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Mention blockchain to your average Joe, and the odds are that he conjures up notions of cryptocurrencies, like Bitcoin and secret financial transactions. But in the business world, blockchain is much more than an ultra-secure, digital financial ledger or another "over-hyped" new technology.
When combined with the Internet of Things (IoT), blockchain enables new value propositions and new business models, while resolving issues of transparency, complexity and security in transactions involving multiple parts and large amounts of data, or records of value. In many ways, blockchain is the "missing link" that allows IoT distributions to reach their full potential.
Blockchain 101
Before discussing this subject in more detail, we clarify some misunderstandings and misunderstandings concerning the blockchain. In a fundamental sense, blockchain is the main technology that acts as a decentralized ledger that allows a shared set of computer systems to agree that a transaction between the parties is genuine. These results are recorded in a database structure protected by cryptography, the blockchain itself. It is impossible to manipulate the information inside the blockchain, so that all parties are able to agree a single version of the truth in a transaction. Pretty easy, right?
IoT + blockchain
So, how does the blockchain refer to the IoT? In the enterprise, the real value of IoT derives from the data generated by the connected devices. This data can be analyzed to identify areas for business improvements and opportunities for new value propositions and markets. For example, manufacturers can analyze IoT data flows from connected machines in their plant to enable predictive maintenance and thus reduce downtime.
In many use cases, such IoT data crosses the boundaries of the organization and even among several companies – giving professionals a view of the operations together. The challenge is to ensure that these data are accurate, reliable and, above all, safe. Furthermore, data reconciliation is a time-consuming process, especially if done manually, which involves data sets from disparate sources that often do not match.
Here's where blockchain can help. Blockchain technology facilitates continuous, permanent and decentralized recording of IoT data transactions across entire organizations and even across devices. There is no need for an intermediary to reconcile such data – everyone knows they are looking at a single version of the truth, which establishes trust between all parties. With these advantages, blockchain makes IoT implementations much more efficient and powerful. Let's analyze a couple of use cases.
Blockchain and IoT use cases
By providing a single source of truth and instant transaction reconciliation, blockchain technology is perfectly suited to decentralized computing environments such as supply chains. In particular, blockchain can alleviate many track-and-trace challenges, helping to minimize the impact of counterfeiting, product recalls and food-borne diseases.
For example, counterfeiting is a huge problem in the semiconductor industry, which costs US chip makers $ 7.5 billion in lost revenue in the year. Using blockchain technology, semiconductor manufacturers can create an incorruptible chain of custody for a chip or chip shipment through each stage of the supply chain. If a chip is considered a forgery, the manufacturer can trace back through that chain of custody and assess where a counterfeit incident occurred, as well as identify and replace any other potentially defective chip.
Likewise, the food industry can refer to the blockchain register to identify the origin and trace the positions of the contaminated products, facilitating and even avoiding devastating appeals. The speed of transaction reconciliation is crucial, allowing food producers and distributors to gain immediate visibility into their supply chain. Walmart has shown how quickly these reconciliations can occur using blockchain technology to track down a mango package in the farm from which it originated. With the blockchain, the process took only 2.2 seconds, while it would take almost seven days with traditional digital and paper methods.
In addition to creating new operational efficiencies, blockchain promotes new value propositions and disruptive business models – enabling organizations to further capitalize on the digital economy and compete better. For example, blockchain is very promising for the reconciliation of health records. With an instant, accurate and secure view of a patient's medical history, physicians can improve patient safety and health outcomes by ensuring they are not prescribing a drug that could negatively interact with other current or previous medications of other physicians.
Blockchain could also help strengthen data privacy by decentralizing personal data stored in various repositories and providing users with information about who has accessed it. As for the new business models, blockchain can allow micro-payments, allowing companies to reduce their transaction fees, reduce transaction times and create a transparent and fair payment distribution system. An example in which micropayments are used is in the music streaming industry.
What are next for blockchain?
We have only scratched the surface of blockchain capacities, especially when coupled with IoT – and the future looks bright. Indeed, the global blockchain technology market is expected to reach $ 7.59 billion by 2024, with a CAGR of 37.2%. However, most of today's blockchain efforts are still undergoing technological discovery and proof-of-concept phases.
For enterprise-scale deployments, we will need more scalable solutions based on a consolidated structure of emerging standards that will allow interconnection between disparate blockchain networks. Such solutions would be able to execute hundreds of thousands of transactions per second. Until then, I encourage IoT professionals to explore how the blockchain can apply to their data streams and specific use cases. This will help to determine if blockchain is the right tool to solve the problem and whether it is really the missing link in the IoT distribution.
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