IoT keeps growing in terms of popularity. Yet, at the same time that IoT is becoming one of tech’s biggest trends, blockchain is easily keeping up.
The Internet of Things (IoT) keeps growing in terms of popularity. Yet, at the same time that IoT is becoming one of tech’s biggest trends, blockchain – the underlying tech behind cryptocurrencies like BitCoin – is easily keeping up.
Through the use of sensors and other edge devices and infrastructure, IoT is transforming the way enterprises operate. A major challenge is then presented to enterprises, which need to protect information at all levels of the IoT ecosystem. Unfortunately, data security has become extremely complex, with the number of connected devices growing every year. It is here where blockchain comes in – by helping to combat security breaches in an IoT system.
What exactly is blockchain and how does it work? Read on for the answer.
Blockchain is one of Gartner’s top 10 2020 strategic tech trends! Read more.
Blockchain and IoT
According to ISG, Blockchain is a distributed ledger technology that makes machine-to-machine transactions possible when they combine with IoT. Using a set of transactions that are recorded in a database, it is verified by multiple sources and entered into a common ledger distributed across every node. The combination of IoT and blockchain allows a smart device to function autonomously without the need for a centralized authority, offering various potential benefits. It can also track how devices communicate with each other.
Though the decentralized nature of blockchain is an architectural benefit, it can post a potential problem for IoT as these platforms rely on client-server or hub-and-spoke architecture, which is centralized authority. An IoT platform that is built to be decentralized in nature will assist in ensuring compatibility with a blockchain network, but can also be a challenge to configure IoT sensors to handle their own computing and data storage, since they can rely on storage resources and central compute.
Integration of Blockchain
Blockchain has been integrated with IoT across industries such as Financial Services, Banking, Agriculture and Automotive. It has also been used with IoT in supply chain, smart homes, smart contracts and logistics. Smart contracts, a relatively new mechanism, apply blockchain to IoT ecosystems to automatically execute a contract once certain conditions are met. The smart contract is what allows a smart device to function on its own without the need for a centralized authority.
This use of blockchain technology allows enterprises to manage data on edge devices in an IoT system, reducing costs associated with IoT device maintenance and data transfer. It reduces the risks of managing data because the ledger is not vulnerable to cyberattacks due to the fact that there is no centralized data repository. It also eliminates the IoT gateway or any other intermediate device for data exchange, reducing the time required to process the data.
See how blockchain technology is also dramatically improving cybersecurity in real estate!
Cyber Security
Blockchain imposes high-level security by authorizing and authenticating encrypted device-generated data with the help of distributed, decentralized ledgers. In a distributed ledger, data storage and computation are spread across millions of devices. A result of this is that the failure of a device, network, or server will not affect the entire IoT ecosystem because it might be in the traditional model. In many cases, the fortitude of a blockchain network will approach fault-tolerance, where the network can continue operating if nodes are taken offline.
Many IoT ecosystems present soft targets for hijackers due to weak access control and client/server architectures. DDoS (distributed denial of service) attacks have become more frequent. These types of attacks disrupt normal traffic to connected devices by overwhelming the target or surrounding infrastructure with a flood of internet traffic. IoT networks and devices can be protected from botnet-driven DDoS attacks with a distributed security architecture of a blockchain. In this type of architecture, every device in a network is independently secured with a peer-to-peer blockchain network.
Benefits of Blockchain and IoT
According to Enterprise Digitalization, while blockchain and the Internet of Things (IoT) are each powerful by themselves, the combination of these technologies can be leveraged by enterprises in an incredible way. A 2018 study by Aftrex Market Research found that the combined blockchain and IoT market is estimated to reach $254.31 billion by 2026. Here are five specific benefits of blockchain and IoT that will propel the market growth in years to come.
1) Accelerated Data Change
According to Aftrex Market Research, one of the leading benefits of the combination of IoT and blockchain is accelerated data change. Reportedly, the current implementation of blockchain has its limitations with this facet because it caps the number of transactions per second. A more enterprise-grade approach, like a permission-based blockchain, is required to handle the amount of data, the number of devices of IoT, and the speed at which two parties transact. A blockchain that can minimize the time to validate transactions by leveraging trusted nodes is essential to handle the performance requirements of IoT, and it is one that can handle the speed of IoT data exchange.
2) Lower Costs
One of the most praised benefits for enterprises is the ability to reduce operational costs. Blockchain allows data to be submitted on a peer-to-peer basis without centralizing control, which lowers business expenses. Scaling a highly-reliable centralized infrastructure is bound to be expensive. Decentralization enables a more cost-effective way to eliminate single points of failure while addressing the scale of IoT.
3) Improved Security
Security is one of the innate attributes of blockchain thanks to its ability to legitimize data and make sure it comes from a trusted source. Because of the high number of devices within IoT, this benefit is especially helpful. The combination of the technologies could strengthen privacy agreements and enhance secure communications. And it’s not just devices – it’s also human to human, device to device and human to device. Having this trusted ledger that transparently shows who has access, who is transacting, and a record of all those transactions is a major benefit. Enterprises that are currently utilizing a combination of blockchain and IoT often count on security measures like device authentication, though this is just the tip of the iceberg. To fully ensure security, there needs to be various security layers implemented to prevent unauthorized access or cut off access if a bad actor is detected.
4) Streamlines Accounting
Accounting is one of the first departments within an enterprise that could benefit immediately from the added transparency provided by blockchain and IoT. It is crucially important for entities to know what organizations are sharing/sending money/data across a linear, time-stamped chain. It’s a hardened and reliable chain of transactions that can’t be changed.
5) A More Efficient Supply Chain
A major priority for many enterprises is making supply chains more efficient. Yet, numerous economic and global challenges make this process more difficult. By eliminating the middle man, blockchain and IoT can improve supply chain efficiency, increasing the speed of transactions and lowering costs. If a typical supply chain transaction takes four or five hops to be validated, fees are paid with each hop. With the blockchain serving as a validator to a degree, untrusted parties can exchange data directly with one another, which eliminates the fees associated with every hop.
Room for Growth
The adoption of IoT-blockchain technology is not yet widespread due to operational challenges and technical concerns. Storage and scalability are major issues in blockchain systems that maintain a large centralized ledger and storing the ledger on edger nodes in inefficient since smart devices at the edge are not yet capable of handling relatively large amounts of computational power or storing large volumes of data.
Though the concept of IoT-blockchain technology is still in its initial stages, it is likely to have a massive impact in the coming years. Implementation of regulations and standard security rules will encourage the adoption of IoT-blockchain technology. By introducing new standards of peer-to-peer communication and data transparency, blockchain can add a new degree of security to the internet.
Interested in the potential impact of blockchain? Read more here!
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