Mention blockchain to your average Joe, and odds are that it evokes notions of cryptocurrencies, like Bitcoin, and covert financial transactions. But in the enterprise world, blockchain is much more than an ultra-secure, digital financial ledger or another “over-hyped” new technology.
When combined with the Internet of Things (IoT), blockchain enables new value propositions and new business models, while solving transparency, complexity and security challenges in transactions involving multiple parties and large amounts of data, or records of value. In many ways, blockchain is the “missing link” that enables IoT deployments to achieve their full potential.
Before diving into this subject in more detail, let’s clear up some of the misconceptions and misunderstandings surrounding blockchain. In a basic sense, blockchain is core technology serving as a decentralized ledger that allows a shared set of computing systems to agree that a transaction between parties is authentic. These outcomes are recorded in a cryptographically secured database structure – the blockchain itself. It is impossible to manipulate information within the blockchain, so all parties are able to agree on a single version of the truth in a transaction. Easy enough, right?
IoT + blockchain
So, how does blockchain relate to IoT? In the enterprise, the real value of IoT comes from the data that connected devices generate. This data can be analyzed to identify areas for business improvements and opportunities for new value propositions and markets. For example, manufacturers can analyze the IoT data streams from connected machines on their plant floor to enable predictive maintenance, and therefore, reduce downtime.
In many use cases, such IoT data traverses across organizational boundaries, and even across multiple enterprises – giving practitioners a “big picture” view of operations. The challenge is ensuring this data is accurate, trustworthy and most importantly, secure. Further, reconciling the data is a time-consuming process, especially when done manually, involving data sets from disparate sources that often do not match.
Here’s where blockchain can help. Blockchain technology facilitates the seamless, permanent and decentralized recording of IoT data transactions across entire organizations and even across devices. There is no need for an intermediary to reconcile that data – everyone knows they are looking at a single version of the truth, which establishes trust among all parties. With these benefits, blockchain makes IoT deployments much more efficient and powerful. Let’s explore a couple of use cases.
Blockchain & IoT use cases
Providing a single source of the truth and instantaneous transaction reconciliation, blockchain technology fits right at home in decentralized computing environments like supply chains. Specifically, blockchain can alleviate many track-and-trace challenges, helping minimize the impacts of counterfeiting, product recalls and foodborne illnesses.
For example, counterfeiting is a massive problem in the semiconductor industry, costing U.S.-based chip manufacturers $7.5 billion in lost revenue per year. By using blockchain technology, semiconductor manufacturers can create an incorruptible chain of custody for a chip or shipment of chips through each step of the supply chain. If a chip is believed to be a fake, the manufacturer can go back through that chain of custody and assess where a counterfeiting incident occurred, as well as identify and replace any other potentially faulty chips.
Similarly, the food industry can refer to the blockchain ledger to pinpoint the origin, and track the locations of tainted goods, facilitating and even preventing devastating recalls. The sheer speed of transaction reconciliation is crucial, allowing food manufacturers and distributors to instantly obtain visibility into their supply chain. Walmart demonstrated just how fast these reconciliations can occur using blockchain technology to trace a package of mangos back to the farm from which it originated. With blockchain, the process took just 2.2 seconds, whereas it would have taken nearly seven days using traditional digital and paper-based methods.
In addition to creating new operational efficiencies, blockchain drives new value propositions and disruptive business models – allowing organizations to further capitalize on the digital economy and better compete. For instance, blockchain holds great promise for reconciling health records. With an instant, accurate and secure view of a patient’s medical history, doctors can improve patient safety and health outcomes by ensuring they are not prescribing a medicine that could adversely interact with the patient’s other current or previous medications from other physicians.
Blockchain could also help strengthen data privacy, decentralizing personal data stored in various repositories and giving users insight into who has accessed it. As for new business models, blockchain can enable micro-payments, allowing businesses to lower their transaction fees, bring down transaction times, and create a transparent and fair payment distribution system. An example where micropayments are used is in the music streaming industry.
What’s next for blockchain?
We’ve only scratched the surface of blockchain’s capabilities, especially when it is paired with IoT – and the future looks bright. In fact, the global blockchain technology market is expected to reach $7.59 billion by 2024, at a 37.2 percent CAGR. However, a majority of today’s blockchain efforts are still in technology discovery and proof-of-concept stages.
For enterprise-scale deployments, we will need more scalable solutions based on an established framework of standards to emerge that will allow interconnectivity between disparate blockchain networks. Such solutions would be able to perform hundreds of thousands of transactions per second. Until then, I encourage IoT practitioners to explore how blockchain can apply to their data flows and specific use cases. This will help determine whether blockchain is the right tool to solve their problem – and whether it is truly the missing link in their IoT deployment.
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