What can blockchain bring to the Internet of Things?

China Energy Storage Network: Since the beginning of 2018 , many technology trend reports and articles have proposed that blockchain and the Internet of Things may be the next key to development. Moreover, by 2019 , nearly 20 % of all IoT deployments may have basic blockchain services.

Many companies are not clear about the future development of blockchain and may worry about being excluded from the rapid development of blockchain. This is also a basic status quo of blockchain development. Despite this, blockchain has become the new darling of the technology industry, and many individuals, companies, governments and even secret organizations are using this technology to conduct various experiments.

In the future, the Internet of Things will be the field that creates the most sparks with blockchain. Why?

Problems facing the IoT industry

By far, the most pressing challenges facing the IoT are issues of security (ensuring the privacy of data and the safety of data storage) and integrity (data continuity and compatibility of various data interactions).

It is clear that the Internet of Things will gradually expand into all aspects of our lives and lead to a dramatic increase in connectivity. However, the servers used to transfer data between networked devices are more likely to become the weak link in terms of productivity and reliability.

Hardware: Due to the different application scenarios of the Internet of Things, there are many types of sensors with different functions. In many segmented scenarios, there are problems of cost and scale. The sensors themselves require the support of some semiconductor materials, biotechnology, chip technology, packaging technology, etc., and their technological updates will be restricted.

Standard compatibility: The diversity of IoT terminal devices, differences in communication protocols, and different application scenario requirements have led to inconsistencies in various standards in the IoT field: hardware protocols, data model standards, network protocols, sensor standards, device connection standards, platform compatibility, third-party application interfaces, service interfaces, etc. Inconsistency in various standards will lead to waste of resources and various problems in device intercommunication.

Data storage issues: Currently, the data collected from IoT devices is stored on central servers (cloud services), but as the number of connected devices increases exponentially, data storage costs, access efficiency, performance stability, etc. will be greatly tested. Even if unprecedented economic and engineering challenges are overcome, cloud servers will still be a bottleneck and failure point, which will subvert the entire network. This is particularly important when human health and life are increasingly dependent on the Internet of Things.

Data analysis issues: Currently, the processing of IoT device data after collection is just simple data processing and services in terms of device networking management and operating status, lacking in-depth data mining and value application in improving enterprise generation efficiency and revenue. This aspect will also be constrained by the development of artificial intelligence and big data technologies.

Problems with industry application scenarios: Currently, industry application scenarios based on the Internet of Things are still in their early stages. After being connected to the Internet, smart devices have not improved people’s lives and problems through intelligence. Consumers are not willing to do so, and there is a lack of mature business models.

Security issues: The IoT has specific application scenarios in smart cities, transportation, energy, finance, home, and medical care. In these scenarios, the number of connected devices and the amount of data transmitted will reach unprecedented heights, and their execution environments are different. Traditional network security defense faces huge challenges. Security issues are manifested in two aspects: one is the impact on system security and personal life safety after the machine is attacked or tampered with, and the other is data leakage. Once security issues arise in the IoT field, the harm will be great.

Blockchain Solutions

The Internet of Things industry itself is an industry with very complete upstream and downstream connections. Although there will be a series of bottlenecks and problems in its development, these problems are industry-wide systemic problems.

Using blockchain technology to transform the Internet of Things industry is not a process of subversion, but a process of integration. The Internet of Things industry integrates blockchain technology just like integrating cloud computing, big data, and artificial intelligence technologies. Blockchain technology is used to solve or improve certain links or problems in the Internet of Things industry, rather than going through the processes of each link in the Internet of Things industry again, which is basically impossible and unnecessary.

Based on this understanding, we believe that the application of blockchain technology in the Internet of Things industry is mainly at the platform and application levels. Combined with the problems faced by the development of the Internet of Things itself, the main application directions of blockchain are two aspects: data security and privacy protection and exploration of new business models (data transaction settlement).

Data security and privacy protection

Currently, IoT applications basically adopt a centralized structure, and all data is aggregated to a cloud resource center for unified control and management. Once an IoT platform or system encounters a security vulnerability or system defect, there may be a risk of information leakage.

On the other hand, government security departments can review the data content stored in the central server without authorization, and operators or platforms are likely to sell users' private data to advertising companies for big data analysis for commercial interests, in order to achieve personalized recommendations based on user behavior and preferences, etc. These will cause data security and privacy issues.

With blockchain technology, data is encrypted before being sent, and identity authentication is added during data transmission and authorization. Any operation involving personal data needs to be decrypted and confirmed through identity authentication, and operation records and other information are recorded on the chain and synchronized to the block network. In this way, blockchain can protect the security and privacy of user data to a certain extent.

New Business Model

The current Internet of Things only connects devices together to complete data collection and device control functions, and does not have high intelligence. What the future Internet of Things requires is that each terminal networking device has a certain degree of intelligence, autonomously collaborates under given rules and logic, and completes various applications with commercial value, such as data transactions, value transfer, etc. In this process, it is necessary to ensure that the authorization of data is credible and verifiable, and the entire process of data transactions is fully recorded and cannot be tampered with.

To achieve these functions, under a centralized architecture, it is difficult for different stakeholders to complete autonomous collaboration and transactions between machine data.

Therefore, the collaboration and transactions of current IoT devices can only be carried out under the same trust domain, that is, the devices for collaboration and transactions must be provided or authorized by the same IoT operating service provider, which greatly reduces the true commercial value of IoT applications.

The biggest advantage of blockchain technology is that it can provide direct transactions without trusting intermediaries. The execution terms are formulated through smart contracts, and when the conditions are met, the transaction is automatically executed. This method can generate many application scenarios, such as controlling the refrigerator at home through smart contracts to directly place orders with nearby supermarkets when there are not enough drinks. When the supermarket delivers goods, it automatically scans the barcode of the goods to confirm the order and complete the payment.

We think that the application of blockchain technology in the Internet of Things industry is mainly based on the above two points. Of course, there may also be the following applications, but after analysis, we found that these application requirements seem to be reasonable and in demand, but are difficult to implement.

Reduce costs

With the further application of IoT technology, the number of IoT connected devices is growing exponentially. The computing, storage and bandwidth costs of centralized services will increase the cost pressure on enterprises. Using the distributed point-to-point characteristics of blockchain, can the collection and transmission of IoT data be distributed and stored through the blockchain network, thereby avoiding the introduction of centralized data management and synchronization in large data centers?

After research, we found that the peer-to-peer distributed storage and computing of blockchain can be achieved and improve efficiency and cost in other fields when the data types are similar or the data volume is not large, but it is difficult to truly implement in the Internet of Things industry.

In the Internet of Things industry, there are a large number of IoT devices, the diversity of the various devices themselves, the different data transmission content, and the huge volume of data. Compared with centralized storage and processing, the system complexity, instability, compatibility and other difficulties brought by distribution will be greatly increased. In addition, the performance issues of the underlying public chain are not yet sufficient for commercial use. From the perspective of implementation difficulty, it is not a good solution. There will be many technical difficulties that need to be solved, and it may even increase costs and reduce efficiency.