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Blockchain and IoT: made for each other?

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Blockchain and IoT provide several tangible benefits as individual technologies, but to really unlock their potential it is important to understand how they work together. Jean-Luc Scherer explores the myriad benefits of their convergence…

IoT is everywhere. Almost every object, every asset has nowadays a virtual, a digital representation. And that representation is often obtained by collecting data from an IoT Device, an IoT sensor that allows us to characterise, to quantify that real-world object. Digitising the world around us allows us to better understand it. It allows us to better understand our businesses. By collecting data about key elements of these businesses, we can analyse them, forecast, identify trends and patterns. All of this helps us to get more insights and ultimately take better decisions. A few years ago, Mc Kinsey & Company, a global management consulting firm, reported that by 2025 the overall yearly impact of IoT on the global economy would be in the range of 4 to 11 trillion dollars. With such an impact, it is fair to assume that in the years to come everything that benefits from a connection will be connected.

IoT scalability and security concerns

But IoT has many limitations as well, in terms of security and scalability, and this might make it difficult to capture the above-mentioned opportunity. Here are some of these issues:

The IoT device and platform market in itself is very fragmented, with many standards, many vendors. This slows down adoption, since there is uncertainty about the technology, the vendors, the solutions.
There are also concerns about interoperability and the solutions implemented often tend to create new data silos. Again, slowing adoption.

Data being the biggest asset, the solutions offered do not necessarily protect data through its lifecycle. Data is often securely stored in the cloud, but these solutions do not cater for compromised integrity of devices and tampering of data at the source.

Using technologies like PKI (Public Key Infrastructure) to encrypt the data and store it in the cloud creates a tremendous load and has serious scalability limitations. Finally, the centralised architecture of most IoT solutions, means that there are serious resiliency issues. All transactions are processed in the cloud and unavailability of these cloud resources could lead to a complete stop of your business operations.

Why blockchain will save IoT

This is where blockchain comes to the rescue. Blockchain being a distributed ledger, it can be used to distribute computation, it can be used to log transactions and business operations. KSI (Keyless Signature Infrastructure) blockchain is a technology that can be used to provide integrity of all assets, cloud and devices included.

With KSI, a cryptographically secure hash is created for each asset that we need to protect and it is stored in the blockchain. This allows us to perform audits to see if any data has been tampered with. Every change is logged and unwanted changes in data can be detected and acted on. At any point in time, anybody can validate what the truth should be.
By using KSI blockchain, we can log not only data changes in the cloud, but we can also log software changes and configuration changes at the device level. We can make sure that any change on our IoT device is logged and any unwanted changed can be acted upon. With blockchain we can make sure secure the data throughout its entire lifecycle. With the distributed architecture of blockchain we also remove the limitations that we have with centralised cloud architectures, both in terms of computation as well as resiliency.

IoT will speed-up adoption of blockchain

While blockchain will potentially provide a solution to IoT’s scalability and security issues, IoT will also help blockchain. Blockchain, as you probably know by now provides a distributed ledger, it provides a truth that cannot be altered, that cannot be hacked. Blockchain’s big, big benefit is that it creates trust among untrusted parties (without the need of a trusted third party in the middle). Blockchain can be used to store a common, unalterable truth. It can provide traceability of transactions, truth of what happened.

Blockchain has applications in almost any business, since businesses are all about transactions.
The most immediate applications of blockchain are in businesses where there is huge administrative overhead, whenever there is a lot of paper work and communication that is needed across different systems or different organisations. The blockchain is really useful to store contracts and the conditions related to these contracts.

The Distributed Ledger can also include clauses that should be executed if a certain condition is met. This leads us to what we call smart contracts. Contracts that are executed if certain conditions are met. Still when clearances are done manually, there could be a delay until a transaction is logged in the blockchain. This is where IoT comes to the rescue, it allows you to perform automation. IoT could be used to measure changes that pertain to the conditions of the contract and log these in the blockchain. Here are some examples where IoT helps increasing the efficiencies targeted with blockchain.

Supply chain and logistics. A Distributed Ledger can for instance allow to log when goods are leaving the factory, when they are loaded on a ship, unloaded, when they pass customs, are reloaded on a truck and ultimately delivered to the customer. IoT can be used at various points in this supply chain. Scanning devices can automatically log what goods are shipped and when they arrived at an intermediary location, hence automatically releasing the payment to the freight and shipping company. Sensors can also be used for instance to measure the temperature of perishables, and log whenever a temperature contract breach is noticed. Goods can then be rejected automatically.

The blockchain can be used to store Electronic Health Records. These can easily be updated by adding sensor data from various medical devices. When physicians access the health records they can tie a prescription to the patient’s EHR. When going the pharmacy scanners can be used to verify that the medication is not in contradiction with any known allergies that are stored in the EHR. Reimbursements can also be automated.

Getting a proper insurance policy et processing claims is also a very tedious process. With blockchain, a policy can be defined as a smart contract. By adding IoT, the premium for this policy can be lowered because your asset is monitored, and any threat can be acted upon. Blockchain and IoT can also be used jointly to ensure accurate data is provided to the insurance company when processing claims: i.e. timestamp of incident from alarm, pictures of damages, police reports. As information gets added to the blockchain, the insurance has all data necessary to process a claim. This reduces the amount of fraud, reduces costs of operations, and speeds up pay-out. There are many more examples we could come up with, but the important thing to understand is that businesses have to transform in order to stay competitive, to survive. They need to digitise their processes, their assets to collect more data and get insights. Only with the right insights can a business leader steer his company through challenging times. IoT and blockchain are both key elements in this transformation process. If data has become the fuel to our businesses then IoT and blockchain have become the oil rigs and pipelines to that will keep feeding our business engine with the fuel it needs.

Rushika Bhatia

Rushika Bhatia is one of the region’s leading commentators on business and current affairs issues. She is the Editor of SME Advisor magazine - the flagship title of CPI Business. She is passionate about infographics – with special emphasis on data, research and statistics. Rushika has a Bachelor’s Degree from Indiana University, USA and is also CIMA qualified.