Can IoT and blockchain work together?

A look at the challenges

Centralization vs. decentralization
The central values of both IoT and blockchain seem incompatible. IoT gravitates towards centralization, ensuring all IoT devices are connected to one main server or network for all of the benefits this affords, while the premise of blockchain is decentralization. Blockchain ensures that not all participants in an interaction have to trust each other by utilizing a disparate network of nodes, thus creating the legendary security for which blockchain is known.

Speed
IoT devices rely on speed, one of the major benefits of the centralized processing system. Whether it’s a phone, a smart card or some other customer-oriented device, timeliness is central to the usefulness of IoT devices. However, blockchain is inherently slower. It takes time for a decentralized system to come to a consensus, and this kind of delay would be impractical for many IoT devices. For example, you can’t have a smart car waiting 10 minutes to make a decision that needs immediate attention.

Security
Blockchain is widely lauded for its security benefits achieved through asymmetric cryptography. Users hold a private key to create a digital signature of every asset on the blockchain, proving ownership. If anyone gains access to this key, they effectively own your property. In IoT, each device performs its own business, and no human interaction is needed between the device and the network it connects to. How to marry these two concepts is one of the major hurdles of any IoT blockchain technology: Would each device store its own private key? What happens when that device is hacked?

Development mismatch
Finally, there is the disparity caused by the age of the blockchain market versus the age of the IoT market. Many IoT sensors are designed to be operational for years at a time, but blockchain technology is in its infancy, constantly changing and, at times, quite volatile in its development. Any IoT device incorporating blockchain technology must take this into account to ensure that it doesn’t immediately become obsolete.

A look at the possibilities

Security
If the logistics can be managed, blockchain implementation in IoT devices promises a solution to the difficult problem of running secure, efficient and independent IoT systems. Privacy and security in IoT is a fundamental concern, especially given the vast amounts of personal data IoT collects and transfers on a daily basis. Ensuring a secure process between validated, legitimate stakeholders is of primary importance, and blockchain ensures this through user verification and provenance checks.

Blockchain also allows for consensus and agreement models to detect hackers and unverified users, thereby mitigating cyberthreats. And on a system with tens of thousands of IoT nodes, the possibility of hacking the network is remote at best.

Efficiency
Blockchain allows for automated interactions to occur between different nodes in the system, predicated on preset embedded criteria, without the need for communicating with the central network. This means that business logic can be executed automatically, without human intervention, significantly streamlining processes and increasing efficiency of IoT devices while still maintaining high levels of security.

Tracking
Model tracking allows a system to record metadata and the results of logic executed by the network, creating an immutable history of what has happened and what (and why) certain decisions were made during IoT processing. This allows regulatory compliance, troubleshooting and model improvement to become an integral part of every system.

Real-world examples

IDC estimated that by 2019 as many as 20% of IoT deployments will include blockchain technology. This growth isn´t casual since many large companies have been exhibiting their IoT blockchain technologies for several years.

In 2017, SAP and IBM partnered to demonstrate how IoT and blockchain can automate a pharmaceutical supply chain. Individual units needed to be refrigerated to specific temperatures which were measured via sensors, and that data was fed back to the main network. SAP’s Leonardo software platform was combined with IBM’s blockchain cloud service to create a system that could track these sensors, manage unit refrigeration and ensure unit security from shipping through to final retail delivery, with the transactional history of the process visible to all parties.

This same methodology is being replicated in IBM’s newly launched IBM Food Trust, which is already being used by Walmart to track vegetables from farm to table. IoT provides the monitoring and tracking infrastructure, and blockchain provides a trusted way to audit whether the movement of goods complies with policy.

The promise of IoT blockchain benefits, unfortunately, does not mean solutions to the challenges listed above. A lot of infrastructure, integration, technology and governance work are needed before integrated IoT and blockchain technologies are widely available. Small steps taken by companies like IBM are the first in a long journey toward designing an IoT system with in-built blockchain capabilities.

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