The IoT industry is extremely interested in the blockchain technologies implementation due to the fact that the blockchain offers exactly what IoT requires – decentralization, anonymity and transparency. However, experts agree that at the present stage of its development, the blockchain is not stable enough. Today we analyze the pros and cons of integrating the blockchain into the IoT and also look at successful IoT blockchain applications.
IoT market size
According to the data published by Juniper Research in June 2018, the total number of IoT devices is around 21 bln in 2018 and will grow up to 50 bln by 2022. The main reason of this fast growth will be the rise of edge computing, that “would be critical in scaling deployments up, owing to reduced bandwidth requirements, faster application response times and improvements in data security”. Juniper Research estimates 46 billion industrial and enterprise devices connected in 2023 that will rely on edge computing.
According to IDC research, IoT spending will reach $1.2 trillion in 2022 and at least 20% of IoT devices will use blockchain
Blockchain appears to be a perfect solution as IoT industry is in a constant search for secure and automatic ways of devices and sensors interaction. Blockchain that is a distributed ledger technology regulated by smart contracts can accelerate data exchange by removing the middleman – a server that organizes all the communication between an Iot device and its network.
- A distributed system that can record and share data across a network of key stakeholders.
- Embedded business terms for automating interactions between nodes in the system.
- Hash-based security, verification of identity and provenance authentication.
- Consensus and agreement models for detecting bad actors and mitigating threats.
Applying a blockchain model in an IoT network could solve several digital business issues:
- Analytical model tracking: the system will be able to record and share metadata and create an immutable history of the IoT devices decision making processes.
- Secure software updates: blockchain will allow to publish software updates in a form of URL on the blockchain, including cryptographic hash that will provide additional security level when IoT device validates it during the process.
- Automation of the payment process: automated payments based on the data produced by IoT devices and sensors, micropayments between devices without human confirmation.
Possible benefits, however, not yet able to outweigh the disadvantages:
- Longevity issues: most of IoT devices and sensors are supposed to operate for years while blockchain is highly volatile and there’s no solution for that yet. IoT wants to get reliability, scalability, and endurance to succeed from blockchain, while blockchain is still on an experimental stage.
- High development costs: creating a blockchain application that’ll work without crashing might be expensive and time consuming.
- Security issues: although security has always been one of indisputable blockchain feature, human factor should not be underestimated, so that blockchain IoT projects usually have bugs and security holes inside. That’s what happened to Iota, the most well-known example of blockchain for IoT project: they implemented a serious vulnerability in their code creating their r own hash function, which allowed people to steal Iota coins.
- IOTA – a new transactional and data layer for IoT based on Tangle technology.
- WaltonChain – a Chinese analog of Ethereum that focuses on data sharing. Its own Radio-Frequency Identification (RFID) technology utilizes radio waves to read and capture information that is stored on a tag attached to an object, which can be really usefull in IoT industry.
- Streamr combines IoT and blockchain to make data streams tradeable. The project uses its own interface for payments and real-time data transfer.
- Slock.it solves the problem of efficiently connecting a device to the blockchain and adds the necessary features for it to become usable to non-blockchain developers working on IoT systems. It is highly interoperable with other devices and completely decentralized.
- Chain of Things is a consortium exploring use cases for blockchain combined with IoT technology.
- Ambrosus is a blockchain IoT network that mainly focuses on the pharmaceutical and food industries. This project provides secure communication between sensors and the blockchain to optimize supply chain assets.
- BlockCloud – SCN (service-centric networking) on blockchain, powered by Shenzhen Oudmon Technology – a smart home/smart wear company that serves millions of users in China and has over 100 partners. Oudman has been in the IoT business for the past six years; the company has submitted applications for more than 80 patents and connected over 8 million devices.
Blockchain in IoT definitely has a huge potential, but it’s not the only way of evolution. Blockchain still has serious performance and scalability issues that should be solved before it reignes IoT. Internet of Things need some kind of new blockchain platform that would be able to use different frameworks, customized to utilize blockchain differently at IoT’s edge, platform and enterprise layers.