovation.
Aside from interoperability, security, and all the legal issues, two additional road hazards may stymie the potential roll-out of blockchain. It doesn’t matter how great your network is if the device hanging off it is an open door that allows hackers and tampering to occur. And when something does go wrong, deciding who is ultimately responsible and who will regulate the smart contracts outside of the blockchain ecosphere will have to be figured out. Being decentralized makes this accountability even more challenging. The irony in this is that blockchain was developed to get regulators out of the banking industry and securely create a global currency. It may be all that glitters is not gold.
Another key determinate is who will be best to roll out these networks. Right now, the Information Communications Technology Industry will be the likely target of finding qualified individuals to apply blockchain strategies as networking and communications are critical to having a successful system. If the ICT industry does not catch up and get involved, others will be raking in the Bitcoin, and it could be an industry that may not have your best interest in mind.