Technology Internet of Things (IoT) and Blockchain Technology

Technology

Internet of Things (IoT) and Blockchain Technology

January 31, 2023

The Internet of Things (IoT) and blockchain technology are transforming the way we communicate and interact, opening up numerous examples of how connected devices can benefit from the decentralized approach, transparency and traceability, reliability, tamper-proof characteristics, and automation offered by blockchain.

IoT with blockchain refers to the use of a cryptographically secure digital ledger to authenticate, store, and share data generated by connected devices, in a reliable way that prevents that data from being falsified, corrupted, or altered.

Dgtl Infra provides an in-depth overview of the Internet of Things (IoT) in combination with blockchain, explaining what exactly the two technologies can offer. Additionally, we review key examples of how IoT and blockchain work together in many different industries and domains, including security, healthcare, the supply chain, and the Industrial Internet of Things (IIoT). Finally, Dgtl Infra highlights the major benefits and challenges of integrating blockchain with the Internet of Things (IoT).

What is IoT with Blockchain?

Before analyzing how the two technologies work together, let us first examine the concepts of blockchain and IoT individually:

Internet of Things (IoT): refers to networks of devices that collect sensor data and share these measurements with gateways or servers, usually via the internet, allowing for the automation and management of numerous systems and processes
Blockchain: a cryptographically secure digital ledger that maintains a record of all transactions that occur on the network and follows a consensus protocol for confirming new blocks (digital pages in the ledger) to be added to the blockchain

By integrating IoT with blockchain technology, IoT data can be secured, authenticated, and decentralized, which improves trust, transparency, traceability, and reliability in IoT-based processes and automation. The combination of these two technologies can be applied to improve the security, healthcare, and industrial sectors, as well as global supply chains.

Notably, blockchains can be public (e.g., Bitcoin and Ethereum) or private, with access to the blockchain data and network being restricted to as little or as many people as is necessary for the specific use case. Typically, private blockchains are developed for specific organizational purposes.

Market Forecasts – Internet of Things (IoT) and Blockchain

Below are five different examples of how the Internet of Things (IoT) and blockchain market is expected to grow over the next several years:

Metric	Forecast
Global Market for Blockchain in IoT	$2.4 billion by 2026, CAGR of 45%
IoT Devices Connected to Blockchain Networks	4.7 billion by 2029, CAGR of 5.3%
Blockchain in Security – Market Size	$17.5 billion by 2030, CAGR of 44%
Blockchain in Healthcare – Market Size	$1.2 billion by 2028, CAGR of 61%
Blockchain in the Supply Chain – Market Size	$16.7 billion by 2030, CAGR of 52%

Note: CAGR refers to compound annual growth rate.

What are Examples of IoT and Blockchain?

Examples of IoT and blockchain technology working together span many different industries and domains, including security, healthcare, the supply chain, and the Industrial Internet of Things (IIoT).

IoT and Blockchain in Security

IoT and blockchain can protect organizations and individuals from different forms of harm, whether it is using cybersecurity measures to shield networks and devices against unauthorized access or a focus on privacy to protect personal information.

Cybersecurity

Blockchain can be used to safeguard IoT devices against cyberattacks by providing various security measures:

Identity and Access Management: blockchain enables the creation of a secure digital identity for each IoT device on a network, as well as authenticated management of access control for the devices, thus making unauthorized access or control of a device extremely difficult
Decentralization: blockchain networks make it significantly more complex for cybercriminals to gain control of an entire network as they would need to compromise the majority of the nodes (e.g., computers and IoT devices) on the network, rather than a single server
Immutability: blockchain creates a permanent, unalterable record of transactions and data. This makes it difficult for cyberattacks to modify or corrupt the data stored in the blockchain, as any changes made to the data will be detected and rejected by the network. In the context of IoT, incorrect or unreliable data would have negative consequences for many applications, such as industrial control systems, because corrupted data can cause malfunctions in devices and lead to incorrect decision making – particularly when automation is involved
Smart Contracts: software can be used to digitally facilitate or enforce a rules-based agreement between transacting parties, once certain conditions are met by an IoT device. Since smart contracts run on a decentralized network, they can be used to ensure the secure collection and storage of data by an IoT device. Together, these features make it vastly more complicated to generate spoofed records or commit fraudulent transactions

Privacy

IoT devices integrated with blockchain can improve privacy. Blockchain-based systems make pseudonymous and anonymous transactions possible, protecting the identity of device owners or users. Additionally, blockchain allows for a “zero-knowledge proof”, enabling authentication without revealing the underlying data such as personally identifiable information.

Together, these identity and authentication features facilitate privacy-preserving smart contracts, which can use data from IoT devices to automate and enforce rules-based agreements, without the need for personal information to be revealed.

IoT and Blockchain in Healthcare

IoT and blockchain technology can coexist in many complementary use cases in healthcare. As illustrative examples, consider the following two IoT and blockchain scenarios below: i) pharmaceutical distribution and ii) blood and organ donation systems.

Pharmaceutical Distribution

A pharmaceutical distributor has to transport a drug over long distances and the drug needs to be stored at a specific temperature – between 50 to 60 degrees Fahrenheit (10 to 15.5 degrees Celsius). With IoT sensors and blockchain authentication, the drugmaker can ensure that the necessary conditions were actually maintained throughout the transportation process. Moreover, through the use of a smart contract, payment to the distributor could be contingent and automatically enforced based on the drug being shipped properly, according to pre-defined rules.

How so? Temperature sensors can track the ambient storage temperature for each case of drugs, periodically collecting and storing the temperature values to a blockchain, at regular intervals. These IoT sensors can also be designed to be tamper-proof, by logging any errors, deviations, or resets to the blockchain.

Since the data recorded on the blockchain cannot be falsified or altered, trust and transparency are greatly enhanced. In addition to providing effective quality control and monitoring, this solution has the added benefit of reducing or eliminating the need for sampling inspections. To this end, analytics programs can instantly identify and flag any issues in the temperature values logged by the IoT sensors, right down to the level of an individual case.

Blood and Organ Donation Systems

Blood and organ donation systems can utilize IoT sensors and devices (e.g., RFID tags) to monitor critical parameters (e.g., temperature, integrity of seals, light exposure), while blockchain can authenticate and secure this data. The combination of IoT and blockchain enhances communication, transparency, traceability, and privacy between donors, doctors, medical facilities, and recipients.

With this type of blockchain-authenticated data from IoT medical devices – such as glucometers and implants – medical practitioners, patients, labs, and insurance providers can also ensure that the data being shared is unique, accurate, and verified. This is because the data stored on a blockchain is immutable and cannot be altered.

IoT and Blockchain in the Supply Chain

A standard car is made from roughly 30,000 parts, sourced from around 1,000 suppliers. While a typical passenger jet can comprise hundreds-of-thousands to millions of parts from tens-of-thousands of suppliers. As such, it is easy to appreciate the complexity of tracking and verifying who made what – when, how, and where.

IoT and blockchain can improve supply chain efficiency in many ways, like sourcing & procurement and logistics:

Sourcing and Procurement

A car or aircraft manufacturer will procure a part with hundreds of subcomponents that are sourced from dozens of tier-2, -3, and -4 suppliers. IoT sensors in the assembly line of each of these direct suppliers can collect data to verify the quality and integrity of not just the subcomponents, but also of the processes through which each subcomponent was made.

The decentralized blockchain network helps provide transparency to this assembly line data, enabling all permitted participants to trace the history of each component – from the original equipment manufacturer (OEM), to direct suppliers, and even end customers.

Ultimately, transparent assembly line data can empower insights and interventions that reduce wastage (e.g., overproduction and defects), prevent counterfeit parts, and speed up the entire process. Tracking a product’s history and origin, often called “provenance tracking”, also improves trust between the different participants in the supply chain. Importantly, this provenance information, is recorded and immutably stored in the blockchain network.

Logistics

In logistics, the decentralized blockchain network, in combination with IoT devices – such as sensors, GPS, and RFID tags – allow for real-time tracking of the position, movement, speed, and ambient conditions of shipments. While these IoT devices can be attached to packages or vehicles to generate tracking data, blockchain helps to improve the credibility, security, and transparency of this data by maintaining a digital ledger of all movements of the packages and vehicles.

Overall, IoT and blockchain technology can facilitate better management of logistics operations, which results in improved delivery times, reduced costs, and increased efficiency for logistics companies.

Industrial Internet of Things (IIoT) and Blockchain

Blockchain has distinct benefits to improving and unlocking industrial IoT use cases, known as the Industrial Internet of Things (IIoT), specifically, examples include:

Authentication: with billions of data points logged from thousands or even millions of IIoT sensors, blockchain introduces much-needed authentication for data, ensuring it is secure and tamper-proof on a decentralized ledger of data transactions. As such, blockchain helps IIoT use cases meet their compliance, auditing, and regulatory requirements
Automation: by automating complex processes and business logic, blockchain-powered smart contracts increase efficiency and reduce human errors. For example, IIoT sensors can track inventory levels for hundreds of parts in a complex manufacturing operation, and automatically raise job cards, production requests, or purchase orders, whenever certain pre-defined conditions are met. If inventory levels happen to be low, smart contracts can execute a new purchase order to authorize the acquisition of additional inventory
Cost Reduction: through the automation of IIoT processes, blockchain can help streamline industrial supply chain operations and reduce the need for intermediaries and human intervention. In turn, the combination of IIoT and blockchain can reduce costs and improve efficiency

Predictive Maintenance

Blockchain’s ability to provide anonymized but authentic data opens the doors to benefits such as data aggregation and predictive analytics that would not otherwise have been possible. For instance, a small packaging and bottling manufacturer would only be able to collect data from IoT devices and sensors within their own operations. Therefore, if they were to face breakdowns of compressors or conveyors on their factory floor, they may not have adequate data points for artificial intelligence-driven predictive maintenance.

By aggregating similar, anonymized data from several small packaging and bottling manufacturers on a blockchain, third-party providers of predictive software tools and maintenance services could gain enough information to improve efficiency across all manufacturers. Thus, even small businesses would reap the benefits of predictively replacing and repairing equipment before failures occur, avoiding costly downtime and delays. At the same time, these individual companies would still ensure that their proprietary IoT data is kept confidential.

Benefits and Challenges of IoT and Blockchain

According to a recent Gartner survey, 75% of IoT technology adopters in the U.S. have either already implemented blockchain in their technology stack, or are planning to do so within the next year.

Integrating blockchain with the Internet of Things (IoT) can deliver numerous benefits, such as improving transparency, traceability, reliability, and automation. However, combining the two technologies also comes with challenges, including scalability, interoperability, and energy consumption.

Benefits of IoT and Blockchain

The benefits of combining IoT and blockchain technology are a decentralized approach, transparency and traceability, reliability, tamper-proof characteristics, and automated transactions.

1) Decentralized

IoT devices generate vast amounts of data which can be securely stored and managed using blockchain technology. By leveraging decentralized networks, instead of centralized cloud servers, data is not controlled by any single entity or service provider (e.g., Amazon Web Services) and can be more secure from cyberattacks and data breaches.

2) Transparency and Traceability

Blockchain allows for an immutable record of transactions, ensuring transparency and traceability of data generated by IoT devices. Together, these features improve the ability to analyze data collected by IoT devices, while simultaneously making it easier to identify the source of any problems or errors in the IoT network, or the devices themselves, enabling rapid resolution.

3) Reliability

Blockchain provides a fault-tolerant infrastructure for IoT, enabling devices to work seamlessly even after the failure of one or more nodes (e.g., computers and devices) on the network. Additionally, blockchain employs redundancy measures, such as creating multiple backups of the data, to further enhance its reliability.

4) Tamper-Proof

Blockchain uses consensus algorithms and hash functions to make it difficult for anyone to tamper with data generated by IoT devices, providing greater confidence in the accuracy and integrity of data. Consensus algorithms, such as “proof of work” or “proof of stake”, validate transactions and add blocks to the chain. While hash functions link blocks together in the chain, making it difficult for someone to alter the data in a block.

5) Automated Transactions

IoT devices can be programmed to automatically trigger transactions on the blockchain, leading to more efficient and streamlined processes. These transactions can be executed via a smart contract, which is software that facilitates a rules-based agreement between transacting parties. Smart contracts have a wide variety of applications – from automatically executing purchase orders in manufacturing, to automatically allocating resources such as labor, energy, and raw materials in a supply chain.

Challenges of IoT and Blockchain

The challenges of combining IoT and blockchain technology are scalability, compute and storage, interoperability, and energy consumption.

1) Scalability

IoT generates massive amounts of data, which can pose a challenge for blockchain networks in terms of throughput and latency. Some established blockchains, such as Bitcoin, have limited throughput, with a current average throughput of ~7 transactions per second (tps). Additionally, blockchain networks are hindered by higher latency, with the average time it takes for transactions to be processed and verified on a blockchain being 10 minutes – this leads to decreased performance for IoT devices.

2) Compute and Storage

IoT devices are typically designed to be small, low-cost, and low-power, with their main purpose being to gather and transmit data. As a result, IoT devices often have limited compute and storage capabilities, meaning they may struggle to run demanding blockchain software applications and process/store large amounts of data. Problematically, blockchain needs significant computing power to perform the complex mathematical calculations required to validate transactions, as well as storage, because each node in the network must maintain a copy of the entire blockchain. IoT’s growing use of edge computing could resolve this compute and storage issue.

3) Interoperability

IoT devices may use different protocols and standards (e.g., MQTT and HTTP), making it difficult to integrate them into a common blockchain network. Presently, there are only a small number of standards available for the integration of IoT and blockchain, leading to reduced interoperability. As an example, Ethereum, a blockchain platform, offers the capability to build IoT applications through the utilization of its blockchain network.

4) Energy Consumption

The energy consumption associated with running a blockchain network can be significant, depending on the consensus algorithm used, making it challenging to operate large-scale IoT networks with a significant number of nodes. “Proof of work” consensus algorithms, such as the one used by Bitcoin, consume large amounts of energy because they require significant computational power. Whereas “proof of stake” consensus algorithms, such as the one used by Ethereum, consume relatively less energy, as they do not require intensive computations.