What Challenges Must the Blockchain and IoT Convergence Overcome?

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Although you may think of them as wholly separate concepts, the writing on the wall says the technologies we call IoT and blockchain are due for convergence, and probably sooner rather than later.

How fast this happens across the industry as a whole, as well as within individual organizations and companies, depends on besting a number of challenges and existing technological shortcomings.

Why So Much Overlap Between IoT and Blockchain?

The Internet of Things, or IoT, is the network of devices around the globe that use existing internet architecture to communicate with one another or with a home base. Such a web of connectivity has untold commercial and industrial applications, thanks mostly to how radically it improves the rate at which information can be exchanged.

Exchanging all this data requires a considerable amount of trust, which is where blockchain enters the equation. Blockchain gave rise to cryptocurrencies like bitcoin because it’s built on a shared and distributed ledger. This can be a hazy concept to visualize without an example. Financial transactions are the obvious choice.

Every kind of transaction under the sun, whether it’s transferring money between two people, qualifying somebody for a bank loan, buying and trading stocks, and exchanging one foreign currency for another, requires several trust mechanisms. They ensure the involved parties are who they say they are and that the funds in question don’t have a checkered past.

How does blockchain solve this, and how does it apply to the IoT?

Blockchain for IoT Creates Trust

The immutable, distributed shared ledger that’s used to ensure cryptocurrency tokens can’t be duplicated or forged just as easily applies to the problem of establishing trust between one point on the internet and another. In other words, when data needs to be exchanged, it takes a lot of work to ensure nobody is spoofing anybody else’s identity, that the information hasn’t been tampered with, and that it hasn’t been intercepted along the way.

It’s beginning to feel like blockchain, and the IoT were made for each other. The IoT provides new kinds of networking between industrial systems and additional ways to collect and analyze data. Connected manufacturing and inspection equipment help optimize every step, including:

  • Sourcing operations for raw materials and unfinished goods
  • Handling of workpieces and quality control during manufacturing
  • Finishing processes and final inspections
  • Packing into shipping cartons and dispatch to distributors or end-users

Your company probably doesn’t have just one facility, business partner or supply chain. Any of the branches of your operation may be in contact with any of the others, with business partners and vendors, and with third-party analytics systems, physical infrastructure and cloud computing tools.

Blockchain for IoT Requires Universal Compatibility

The biggest reason blockchain has so much potential is because it proposes a single type of architecture — one standard — for creating and maintaining trust between all these parties. However, interoperability between public and private blockchains, and even between competing standards, is likely to remain a sticking point in the rollout of blockchain for IoT.

The International Standards Organization (ISO) is a consortium of industry voices committed to creating and updating the standards that make modern business possible. Their ISO TC 307 technical committee, representing experts from 30 countries, met for the first time in Sydney in 2017 with the goal of advancing international standards for blockchain-based distributed ledgers.

Groups like this one will only become more important as global trade matures and seeks new ways to reduce costs while maintaining the integrity and public accountability.

Blockchain for IoT Requires Greater Scalability Than We Have Now

The IoT provides a way for companies to network their essential digital tools and physical assets, as well as achieve a greater cohesion among daily management, business forecasting and data analytics.

Installing a blockchain node on an IoT device provides practically bulletproof authenticity and makes it a part of your distributed ledger. The problem is, most of the devices in the industry today that are a good fit for the IoT are not necessarily, as they’re designed now, ready for blockchain. As a reference, a full Ethereum node requires 667 gigabytes to install, which is a stretch for a lot of consumers and even industrial equipment.

Moreover, as members of a shared ledger, blockchain nodes must process a considerable amount of information — up to 15 transactions every single second.

Distributed ledger technology (DLT) is the crowning achievement of blockchain and what gives this technology its power. Keep in mind that the consumer-level IoT is comprised of objects like digital bathroom scales, smartwatches and home security systems and that the industrial-grade IoT includes things like smart conveyor systems and automated injection molding equipment.

This is billions of devices, with billions more on the way. For each of these devices to take part in DLT technology, each one needs adequate bandwidth and install space to become a blockchain node. Right now, this is one of the greatest limitations to rolling out blockchain to more of the industries that have come to rely on the IoT.

What Can You Do?

If you represent a company that’s interested in using blockchain to achieve greater connectivity and trust within your organization and across your network of partners, joining one of the consortia on bitcoin in enterprise is a great place to begin. The convergence of IoT and Blockchain depends on the development of common industry standards — and you can be a part of it.

Even if you don’t want to pursue membership, it’s not too early to broach the subject with your partners. There are lots of compelling cases out there, such as using blockchain-based smart contracts to create more seamless transactions between business entities. However, techniques like this only achieve wider adoption if people like you make the case for them on the ground and achieve buy-in one partner at a time.


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Megan Ray Nichols Freelance Science Writer
Megan Ray Nichols
Freelance Science Writer

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