When the Blockchain Technology meets the Internet of Things


In this ever-growing world of technology, we are staring to hear how the Internet of Things (IoT) is bound to change our homes, our offices and our cities. There are numerous reports about this incredible new trend. Most of these reports, include the current state of IoT and also interesting forecasts for the future impact on the world’s economy and society. It looks promising to say the least.

The Challenges

In recent studies and debates, experts have identified some challenges in achieving this future, which could be narrowed down to the following:

Scalability – despite the growing number of SaaS / Cloud services, today’s Internet of billions of Things won’t scale to the Internet of hundreds of billions of Things because of slow adoption, costs and the complexity of most IoT solutions, reports the IBM Institute of Business Value; • lack of standardization and protocolization – taking out of the picture size and design, so far, no effort has been put into creating a single communication standard and there is no emergence of a global software solution / protocol (the ultimate global protocol as pictured by Vinay Gupta ); • the absence of a secure and private solution; • and finally, the non-existence of a perfect cloud/web service with 100% uptime – if we look back, every major SaaS/cloud service has had its problems, from botnets attacking CloudFlare to big outages causing Skype calls services to go down, we’ve seen it all.

What could be the solution to these difficulties?

Most, if not all of these challenges in expanding the Internet of Things can be addressed by technological breakthroughs, such as distributed consensus in computer science, advancements in cryptography and advancements in peer to peer network technologies.

Enter the Blockchain. It’s an immutable record of digital events (transfer of value and/or state) shared peer to peer between different parties. It can only be updated by consensus of a majority of the participants in the system and, once entered, information can never be erased. It is constantly growing, as miners add new blocks of data to it (every few seconds or every 10 minutes, depending of the blockchain) to record the most recent events. The blocks are added in a linear, chronological order and each full node (i.e. computing device connected to the network using the mining client for validation) has a copy of the Blockchain, which is downloaded automatically upon joining.

The validation process (or, in blockchain terminology, the mining process) is somehow difficult, as in it needs a lot of energy as Proof of Work (PoW), therefore, for a bad actor to distrupt the network, it requires at least a little more than the entire computing power of the network, making it unfeasible to destroy.

The Blockchain technology – previously used in digital currencies such as Bitcoin – has certainly caused a storm in the world of finance and banking (or, more simply, FinTech). Innovative start-ups are already applying this technology to cut down the cost of transferring money. Big investment funds, alongside major banking giants, are investing hundreds of millions in such breakthrough projects. The perfect example of how this is changing the banking industry is the announcement that 22 major banks are joining a consortium to form a common framework for using blockchain technology (the R3 blockchain consortium).

As it stands, the Blockchain has the potential to help surpass the obstacles in achieving the desired growth in the Internet of Things, due to the following properties:

– it is truly scalable, as it can scale the same way a torrent can to hundreds of thousands of peers;
– it has the potential to standardize the entire network;
– the security is built-in: the fact that the blockchain is distributed across tens of thousands of computers means that hacking it is almost impossible or unfeasible (in fact, this is one of the main reasons why we see such a big hype in the banking industry over the applications of this technology);
– it is transparent, as the cryptographic public address of the sender and receiver of every event is recorded, and everything is available for inspection;
– it can also offer great improvement in terms of privacy, as users are pseudonymous and can perform transactions instantly without the need for any personal authentication.
– and, finally, it has no down-time and it’s immune to censorship as no single authority has general control over it (due to its de-centralised structure). If the database of an institution or a cloud system goes down, users will be unable to perform data transactions with it, which, in many cases, can have serious consequences. With blockchain, users can have continuous, open access, without any potential risk of interruption.

A new paradigm in designing IoT-enabled applications can emerge from the more advanced smart blockchain technologies that are being developed. Perhaps this space too is going to be tranformed, like in the case of the FinTech environment. There are quite a few projects/organizations that promise to do just that. Among them, the most notable are the following:

– Ethereum – Ethereum is an extremely complex project. It focuses on the development time and security of small applications, and the ability of different applications to interact very efficiently. Ethereum does this by building what is, essentially, the ultimate abstract foundational layer: a blockchain with a built-in Turing-complete programming language, allowing anyone to write smart contracts and decentralized applications ÐAPPs or decentralized autonomous organizations (ÐAOs) where they can create their own arbitrary rules for ownership, transaction formats and state transition functions.

– Eris Industries – Eris is a free software that allows anyone to build their own secure, low-cost, run-anywhere data infrastructure using blockchain and smart contract technology.

– Expanse EXP – Expanse is a decentralized cryptographic information, application, and contract platform. It is among the first of such to be fairly distributed, democratically controlled, and community managed. Through the use of smart contracts and decentralized blockchain technology, it is run not by any one individual or group, but by the users of Expanse itself.

In conclusion, whether the IoT+Blockchain solution will win over the IoT+Cloud solution is yet to be decided. Certainly, the few start-ups that are currently testing this field are not enough to create the network effect needed for most companies to join in using the same idea, but history is full of unpredictable events. Indeed, the Internet itself could be noted as one of them. We now have grown used to this this ubiquitous technology and tend to forget its humble beginnings, yet the very medium that we are using to read this article is an example of network effect that has completely transformed the telecommunications industry. The blockchain is indeed promising and it is also definitely worth engineers’ attention – a particular subject deserving consideration being the best
hardware options for embedding it in different IoT applications.

In the hope of promoting openness and encouraging further innovation, RS Components will be the main sponsor of the first IoT + Blockchain Hackathon in London next month, taking place on the 7th of November. More details about this exciting event can be found here.

Author: Andy Baloiu