IoT could be the killer app for blockchain
As the number of sensors in vehicles, factory machinery, buildings and city infrastructure grows, companies are looking for a secure and automated way of enabling a mesh network for transactional processes. Blockchain appears to best fit that bill.
The total number of connected Internet of Things (IoT) sensors and devices is expected to leap from 21 billion this year to 50 billion by 2022, according to recent data from Juniper Research.
The massive growth in IoT connected devices over the next four years, Juniper claims, is driven mainly by edge computing services – the processing of data away from the cloud and closer to the source. A substantial portion of the estimated 46 billion industrial and enterprise devices connected in 2023 will rely on edge computing, Juniper said, so addressing key challenges around standardization and deployment will be crucial.
Blockchain, the electronic, distributed ledger technology (DLT) that also contains a business automation software component – known as self-executing “smart contracts” – could offer a standardized method for accelerating data exchange and enabling processes between IoT devices by removing the middleman. That middleman: a server that acts as the central communication spoke for requests and other traffic among IoT devices on a network.
“Fundamentally, the idea is you don’t have a central agent – no one approving and validating every single transaction. Instead, you have distributed nodes that participate in validating every transaction in the network,” said Mario Milicevic, a member of the Institute of Electrical and Electronics Engineers (IEEE), a leading authority on technology innovation that has more than 500,000 members.
In a traditional supply chain setting, Milicevic explained, a central server authenticates the movement of goods and materials from one location to another. Or a central authority could decide to halt certain processes based on pre-determined rules. In a distributed blockchain IoT network, the IoT devices on a peer-to-peer, mesh network could authenticate transactions and execute transactions based on pre-determined rules – without a central server.
Blockchain technology could also improve security through decentralized interaction and data exchange by bringing scalable, distributed security and trust to IoT devices, applications and platforms. The technology uses hashing algorithms to create an unchangeable record of transactions, and that information can be encrypted and only accessed through public and private keys.
Smart contract software, self-executing code that could be embedded on each IoT chip, could determine what action takes place when a condition is met. Those actions would only be executed when an incoming transaction authenticated. “So, you don’t need central agency to tell each node when to do something,” Milicevic said.
Blockchain ledgers decrease the time required to complete IoT device information exchange and processing time.
“It could be in an automotive manufacturing plant. As soon as a certain part arrives, that part then communicates that to other nodes at that destination, which would agree that part arrived and communicate that to entire network. The new node would then be allowed to begin doing its work,” Milicevic said.
The rise of edge computing is critical in scaling up tech deployments, owing to reduced bandwidth requirements, faster application response times and improvements in data security, according to Juniper research.
Blockchain experts from IEEE believe that when blockchain and IoT are combined they can actually transform vertical industries.
While financial services and insurance companies are currently at the forefront of blockchain development and deployment, transportation, government and utilities sectors are now engaging more due to the heavy focus on process efficiency, supply chain and logistics opportunities, said David Furlonger, a Gartner vice president and research fellow.
