What Are The Benefits of Combining the Blockchain With IoT?

 

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Chithra B Unni, a business analyst, answers the question on QuoraWhat are the benefits of combining the blockchain with IoT?

Blockchain, a form of Distributed Ledger Technology, transfers digital information in such a way as to eliminate the chances of data being copied or replicated in any way. Originally this technology was devised for the rapidly growing online digital currency known as the Bitcoin.

Its ability to have no physical form and limitation to only network-based processing makes it a revolutionary technology for all kinds of financial transactional apps and methods on the web, making them highly secure.

Recognizing this potential of the blockchain, technology gurus worldwide are now doing efforts to utilize its abilities for other sectors as well, namely, for the connected IoT apps and devices. The following paragraphs will describe the important relationship between IoT and Blockchain.

An IoT platform enables IoT devices to send data to blockchain ledgers for inclusion in shared transactions with tamper-resistant records. By using IoT in blockchain all participants in a network can verify each transaction, preventing disputes and ensuring each participant is held accountable for their individual roles in the overall transaction. The distributed ledger makes it easier to create cost-efficient business networks where virtually anything of value can be tracked and traded, without requiring a central point of control.

Consider the following scenario – a private blockchain for a driverless connected car that will enable secure and real-time interactions from the car starting with car startup, driver authentication, smart contracts to exchange insurance and maintenance service information and real-time location info to track safety.

Blockchain-Based Distributed Ledger Technology (DLT) Fills in Five Critical Gaps in IoT

  • In such typical scenarios as the above, a Blockchain-based distributed ledger provides the trust, record of ownership, transparency, and the overall (decentralized) communication backbone for IoT.
  • IoT architectures that relied on centralized servers to collect and store data will be able to write to local ledgers that will synch with other localized ledgers to maintain a single yet secure copy of the truth.
  • All IoT transactions on the Blockchain will be timestamped thus ensuring that they are available essentially – for posterity.
  • Smart contracts can then be applied to the data in the blockchain to enforce business conditions on the IoT interactions.
  • Blockchain due to its background in high-end cryptography helps with IoT security.

Use of IoT in blockchain can also help in implementing compliance by allowing companies to track equipment or process history in an indelible record and enable easy sharing of this information with regulatory agencies or insurers. IoT architecture can handle many security and privacy threats. It can also help in reducing the vulnerability of blockchain network due to denial of service attacks, modification attacks, and the 51% attack. Thus, IoT helps in providing a lightweight, secure and private framework that retains most benefits of blockchain technology.

Implementation of IoT in blockchain facilitates the development of open technology platform that can enable devices to discover, communicate, and interact with each other in a distributed and fully autonomous manner.

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