In this opinion piece, Pindar argues that while emerging blockchain technologies will gain traction in Internet of Things (IoT) applications, more work is needed to realize opportunities.
If blockchain has yet to reach peak hype, then at the very least, it is gaining traction in terms of investment.
With numerous VCs, startups and major tech companies all having poured significant financial resources into various applications of the technology, the effort they must focus on now is collaboration.
In the simplest terms, blockchain is a distributed database that provides a secure, yet transparent way to make, record and verify any type of transaction. A transaction does not have to be financial; it is simply any type of transfer between two parties that typically requires a third party for authentication and to broker the exchange.
Perhaps the most common example of the traditional third-party model is stock trading or other financial transactions that rely on clearing houses to execute.
The idea behind blockchain is to eliminate the need for a sometimes costly and performance-draining central authority, and replace it with a shared record of unalterable blocks of data, distributed across computers around the world.
The challenge now is to test and validate the various blockchain networks that have been built, and then to find a way to standardize and consolidate protocols so these networks can work together.
Since the technology first emerged in 2008, and then began to expand beyond bitcoin around 2014, so many standards and protocols have been developed that, at present, there are simply too many.
Once consolidation does start to happen, applications everywhere will have a blockchain layer somewhere in the back-end, enabling a number of new use cases in business and finance.
But there is no use case where this will have such ‘game-changing’ impact as with the Internet of Things (IoT).
This is because, for IoT to make the type of strides that its stakeholders are hoping for, blockchain’s ability to help different systems communicate with each other in a trusted way will be essential.
Think of a connected car ‘speaking’ with smart parking meters to help you park faster, or to local coffee shops to figure out which one makes the most sense for your route to work. That smart car might even place the order for you.
Creating these types of closed-loop systems that give our lives new conveniences or make cities more liveable will require public and private IoT networks to trust in one another’s networks and devices.
So where does blockchain play a role?
Blockchain creates an easier way for devices to verify one another. Like so many other transaction types, financial, PKI (public key infrastructure) or otherwise, IoT communication has historically required a trusted third party.
Blockchain changes that dynamic, distributing the trust model, recording the transaction on a shared ledger, cutting out the central authority and making the transaction cheaper and faster.
This new design will also benefit the security of IoT, since it eliminates the restrictions imposed by the traditional central authority trust model which have made IoT vulnerable – most notably to Mirai-style botnets, which recently allowed hackers to take over thousands of IoT devices only protected with default passwords and then use them to launch distributed denial-of-service attacks.
In providing a distributed trust model, blockchain removes the ‘single point of failure’, in turn enabling device networks to protect themselves in other ways, such as allowing the nodes within a given network to quarantine any nodes that start behaving unusually.
Still, among the various blockchain networks in development, none have been rigorously vetted from a security standpoint.
In 2017, we will see more blockchain networks going through extensive security testing. We will also see continued efforts to standardize how these networks communicate with one another.
There are a number of companies currently working together to try to make this happen. A consortium of them recently met in Berkeley and have launched a collaborative effort to create a shared blockchain-based IoT protocol. Companies involved represent fields ranging from security to banking, logistics supply chains, energy, pharmaceuticals and health records.
All of these companies share in the belief that blockchain has the power to give us new and exciting IoT use cases, but also that we need to create a common protocol to make it easier for IoT to fully realize the benefits of blockchain.
And all that will require is a little cooperation.
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