What does blockchain mean? For a long time, it was confused with Bitcoin, the first application of the technology in the real world. It is only in the past couple of years that the world is really waking up to the seemingly unlimited potential of blockchain.
Blockchain technology is being used to find solutions for existing problems in almost every domain, from the finance sector to data security, ecommerce and even real estate. But one area where this technology can have about some exciting applications is the Internet of Things or IoT.
Unleashing the Potential of IoT
Like blockchain technology, IoT too is in its nascent stages of adoption, poised to change the landscape of technology in the near future. Currently, IoT is based on central database architecture. In the first half of 2018, many systems based on IoT were temporarily taken down due to single point failure by a distributed denial-of-service (DDoS) attack.
According to a Gartner report, approximately 8 billion connected devices were in use by the end of 2017. This represented a 31% increase from 2016. The number of connected devices is only expected to rise in future, with some estimates pegging the total number of such devices at almost 20 billion by the end of 2020. Experts have, however, also predicted that data hacking could cause damages of up to $2.1 trillion by 2019. An increase in connected devices is only going to further complications of data security, connectivity and data management.
The good news is that blockchain technology might be able to provide a solution for all these hurdles.
Why IoT Needs Blockchain
Here’s a look at the some of the key areas of IoT where blockchain can bring about a meaningful difference:
1. Data Security
The current IoT systems are based on a central database architecture, making them vulnerable to cyber attacks. Single point failure can take down the entire system, affecting millions of devices, as well as the services associated with them. It can even compromise the privacy and personal information of users.
Blockchain is based on a distributed ledger system. Data is stored on a network of computer systems. This not only means that no single point failure will take the system down, it also means that hackers need to breach all the computers on the network to access data, making it next to impossible to hack. It can allow businesses or individuals to control multiple devices efficiently, without compromising on data security. Over $10 billion worth of cryptocurrency has been stored securely on blockchains since the technology’s inception in 2008.
2. Decentralised IoT
IoT services are provided via the cloud, which connects billions of IoT devices, and offers storage and processing power. As mentioned above, this exposes the system to single point failure issues. It can be misused by hackers or tech giants to manipulate and misuse device data. With increased traffic, it might also present obstacles to scalability. What if your house is on fire and the smart sensors installed at home try to contact the fire department but the central server is overburdened and is unable to process your request?
Blockchain can resolve this issue with its peer-to-peer distributed system. It will distribute the processing of information over a large network of systems. This will eliminate the possibility of single point of failure. It provides a completely secure record of messages sent between IoT devices, ensuring the autonomous working of devices, without a need for a central database.
3. Reduced Cost of Automation
IoT aims to automate certain tasks, which it has been successful in doing to some extent. Products like smart light bulbs, thermostats, voice assistants, in addition to existing smartphones, computers, watches and other connected devices, have reduced manual work.
Smart contracts, powered by blockchain, can further be used to execute transactions without any human intervention. Blockchain technology’s biggest gift is that it eliminates the role of a middleman. This means that it can provide a system that handles operations on its own, reducing the cost of automation.
Major companies have already started exploring the potential of blockchain in IoT. Cisco, Bosch, Bank of New York, Mellon, Gemalto and Foxconn, along with blockchain startups like BitSE, Consensus Systems (ConsenSys) and Chronicled, have recently announced that they are working together to create a shared blockchain protocol for IoT that allows everyday objects to connect to the internet and send and receive data.
IOTA is a distributed ledger designed specifically for IoT. It aims to provide an infrastructure that enables machine-to-machine transactions between all the different IoT devices. It has been backed by Microsoft, Ubuntu and Innogy Consulting.
International Data Corporation has estimated that by 2019, almost 20% of IoT devices and services will feature blockchain technology. What does blockchain’s implementation mean to IoT is yet to be fully answered. However, one thing is clear. With the implementation of blockchain, IoT will become more secure, decentralised and cost-effective.