How Blockchain & the Internet of Things leverage and benefits each other

Blockchain & Internet of Things (IoT), two very promising and big (r)evolutions in the digital world. Where Blockchain is promising us less interference of third parties, governments and institutions to provide almost the level of real trust in the digital world. Internet of Things on the other hand is giving us the insights we did never have and now can steer on. Insights that now give us real insights on the state of an external environment or the internal state of men, animal, application or whatsoever. Let us first have a quick look on the pro’s and cons of these two technologies before we dive into the content.

Blockchain key promises

First let us take a closer look to the key features and promises of Blockchain:

  • Digital Trust

Think about all possibilities of doing business and creating productivity without the interference of institutions and other third parties. The power of Blockchain at large is that we create an environment of digital trust to increase productivity. You even don’t have to trust the person you are doing business with because you both trust the technology.

  • Transparancy & decentralization

Blockchain is a system of decentralized and distributed databases. Everyone can have a copy of the data. Blockchain for that reason is promising for getting: the right person getting the right insights at the right moment.

  • Double spending

Value cannot be double spent in Blockchain. You cannot sell a house twice or spend the same banknote twice. Blockchain guaranties in its algorithm that double spending is impossible. You can be sure that you are the only one that owns the value.

  • Ownership

As a consumer of the Blockchain you want to be sure that the sender is the owner of the value. The cryptography that is used assures you that only the person with the private key can send the value to the receiver. So, it is very important that the private key is stored securely, ideally in an offline vault.

  • Smart Contracts

Most of the Blockchains support Smart Contracts. This is a very powerful feature. It is now possible to program trust and money. We found a quite good definition of smart contracting on Investopedia we would like to share.

Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. They render transactions traceable, transparent, and irreversible.

Smart Contracts Definition | Investopedia

Questions around Blockchain

Now let us have a look at some questions we have around Blockchain and Distributed Ledger Technology:

  • Security & privacy

There are a variety of questions that can be asked regarding security and privacy. How do I know that the Blockchain cannot be hacked? What is the impact of quantum computing on security? The right to be forgotten, how is that implemented? If everyone can read the data how do I secure that? Where is my data stored? How can I trust the data that is on the Blockchain? What are the possibilities of an Identity Provider? The list goes on and on, but we just wanted to give you an impression of questions related to security & privacy and Blockchain/DLT.

  • Regulations

A lot of people are focusing on the fact that there is less interference of third parties, and that is correct. The other fact is that they are replaced by others sometimes. Take the example of having your insurance via Blockchain, you still must trust the insurance company as an (e.g.) regulator in the process and an institution with the role to… You get the point.

Internet of Things key advantages

Now that we have discussed some of the many pro’s and con’s of Blockchain, we will dive into Internet of Things (IoT) and do the same with this technology:

  • Insights

The biggest advantage of Internet of Things is that we can steer on insights we never had before. Before the era of Internet of Things, sensors, Industry X.0 we steered on company data which quite often was incomplete, not accurate or not interpreted right.

  • Real time data

Another big advantage is the shift from historical data to (near) real time data. Internet of Things is helping us big time to steer on data of ‘this’ moment. That is also why IoT is one of the main drivers for elements like preventive and predictive maintenance.

  • Open data

Internet of Things is also a big driver in open data like weather and government data. Using this type of external and Big Data we can make data driven decisions and act on information we were not able to dream of a few decades back.

Questions on Internet of Things

After we have discussed the pros of the Internet of Things, let us have closer look at the downside of Internet of Things.

  • Privacy

With sensors, camera’s and other items on every street corner the question is how we can manage our privilege and right called privacy. One example how the Internet of Things is enabling for example a surveillance state is what is happening in China now.

“The Chinese government plans to launch its Social Credit System in 2020. The aim? To judge the trustworthiness – or otherwise – of its 1.3 billion residents”

The text above is the header of the article which appeared on Wired, called: “Big data meets Big Brother as China moves to rate its citizens

  • Security

Another item that comes to mind is the very unsecure state of IoT nowadays. With an increase of connected machines and products how can we manage a secure data storage and transport from (local) gateways to the cloud? With the definition of value changing from material & physical items shifting to data, cyberattacks and hacks are increasing and getting more and more damaging and larger at scale.

The strength of combining these two powerful technologies

There might rise a few questions when reading through this article. Why should I combine two technologies where I doubt items like privacy, security and safety? Here are a few applicable answers:

One of the big questions is: how can data on the Blockchain be trusted? This is where the power of IoT and Blockchain come together.  If the data generated by the IoT device can be used as an input for the transaction on the Blockchain then the input can be validated. But then the next question is raised, how can I trust the IoT device? Do you have to trust the IoT device? Off course most of the time the answer is yes. But for now, let us look at the point after the data is generated. We have summed up three reasons why the combination of the Internet of Things & Blockchain has so much potential and why it is worthwhile to dive into:

  1. Encryption and distributed storage

When the by sensor and actuator generated data is stored and encrypted on Blockchain technology this raw data can be transported to a distributed network. The question is however which data needs to be stored. A solution is to store all the data in a decentralized distributed cloud storage environment and add the hash of the raw data on the blockchain. You can therefor never alter the data because the hash will be different. Also, your transaction size is very low because it only contains a hash. You also can do this with complete documents or images.

  1. The perfect audit trails

With a growing number of networks and data the question of, what is real and what is not, is getting more and more valid. For that reason, Blockchain can be put into place to create a perfect audit trail to locate the source of, and connection between data.

  1. Trusting IoT devices

How can I trust a company? How do I know if a B&B is any good? Through ratings. Can I trust the ratings? Many times, not. The same question arises when consuming data from IoT devices. It is very likely that IoT devices get rated in the future. And yes, the ratings are on the Blockchain, so you can verify the if the rating is authentic. Another solution is to store all the valid public keys of the trusted IoT devices on a Blockchain.

Experiment and iterate to the moon and back

We would like to close the article with the following advice. All technological breakthroughs start with knowing the true potential of specific technologies. How often do you think that inventors were successful by ‘accident’? For that reason, it is important to give people the trust and budget to experiment with new technology and find out what the true potential is. When we know the true potential, we have a starting point to conceptualize the impact on tomorrows business (models) and we can start realizing the dream. That brings us to our last point, moonshots. Moonshots are often referred by as:

“A moonshot, in a technology context, is an ambitious, exploratory and ground-breaking project undertaken without any expectation of near-term profitability or benefit and, perhaps, without a full investigation of potential risks and benefits.” Source: TechTarget

So.., the big question, after reading this article is:

What moonshot are you going to take in combining the potential of Internet of Things & Blockchain?

Biographies of the writers

Martin Aarnoudse – is an IT Professional working at OVSoftware with specialization in .NET and Blockchain. For him Blockchain is the next big thing. He has given a few internal sessions on Blockchain and external sessions for developers are planned later this year. He also supervises two graduates on this topic. Want to know more about his vision on Blockchain or share your own? Get in contact with Martin via his  LinkedIn page

Rick Bouter – is a consultant Emerging Technology within Accenture’s Consulting practice. Within his role, Rick helps companies to understand the impact of new and emerging technologies and how to apply them to create impact for their clients. In his spare time Rick writes articles about innovation and trends such as, Blockchain, Internet of Things, Artificial Intelligence and others which can be found on his website: The impact of new technology on human, ethics and economics are topics that appeals to him. You can contact Rick via his LinkedIn page.

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