Many say they are set to revolutionise all aspects of our lives, while others point out that there is a lot of hot air around both ideas, and a lot is yet to be proved.
However, the idea that putting them together could result in something even greater than the sum of its (not insignificant) parts, is something which is starting to gain traction.
In principle, it makes a lot of sense. IoT is a term used to describe the ongoing proliferation of always-online, data-gathering devices into our work and personal lives. Blockchain is an encrypted, distributed computer filing system designed to allow the creation of tamper-proof, real-time records.
Put them together and in theory, you have a verifiable, secure and permanent method of recording data processed by “smart” machines in the IoT.
Why combine blockchain and IoT?
There are several clear advantages to the idea of building smart machines able to communicate and operate via blockchain.
Firstly, there is the issue of oversight. With data transactions taking place between multiple networks owned and administered by multiple organisations, a permanent, immutable record means custodianship can be tracked as data, or physical goods, pass between points in the supply chain. Blockchain records are by their very nature transparent – activity can be tracked and analysed by anyone authorised to connect to the network.
If something goes wrong, breakages occur, data leaks where it shouldn’t, then the blockchain record makes it simple to identify the weak link and, hopefully, take remedial action.
Secondly, the use of encryption and distributed storage means that data can be trusted by all parties involved in the supply chain. Machines will record, securely, details of transactions that take place between themselves, with no human oversight.
Without the private keys giving write-access to the blockchain (which in this case would be held by machines), no human will be able to overwrite the record with inaccurate information.
Thirdly, the “smart contract” facilities provided by some blockchain networks, such as Ethereum, allow the creation of agreements which will be executed when conditions are met. This is likely to be highly useful when it comes to, for example, authorising one system to make a payment, when conditions indicate that delivery of a service has been provided.
Fourthly, blockchain offers the potential of greatly improving the overall security of the IoT environment. Much of the data generated by IoT is highly personal – for example, smart home devices have access to intimate details about our lives and daily routines. This is data that needs to be shared with other machines and services in order to be useful to us. But it also means there are far more openings for hackers to potentially attack us. Business and governments invested in IoT also have to contend with this increased scope for a data breach by criminals, rivals or foreign enemies.
Allowing access to data from IoT devices to be managed through blockchains would mean an additional layer of security that any malignant actor would have to bypass – one that would be secured by some of the most robust encryption standards available.
Centralised v decentralised systems
Above the fact that it will offer new opportunities, it is even possible that blockchain and IoT convergence will become a necessity at some point. If the current IoT paradigm – devices connected via a centralised cloud storage and processing service – continues, then systems are likely to become increasingly bloated, as data volumes, as well as the number of connected devices, continue to increase.
These cloud services are likely to become bottlenecks as the amount of data pumped through them increases. Blockchains can remedy this thanks to their distributed nature. Rather than an expensive, centralised data centre, a blockchain data storage network is duplicated across the hundreds (or potentially thousands, or millions) of computers and devices which make up the network. This huge amount of redundancy means data will always be close at hand when it’s needed, cutting down transfer times and meaning one server failure will be of no consequence to business activity.
Blockchain and IoT are both technologies which have big promises to keep. Both are already being widely and enthusiastically adopted by industry and the public sector, and there is a great deal of speculation about where each of them will lead. Combining them could be the key to ensuring those promises are kept while minimising the security and business risks that go hand-in-hand with technological change.
Bernard Marr is a bestselling author, keynote speaker, and advisor to companies and governments. He has worked with and advised many of the world's best-known organisations. LinkedIn has recently ranked Bernard as one of the top 10 Business Influencers in the world (in fact, No 5 - just behind Bill Gates and Richard Branson). He writes on the topics of intelligent business performance for various publications including Forbes, HuffPost, and LinkedIn Pulse. His blogs and SlideShare presentation have millions of readers.