Blockchain and The Internet of Things

How do they work? And do they work well together?

The advent of the internet in the late 1990s and early 2000s fundamentally transformed our capacity for human interaction. Before the internet era, communication between geographically distributed individuals was limited to written correspondence or costly telecommunications; in-person interactions were far more efficient than the same interactions with distance as a factor, which under-utilized the basic human senses. However, the internet emerged as a superior solution to existing alternatives and revolutionized our ability to connect with people all over the world. Our capacity to share experiences and exchange information in virtual environments that replicate in person communicationwas enabled on a global scale, leveling communication barriers and empowering human connections.

In other words, the internet connected people with people. However, as the world of technology sprinted forward, other things that were not humans began to join our internet networks. Just as we were able to share information and communicate with others in the network, so too were these internet-enabled devices. Thus the internet of people converged with the “Internet of Things”, a term coined by Kevin Ashton in 1999 to describe this new classification of internet participants [citation #1]. As time progressed, the cost to connect devices to the internet rapidly declined as components and capabilities became more readily available, and by 2017 the number of “things” connected to the internet surpassed the number of people in the world, according to a report by Gartner. The adoption of these devices isn’t expected to slow either, with an estimated 20 billion devices within the global IoT network by the year 2020 (Gartner). But what exactly are these “things”, and what impact could they have on our daily lives?

A ”thing” is basically any object that has the capability to connect to the internet, like a smart phone, a tablet, or a laptop. Additional examples can be the fitness tracker on your wrist, your in-home virtual assistant, and many of the appliances in your kitchen. Essentially, anything with the word “smart” in the title or description can be considered an IoT device, and other standard objects can be introduced to the network by applying internet-enabled sensors to them. Many of these devices can interoperate, allowing you to do things like lock your doors, dim the lights, and turn off the oven simultaneously by simply pushing a button on your smart phone or issuing a single voice command to your virtual assistant – and this is just the beginning. As IoT technologies rapidly evolve, the environments in which they are deployed are getting smarter and smarter.

Imagine you are sitting on your couch watching your favorite reality show or sports team on your smart TV. During a commercial break, an ad for Pizza Hut’s latest culinary creation catches your attention as your stomach reminds you at the same time that you haven’t had dinner yet. With a click of the remote, you select the items that you’d like to try and an order is queued in your mobile app that will communicate the details of your order, apply a coupon deal, and share your delivery address. However, a quick internal scan by your smart refrigerator reveals there are still some leftovers from the last time you ate out, and Alexa alerts you before your order goes through and gives you an opportunity to cancel it. You decide to follow through with the order anyway, because after all, that old pizza doesn’t have stuffed crust inside of the already-stuffed crust.

Within a half hour, you receive a notification on your TV that the delivery driver is three minutes away and your front door lights automatically turn on in anticipation. In a matter of minutes the doorbell rings and your show pauses, and as you approach the door to greet the delivery driver, it unlocks. After you enjoy your dinner and finish your show, your biometric wristband coordinates with your phone’s health app to analyze your dietary and exercise trends over the past week. Within seconds, a step count goal for tomorrow is set and several healthy options for your next meal are suggested in accordance with the contents of your fridge.

This scenario is not far from being a reality, and smart homes with this degree of connectivity are only the beginning of the new technology paradigm in our immediate future. The potential applications for IoT devices are practically endless, and they encompass industrial and enterprise-level applications in addition to consumer applications. From companies to cities to countries, the opportunity to leverage IoT technology and the data it generates is has enormous implications. Businesses can enable dynamic supply chains responsive to consumer demand, cities can minimize energy consumption and traffic congestion, and countries can operate on highly efficient transportation grids and national security networks. However, there are two significant concerns currently inhibiting the widespread adoption of Internet of Things in all areas of private, public, and civil life: security and scalability.

In terms of security, IoT devices and the networks they are plugged into can be susceptible to cyberattacks, putting private or personal data at risk. Many IoT devices are designed to operate on low power networks, utilizing only the essential components for connecting while excluding the computing power necessary to run customary cybersecurity protocols. That being said, a breach in a single device could compromise an entire network, rendering vast amounts of confidential information vulnerable to attack. Additionally, the majority of IoT networks operate on centralized cloud solutions, both for storage and processing purposes. This type of centralized architecture leaves a network exposed to cyber threats and also limits a network’s ability to share and process information. As the global IoT network expands to billions of new devices over the next few years, the sheervolume of data generated will overwhelm our current IT infrastructure, restricting much of the value IoT networks create.

In recent years, another revolutionary type of technology has emerged that could very well be the solution for alleviating these primary pain points facing IoT technology: blockchain. Blockchain is difficult to define due to the extensive nature of the concepts and implementations that fall underneath its umbrella. As a matter of fact, the term “blockchain” today is not unlike the term “internet” in the late 90s and early 2000s, in that it comprises a plethora of ideas, components, and applications all headed in unique directions. A common misconception is that blockchain is a cryptocurrency or synonymous with Bitcoin; however, a cryptocurrency like Bitcoin is simply an application built on top of a blockchain architecture, in the same way that email is an application built on top of the internet architecture. However, blockchain can be generally defined as a decentralized network where participants are granted certain rights to exchange, examine, and manage information securely with other members of the network. In addition to these rights, each node, or network participant, is responsible for working with all of the other nodes to confirm and keep an undisputed archive of all information madeavailable throughout the network, which is also distributed amongst all the members. This shared, single source of immutable truth is referred to as a “distributed ledger” and is paramount to every blockchain. Blockchain networks also employ cryptography to fortify communication and data transmission between peers, and they implement algorithms designed to prevent faulty or compromised nodes from breaching or crippling the network.

Due to its unique network architecture, blockchain could help address many of the security concerns faced by IoT networks. Cryptographically encoded communication channels would permit devices to speak and exchange data with one another securely and Byzantine Fault Tolerant algorithms would identify threatening devices and prevent them from incapacitating the rest of the network. Permissions could also be granted to each IoT device, determining which nodes would be able to submit data, communicate with other nodes, and view the ledger within the network. So “things” that might be more susceptible to attack can be assigned write-only permissions, and the rest of the network would monitor these devices and verify that the data they are contributing is valid. Additionally, processing power is allotted to each participant in the network rather than being owned entirely by a central authority, improving latency and facilitating scalability within the network. By allocating resources and responsibilities democratically among network participants, an IoT network powered by blockchain could operate on a highly-efficient and scalable model. Dynamic interactions between devices could optimize end value and enable real-time, data-based decision making. Altogether, these two technology megatrends are very well suited to complement one another and their union will usher us into a new era of connectivity and utility.

Let’s review the smart home scenario from earlier and see a few examples of how an IoT network built on a blockchain framework could interoperate and harmonize the process. To begin, every smart device from your TV to your wristband would be able to connect and communicate securely within the blockchain network, ensuring privacy of your personal data. This way your fridge can talk to your phone which talks to your smart lights and so on in a safe and efficient fashion. A blockchain network could also support payments, allowing an app on your phone to automatically pay for your pizza or other goods and services with digital currencies designed for highly efficient and inexpensive value transfer over the internet. Additionally, tasks like re-ordering household essentials or scheduling routine home maintenance could be automated by leveraging the data made available by assorted devices. The technical term for self-executing transactions like these is a “smart contract”, which is a piece of code built on top of the distributed ledger (or data) layer programmed to execute a specific task once certain data inputs are met. For example, you could create a smart contract that re-orders coffee beans when it’s been 30 days since you bought your last bag, or your annual AC inspection could be automatically scheduled with a preferred technician in accordance with your calendar’s availability. This opportunity for automation also sets blockchain apart as a superior solution to alternative IoT network structures like edge computing within cloud-based systems. The smart contract layer built on top of the data and communication layers unlocks a tremendous amount of potential for an IoT network to streamline security and expand connectivity, especially in industrial and commercial applications.

Let’s look at the example of how Boeing is leveraging block-chain and IoT technology to improve operations. Boeing has taken the coupling of these two technologies from theory into practice, optimizing crucial operations like manufacturing, parts tracking, and asset maintenance. Before connecting integrated sensors and information streams, silos of data were isolated and under-utilized at each independent stage of a product’s life cycle. Consequently, initiatives to enable traceability and transparency were starved of data because a safe, standardized medium of exchange among divisions had not been developed. By unifying disparate IoT networks and data silos with blockchain technology, Boeing has been able to optimize internal operations and establish provenance for parts throughout their entire life cycle. Countless devices can interoperate and speak with each other, creating a rich supply of data that can be collectively drawn upon for logistics improvement, predictive analytics, and customer transparency. Moving forward, Boeing could leverage smart contracts so that parts past due for maintenance or inspections are automatically decommissioned, proactively responding to potential safety concerns and ensuring regulatory compliance. The complete and immutable nature of the distributed ledger provides the basis for smart contracts to build off of, and many other technologies could utilize the data made available within the ledger.

As these two technological mega-trends grow and gain momentum, there is boundless potential for integration and innovation between the two. By the year 2025, the Internet of Things is estimated to have an annual economic impact of $11.1 trillion while the blockchain industry could be worth $10 trillion within a similar time frame. There is a truly exciting future awaiting the Internet of Things and Blockchain, and we have a front row seat as they usher us into a new era of technology and connectivity.

Sources:

1. “That ‘Internet of Things’ Thing” – Kevin Ashton – RFID Journal
2. “Gartner Top 10 Strategic Technology Trends for 2018” – Kasey Panetta – Gartner
3. “Blockchain & Internet of Things” – Complexity Labs
4. “What is the Internet of Things? And why should we care?” – Benson Hougland – TEDx Temecula
5. “Blockchain And The Internet Of Things: 4 Important Benefits of Combining These Two Mega Trends” – Bernard Marr – Forbes
6. “Deloitte Insights: Five vectors of progress in the Internet of Things” – David Schatsky, Jonathan Camhi, Sourabh Bumb – Deloitte
7. “What’s new with the Internet of Things?” – Mark Patel, Jason Shangkuan, Christopher Thomas – McKinsey & Company
8. “Blockchain will be a 10-Trillion-Dollar Industry with RBC’s Mitch Steves” – Frederick Munawa, Mitch Steves – Blockchain Innovation
9. "Boeing Improves Operations with Blockchain and the Internet of Things" - Carlo Gutierrez - Altoros

About the Author:

Allan Gulley is a Certified Blockchain Solution Architect as well as a Blockchain Analyst and Project Manager at the Auburn University RFID Lab, a research center dedicated to supply chain serialization and digitization. Additionally, he is an undergraduate student pursuing a degree in accounting at Auburn University, where he has taken part in several entrepreneurial ventures involving crowdfunding, e-commerce, and intellectual property licensing. If you would like to contact Allan, please email him at allanwgulley@gmail.com or connect on LinkedIn.