Making IoT Better With Blockchain
Connecting devices is one thing, but bringing in ledgers and smart contracts via blockchain can open new avenues for IoT solutions.
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The Internet of Things is a fascinating concept that has occupied our minds for decades, only this time around, it's a reality. IoT opens up a world of possibilities. The benefits are obvious. In your everyday life, you wouldn't have to worry about household appliances because they would be able to service themselves, download new programs that allow them to make the most out of their specs, or take advantage of working at times when electricity is cheaper. Then are the self-driving cars, machines which require no human assistance, even in the case of repairs, and so on.
While that is all great, the problem with IoT is that it's a centralized system, meaning that all devices are connected online inside the cloud. But such communication is far from optimal in case they are only a few feet apart, which is often the case with household electronics. And there is also the fact that, as the IoT becomes more present, it requires a much larger and more complex infrastructure, which will drive the price up, according to Mitch Bailey, who is the head of IT for Assignment Masters. He also points out that the solution might lie within blockchain, which is what Bitcoin relies on today.
How Does Blockchain Work?
Blockchains allows for peer-to-peer communication, which means there would be no need for such massive infrastructure, and in case one of the nodes crashes, it wouldn't bring the entire structure down. Blockchain is a technology that enables the creation of distributed ledger digital transactions among nodes, instead of the communication taking places solely through a centralized server. Each node participant is registered with a blockchain for the purpose of transaction recording.
Aside from needing no additional infrastructure, the blockchain approach is also safer because the transaction ledger does not exist on a server, and therefore it can't be messed with in any way. Other nodes inside the network are responsible for verifying the transaction. In the case of Bitcoin, the safety of blockchains has proved to be impenetrable. Another advantage of using blockchains in IoT is the possibility of creating a circular economy. The resources would be reused, as well as shared.
While driverless vehicles still have a long way to go before they become common, they are very much a reality. Even without the IoT, the number of automated features on them grows with each new generation. Navigation, parking assistance, and lane detection are just some of the examples. But, things will go up a notch as blockchain will allow vehicles to communicate with one another. Companies will also be able to track their fleets much more easily, among other things.
IoT is already being used to monitor the state of infrastructural objects, such as bridges, roads, power lines, water and gas infrastructure, and so on. With blockchain, it would be possible to connect all of these and optimize the costs of maintenance, preventing some of the scenarios. For example, we would be able to monitor forests, rivers, and farms, in order to prevent fires, flood, infestations, etc.
Financial and Insurance Industry
IoT is already a part of the financial industry through devices like ATMs, but with the use blockchain, it would be possible to monitor the devices and schedule maintenance. The insurance industry would also benefit from this. For example, insurance companies would be able to send drones to collect data about claims, and claims could be verified via blockchain.
A distributed ledger capability is also something that can used in the real estate industry. Homeowners and companies would be able to monitor their houses and offices with the help of sensors.
We have already mentioned how blockchain is the foundation for Bitcoin. This means that it can be used in two different ways. The first one would include the safe transfer of currency (Bitcoin, as well as any other cryptocurrency used in the exchange). The second one would apply to the rules and terms of a contract and specify the conditions under which the payment would take place.
IoT is already an integral part of the retail industry. For instance, an increasing number of stores are offering shoppers a self-checkout option. Online stores allow its customers to track the location of the items they have ordered, and so on. With blockchain, all of this would be taken to another level because a middle man, such as the credit card issuer or a central server, would not be needed.
While we cannot for sure say that blockchains are the answer to future IoT problems, right now it is looking like an exciting solution. Only time will tell.
Opinions expressed by DZone contributors are their own.