Blockchain and IoT

Updated: Jun 27

Blockchain in the IoT technology: an overview Introduction to IoT technology

In 1999, British technologist Kevin Ashton came up with the term Internet of Things (IoT) to define a network that not only connects people but also the objects around them. At the time, most people thought this was the stuff of science fiction films. Today, the Internet of Things – a vast network of connected objects collecting and analyzing data and autonomously performing tasks – is becoming a reality, thanks to the development of communication technologies and data analytics. Some typical Internet of Things technologies include, for example, thermostats, heart rate monitors, automatic sprinklers, and security systems. Innovations in IoT technology enable remote monitoring, control, verification, and automation of a wide range of devices and sensors, which can be used within different sectors.

Segments, verticals, and application of IoT technology

  • Smart Agriculture: monitoring of microclimate parameters to support agriculture to improve product quality, reduce resources used and environmental impact;

  • Smart Asset Management: remote management of valuable assets for fault and tampering detection, location, tracking, and inventory management;

  • Smart Building: automatic management of the building's facilities and systems (e.g., those for lighting and air conditioning) for energy conservation, comfort, and safety of the building and the people in it;

  • Smart Car: connecting cars to communicate real-time information to the consumer, connecting vehicles or between them and the surrounding infrastructure for accident prevention and detection, offering new insurance models and/or geo-referenced traffic information;

  • Smart City & Smart Environment: monitoring and managing the elements of a city (e.g., public transportation facilities, street lighting, parking lots) and the surrounding environment (e.g., rivers, forests, mountains) to improve its livability, sustainability, and competitiveness;

  • Smart Factory: adoption of Cyber-Physical Systems, connecting machinery, operators, and products to enable new production management and supply chain planning logic;

  • Smart Health: monitoring of vital parameters remotely, reducing the need for hospitalization, for diagnostic and treatment purposes; locating patients in a way that ensures their safety;

  • Smart Home: solutions for automatic and/or remote management of the home's systems and connected objects, to reduce energy consumption and improve the comfort, safety, and security of the home and the people within it;

  • Smart Lifecycle: Improving product life cycle management, supporting the new product development process, e.g., using do data collected from previous versions of related products;

  • Smart Logistics: supply chain traceability, brand protection, cold chain monitoring, security in complex logistics hubs, and fleet management;

  • Smart Metering & Smart Grid: connected meters (Smart Meter) to measure consumption (electricity, gas, water, heat), their correct billing, and remote management; smart electricity grid (Smart Grid) to optimize distribution, manage distributed generation, and electric mobility;

  • Smart Retail: In-store customer behavior monitoring, to improve the user experience and increase sales. Solutions that enable greater visibility into supply operations to optimize inventory management and reduce the likelihood of in-store stock-outs.

Source: Osservatori Digital Innovation, Politecnico di Milano

State of Art and Data

The size of the IoT technology market continues to grow. According to estimates by Indian analyst MarketsandMarkets, the IoT market, in terms of value, is set to grow at an average annual composite rate (CAGR) of 32.4 percent, from the current $130 billion to $883.5 in 2020. By that date, there will be about 34 billion smart devices connected to the Internet (24 billion IoT objects and 10 billion more traditional devices such as smartphones, tablets, and smartwatches...), up from 10 billion today.

In many ways, smart objects have been employed for decades, such as electronic wristwatches, car alarms, and coordinated traffic lights. What the IoT brings is a greater prevalence of smart objects and higher connectivity between them. The installed base of active Internet of Things connected devices is forecast to reach 30.9 billion units by 2025. The global government Internet of Things endpoint electronics and communications market is forecast to generate about 15 billion U.S. dollars in revenue in 2020.

In the end, the total installed base of Internet of Things (IoT) connected devices worldwide is projected to amount to 30.9 billion units by 2025, a sharp jump from the 13.8 billion units that are expected in 2021. Examples of IoT connections include connected cars, smart home devices, and connected industrial equipment. In comparison, non-IoT connections include smartphones, laptops, and computers, with connections of these types of devices set to amount to just over 10 billion units by 2025 – three times fewer than IoT device connections. As a result, revenue from the global IoT market is set to grow considerably in the coming years.

Source: Statista

How Blockchain helps the IoT technology?

Given the sheer volume of IoT devices and data, in the future Blockchain could be the reference infrastructure for the operation of this large "web" of smart objects. Currently, all IoT ecosystems depend on client/server communications, centralized trusted brokers, protocols such as SSL (Secure Socket Layer), TLS (Transport Layer Security), or mechanisms such as Public Key Infrastructure (PKI) to identify network nodes and control the communications system. These technologies have proven their value for communication between general-purpose computing devices for years and will continue to address the needs of closed and limited IoT ecosystems, such as smart homes. But as the IoT phenomenon grows, centralized networks will soon become a bottleneck, causing delays and failures in critical exchanges due to excessive network traffic congestion.

Fortunately, the decentralization problem has already been solved by Blockchain. The decentralized and secure nature of Blockchain makes it an ideal technology for communication between individual nodes in an IoT network, so much so that it has already been embraced by some of the leading brands in enterprise IoT technologies. Samsung and IBM, for example, announced their Blockchain- based IoT platform, ADEPT, at the last Consumer Electronics Show (CES) in Las Vegas.

When adapted to the application domains of the Internet of Things, the Blockchain will use the same mechanism in use in financial transactions that underpin cryptocurrency management to create immutable records associated with smart devices and the data exchanges that occur between these smart objects. This will allow smart devices to communicate directly, in total autonomy, and verify the validity of transactions without the need for a centralized guarantor authority. The devices will be registered in the Blockchain once they enter an IoT network within Industry 4.0, after which they can process transactions autonomously.

The technology in question can be used to track billions of connected devices, enable the processing of the transactions they produce, and coordinate between physical devices. This decentralized approach would eliminate the failure points (failures) of traditional networks, facilitating the creation

of a more resilient ecosystem on which smart devices can operate. The cryptographic algorithms used by Blockchains would also allow for increased protection of private consumer data.

Source: Blockchain with the Internet of Things: Benefits, Challenges, and Future Directions; International Journal of Intelligent Systems and Applications · June 2018; F. Atlam, O. Allassafi, A. Alenezi, G. Wills.


Problems and Challenges

The intersection of the Internet of Things and Blockchain worlds is characterized by great potential, but also by not insignificant integration difficulties. The main concerns relate to the processing power required to perform encryption of all the objects involved in a blockchain-based ecosystem. IoT ecosystems, moreover, are very diverse. Unlike generic computer networks, IoT networks are made up of devices that have different processing capabilities, and not all will be able to run the same encryption algorithms at the desired speed. Other issues concern how exactly one will be able to monitor and manage billions of connected devices, store the metadata these devices produce and do all this reliably and securely. We can summarize the issues involved in implementing blockchain in IoT with the following list:

  • Scalability: the best-known blockchains such as those of Ethereum and Bitcoin have long suffered from scalability problems and are ill-suited to the amount of data that IoT devices will be producing in just a few years. With the steady increase in internet-connected devices, there are many, therefore, who wonder whether blockchain networks can effectively cope with the huge volume of data that is expected to be produced by IoT devices in the next five to 10 years without slowing transaction speeds or data flow;

  • Security: currently, most IoT ecosystems are based on centralized networks that have several critical security issues. These, in fact, like almost all centralized networks are easy to tamper with and much more vulnerable to hacker attacks, compared to decentralized blockchain networks, which, on the other hand, provide a high level of security through the use of cryptography. However, while talking on a decentralized network, IoT devices will continue to be tamperable, and making these devices more secure will undoubtedly be one of the biggest hurdles to overcome in the Internet of Things field;

  • Interoperability: Another major challenge to be faced in the coming years in the field of the Internet of Things is cross-chain interoperability, which will undoubtedly need to be improved if the benefits of interconnected smart devices are to be truly harnessed. A cross-chain technology is an emerging technology that seeks to enable the transmission of value and information between different blockchain networks, allowing them to communicate with each other. Most blockchain networks operate on isolated ecosystems, which has made it almost impossible for people to fully enjoy the benefits of this technology. Returning to the field of IoT, without developing a fully functioning cross-chain technology, in the future, a situation may arise where IoT devices will be connected to multiple isolated decentralized networks that work well for their purpose but are unable to communicate with other devices;

  • Compliance: Finally, the issue of the legality of IoT concerning blockchain should be considered. Indeed, should one wish to take full advantage of these two combined technologies, one will also have to carefully regulate their operation. For example, if an IoT- connected medical device implanted in a patient were to take any action based on certain rules of the smart contract and end up causing harm to the patient, who should be held responsible? Would it be the responsibility of the manufacturer or the IoT platform? Furthermore, if the IoT platform is based on a decentralized blockchain and, therefore, without a controlling entity and identifying a responsible party could present an additional problem.


Companies using blockchain in the Internet of Things segment

Some examples of innovative companies and start-ups integrating blockchain and IoT into their business model (excluding large companies already mentioned such as IBM, Samsung, AWS, and other IT/ICT service providers):

Xage is a startup based in Palo Alto, California, founded in 2016 by Susanto Irwan and Roman Arutyunov, and is regarded as the world's first security platform that combines blockchain technology with industrial IoT. Xage plans to revolutionize several industries by offering large companies cutting-edge cybersecurity measures using blockchain. Industry 4.0 usually relies on highly connected devices and systems, and protecting these industrial systems is a top priority, as they are often targeted by cyber attacks. Traditional cybersecurity models must, therefore, be replaced with distributed, decentralized models based on blockchain technology that uses cryptography and hash algorithms to secure data. In this context, cybersecurity solutions offered by Xage to enterprises enable machine-to-machine (M2M) and human-to-machine authentication, secure data sharing, device lifecycle management, and autonomous operation.

Helium is a decentralized blockchain-based network designed for Internet of Things (IoT) devices. The project was born in 2013 from the minds of Amir Haleem, Shawn Fanning, and Sean Carey and was officially launched in 2019 to prepare IoT communication for the future by identifying and addressing inadequacies in the current infrastructure. Helium is the world's first decentralized network to use blockchain to connect low-power IoT machines (such as routers and microchips) to the Internet. Helium's native blockchain-based wireless Internet infrastructure uses radio technology to strengthen the Internet connection and dramatically reduce the power needed to operate smart devices. In this way, Helium allows low-power wireless devices to communicate with each other and exchange data through its network of nodes. The nodes take the form of 'hotspots,' which is a combination of a wireless gateway and a blockchain mining device. Users operating the nodes then mine and earn rewards in HNT, Helium's native token.

VeChain is a platform based on the public blockchain VeChainThor, launched in 2015 by Sunny Lu, former IT director of Louis Vuitton China. VeChain is an enterprise solution that combines blockchain and Internet of Things technology to improve supply chain management and other business processes. VeChain provides its customers with special smart chips - built by the company itself - and implemented in QR codes or NFC and RFID tags that act as sensors and capture (and record) information from the surrounding environment that is then uploaded to VeChain's blockchain. This solution is perfect for companies affected by counterfeiting or other types of fraud such as those in the fashion, luxury goods, or food industries.

IOTA is a unique distributed ledger because, in reality, it is not a true blockchain. IOTA has a proprietary (blockchain-like) technology known as Tangle, a system of nodes that confirm transactions. Tangle offers a much higher transaction validation speed than conventional blockchains (e.g., Ethereum and Bitcoin), making it perfect for the ever-expanding Internet of Things ecosystem. Since there is no real blockchain, consequently there are no miners either, and since there are no miners, there are no fees either. Many of the most popular blockchains see fees rise as the number of transactions to be confirmed escalates, unlike IOTA, which instead aims to keep fees minimal and the number of transactions per second that can be processed high. Originally known as Jinn, the project was officially launched in 2016 by Sergey Ivancheglo, Serguei Popov, David Sønstebø, and Dominik Schiener, and over time, IOTA aims to become the most widely used platform when it comes to executing transactions between IoT devices.



Blockchain cryptography makes it virtually impossible for anyone to overwrite existing data records, so using blockchain to store IoT data adds another layer of security to prevent malicious parties from gaining access to the network.

The integration of IoT and blockchain opens the door to new possibilities that could reduce inefficiencies in the industry, improving security and transparency for all parties involved while enabling secure machine-to-machine transactions.

Blockchain and IoT, then, can be an incredible combination that can completely revolutionize the concept of interconnected objects.

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