The association of blockchain technology and the Internet of Things is essential because it can bring major changes in many industries with the help of new business structures, smart contracts and distributed applications.
The Internet of things (IoT) is the network of consumer items, vehicles, home appliances and other objects with hardware, software, networking capabilities, sensors, etc. which enables these items to communicate and share data.
These applications can be used in many different industries such as the banking system, manufacturing, healthcare, appliances, transport, etc. The major concern with IoT is its vulnerability to hackers who have many entry points since every node is connected to the internet. The IoT ecosystem is exposing an enormous amount of data, devices, supply chain partners and the whole population connected via a particular network, which makes it vulnerable to cyberattacks.
That’s why blockchain technology is crucial to IoT enabled devices because it solves many security and trust issues. With a blockchain, applications don’t need any trusted intermediary, as it runs through a decentralized autonomous ledger. With a centralized network, the manufacturer has a high maintenance cost and the consumer has a lack of trust in device so it needs an approach that combines security and transparency.
- A trusted peer-to-peer system that can operate even with node failures.
- A network that detects conflicts and resolves them autonomously.
- A structure that allows users to interact with each other in a predictable and safe manner.
- There are verifiable processes that work through transparency and auditability.
- It can prevent duplication with any other pernicious data.
- There is no need of an intermediary party because it is a decentralized system.
- Since there is no intermediary, the operation and deployment cost of Internet of Things would be reduced.
- A distributed ledger protects an IoT device’s data from interfering, so it eradicates all points of failure.
- With a blockchain, IoT devices show a history of all connected devices for troubleshooting purposes.
A great example to show the utility of the blockchain technology is a traditional supply chain. A typical supply chain involves many stakeholders who verify the whole process, where every individual involved in the process maintains his own personal database to keep track of the product. With a blockchain system, there would only be one shared database to keep track of the asset, where updates would come from cryptographic verifiability and would be instantly and autonomously spread through the network.
Smart contracts, which are built on top of blockchains, are also a fantastic addition to the whole IoT ecosystem. They allow the network of interconnected objects to function autonomously once the rules of the contracts are established. For example, in the case of self-driving cars, smart contracts could be used to ensure that every constraint applied to the cars are followed 100% of the times. This means, theoretically, that if every car on the road were self-driving, IoT enabled cars running on a blockchain with smart contracts, there would be no accidents on the road.
It is safe to say that, combined with the blockchain technology, IoT could change the way our society functions. This could potentially be one of the most important application of the blockchain in our everyday lives. It will be exciting to see what innovations the symbiotic duo will bring in the future.