The Blockchain revolution is about to change all aspects of the digital business and is being touted to be bigger than the internet revolution itself. Combine Blockchain and IoT, and you have a common practicality: a distributed internet of things and a distributed ledger technology.
Various opportunities and challenges represent the combination of these two. There are three key benefits in using Blockchain for IoT:
1) Building Trust: the technology allows the building of trust between parties and devices to work in a systematic manner. Furthermore, the system allows the reduction of risk in collusion and tampering.
2) Reducing Costs: this is achieved by reducing costs associated with overheads accrued from middlemen and intermediaries.
3) Accelerating Transactions: the technology allows the reduction in settlement time practically from days to instantaneous payments.
Every technological advancement has its own challenges that need addressing and the integration of IoT and Blockchain comes with no difference. Technology security is already a challenge, and this needs more adherence to prevent abuse. However, the methodology of Blockchain can also be seen from the perspective that it secures the operation of IoT. Various operational challenges are also in place since the business model and practical aspects require various agreements and many actors in a broad ecosystem. Additionally, legal and compliance issues need to be challenged in solving issues such as rules being executed automatically by a blockchain-based application triggered by another blockchain-based application. This also includes the need of detail and adherence that needs to be given to smart contracts, even outside this IoT-Blockchain scenario.
In this perspective, Blockchain technology promises to be the solution to enabling peer-to-peer contractual behaviour without any third party to certify the IoT transaction. Thus, the Blockchain technology answers the challenges of scalability, single point of failures within the daily operations of an organisation, time stamping, record systems, privacy, and reliability in a very consistent manner.
Blockchain technology could also provide a simple infrastructure for two devices to directly transfer a piece of property such as money or data between one another with a secured and reliable time-stamped contractual handshake. The IoT devices will leverage smart contracts which then model the agreement between the two parties. This feature enables the autonomous functioning of smart devices without the need for centralised authority. If you then extend this peer-to-peer transaction to human to human or human to objects/platforms, you end up with a fully distributed trustworthy digital infrastructure.