Why Blockchain in IoT?

If you’re not quite sure what "shared ledgers" (aka "blockchains") are or how they work, but you’ve heard of Bitcoin, then you’re already familiar with one of the blockchain's earliest applications. Blockchains are decentralized ledgers spread across thousands (or more) computers without a singular authority. Each transaction within a time period is recorded in a block, which refers back to a previous block, creating chains of blocks. As such, they are thought to be highly secure and trust-promoting; the record is permanent and  indelible. If anyone tries to alter the ledger, there’s a record on all the computers making up the blockchain.

And despite a widespread belief that blockchain is primarily used in banking and finance, the technology promises different benefits to many other industries too. There are plenty of people focused on leveraging blockchains for efficiency gains within the largest enterprises. There have been some unique concepts produced from a melding of blockchain with commodities trading, voting, real-estate, or systems, but the candidate most likely to push mass adoption of blockchain is the Internet-of-Things (IoT).

Blockchain presents many benefits:

• it enables IoT ecosystems to disrupt the third party/broker-based central control by decentralized IoT architecture and creating a standardized peer-to-peer (P2P) model that reduces infrastructure, computing, storage and security costs.;
• the decentralizing through blockchain also eliminates bottlenecks associated with single points of failure across nodes, infrastructure etc. As a result, billions of devices could share the same network and resources without deploying large scale infrastructure;
• it answers the challenge of scalability, single point of failure, time stamping, record, privacy, trust and reliability in a very consistent way;
• it can improve the security of individual devices or nodes on a network by giving each its own permanent identity and then preserving that identity within the ledger. This makes fraud very difficult and also helps prevent DDoS attacks.

There are multiple options to leverage blockchain on IoT use cases, the most obvious one is in the security and data monetization spaces.

In a recently published paper, Thomas Hardjono, chief technology officer of MIT Connection Science described a blockchain-based IoT framework called ChainAnchor. This framework addressed device security with activation and security layers supported by device makers, data providers and independent third parties.

In the paper, he mentioned that some of these parties could be allowed to license or sell anonymized data coming from IoT devices. Receiving the data could create incentives for outside agents to participate in the blockchain, bringing additional CPU power to support the health of the system.

The proposed framework includes layers of access that can keep out unauthorized devices or cut bad actors (such as a hacked device) from the network. It also includes cases for safely selling and removing devices from the blockchain.

Blockchain + IoT across industries initiatives

Blockchain is currently being tested in several industries. The main use cases of blockchain in insurance, for instance, are smart contracts and the enhancement of several processes such as claims management. Other applications include fraud management, legally required applications, and even the usage of technologies in an insurance context.

What has many in healthcare excited about blockchain's potential for data security is that its record can be distributed and shared across networks, with credentialed users able to add to – but not delete or alter – the transaction log; it's an inviolable record that a given transaction occurred. Transactions are also encrypted and must be verified by the network.

In the automotive industry, simply imagine a vehicle that can diagnose, schedule and pay for its own maintenance. Or in the supply chain space, a vending machine that can monitor and report its own stock, solicit bids from distributors and pay for the delivery of new items automatically.

All those applications are made possible by the security and connection of blockchain. And as security continues to be an issue in the development of the Internet-of-Things, the cryptocurrency technology seems to have the answers.

Sources: Forbes, Forrester, MIT Connection Services