Blockchain and IoT — Bringing Transformation to the World
The combination of blockchain and the Internet of Things has appeared as one of the most exciting use cases for the technological era. Two big companies, Volkswagen and Bosch believe that the decentralized data and Internet of things marketplaces should co-exist. Also, research done by IDC says that 20% of all IoT deployments will have blockchain services enabled by 2019.
Before understanding how blockchain and IoT combined can bring transformation to the world, let us first explain what is IoT and what is blockchain.
What is IoT?
We shall start with an example of a smartphone to understand the basics of IoT. A smartphone is the only device that you might use for many of your needs- from listening to music, checking emails or messages, communicating with peers, watching movies and playing games.
The phone did not have these many capabilities a few years back. Earlier, people could only send a message or make a call with their cell phones. However, phones have become smarter today because they are connected to the internet.
This is the basic principle of the Internet of Things that objects or devices can become smarter by getting connected to the internet. IoT can be classified into the following categories:
- Things that receive data and act on it
For example, 3D printers, wearable devices and smart TVs that collect data from sensors and take actions based on it.
- Things that gather information and send it
For example, motion sensors, moisture sensors and light sensors that send relevant data for better decision-making.
- Things that perform both functionalities
IoT based farming includes the sensors that gather information about soil moisture to find how much water is needed by the crops.
As the effectiveness of IoT relies on the information available in the system, protecting the information throughout its lifecycle is crucial. This is where blockchain comes into the picture for IoT.
It is now clear what is IoT and how it is related to day-to-day activities. Now we shall explain what is blockchain and it can be integrated into IoT solutions.
What is Blockchain?
The blockchain technology is based on the concept of the decentralized network that records and processes transactions transparently and securely. It is a chain of blocks that contain time-stamped digital records which cannot be altered or deleted once added to the blockchain.
The records saved in the blockchain are distributed across all nodes in the network where every node has an updated copy of the ledger at all times.
People always have a question in their mind how blockchain is different from the current scenario. Presently, every technology company whether it is Airbnb or Uber pretends as a centralized entity when it comes to processing payments or saving data.
Based on the concepts of decentralization, blockchain protects the data from the hands of a few centralized bodies thereby reducing the risks of information theft or hacking.
As we mentioned above that the success of IoT depends on its potential to keep data confidential and secure, bringing blockchain to IoT can remodel the industry.
Why IoT needs blockchain?
The biggest drawback of IoT is that it depends on centralized communication models to interact with the system. It can also be said that all the devices in IoT setup are identified, connected and validated via centralized cloud servers.
However, centralized clouds and networking equipment used in the existing IoT solutions have high maintenance and infrastructure cost. As IoT systems are connected through these services, scalability can become a significant issue.
As the number of IoT devices increases, the number of interactions between the server and devices increases the cost. That is the reason why current systems cannot support large IoT networks.
Also, cloud servers are vulnerable to a single point of failure which means the failure at one point can affect the entire ecosystem. Therefore, using a peer-to-peer model instead of a client/server model can be the right solution that IoT industry needs today.
With decentralization in place, storage needs and computation can be distributed across millions of IoT devices and central failure cannot have an impact on the whole network.
So, the use of blockchain in IoT can help the IoT devices to scale up efficiently.
How can blockchain help in IoT?
As the blockchain is tamper-proof and decentralized, it can do what IoT exactly requires. Using blockchain in IoT can help you track billions of connected devices in the network.
Integrating the blockchain in IoT devices can also reduce the costs of installing and managing servers for an IoT network. Blockchain uses cryptographic algorithms which ensure the confidentiality and security of the data on the IoT network. Blockchain in IoT also protects the network from the man-in-middle attacks because it does not have a single thread of communication.
With smart contracts, agreements can be created which will execute when certain conditions are met. For example, temperature sensors can fetch the data and send it to the blockchain. Based on the fetched records, smart contracts can trigger to take specific logic added to it.
Here are some of the exciting use cases of Blockchain in IoT
- Supply Chain & Logistics
Blockchain combined with IoT can improve the traceability of the supply chain network. IoT sensors like temperature sensors, motion sensors or GPS connected to the vehicles provide information about the shipment status. Data fetched from the sensors gets stored in the blockchain, bringing traceability, auditability and transparency in the system.
- Smart Homes
IoT devices allow the home security system to controlled remotely from the smartphone. But the centralized model for exchanging information generated by IoT sensors lack ownership of data and security standards. By moving the data gathered from IoT devices to the blockchain can solve security issues.
- Parking Solutions
A company named NetObjex has come up with an idea of a smart parking solution with IoT and blockchain. Using IoT sensors, it can become easier to find the empty parking space and pay automatically with crypto wallets.
- IoT sensors installed in the parking area can fetch information such as time for which car remains parked and vehicle number to obtain the linked wallet address. The data gets stored in the blockchain and triggers smart contracts to automate payments.
Numerous industries have started to experiment with the potential of blockchain in IoT networks. As a blockchain development company, we can help you understand how Blockchain IoT combined can transform the various sectors.