Blockchain To Transform IoT Landscape
Businesses have overcome multiple sources of friction over the years whereby market friction was seen to be as the greatest obstacle to wealth. While technology innovations helped overcome inefficiencies, in many cases, business transactions remain inefficient, expensive and vulnerable.
Blockchain technology which creates a permanent and transparent record of transactions – has the potential to obviate intractable inhibitors across industries. Economist Ronald Coase introduced the theory that transaction costs are lower for institutions than individuals. However, in recent years as enterprises have scaled, the added complexity of operations has grown exponentially while revenue growth has remained linear. The result? At a certain point, organizations are faced with diminishing returns. Blockchains have the potential to eradicate the cost of complexity and ultimately redefine the traditional boundaries of an organization.
In the recent IBM study “Fast forward: Rethinking Enterprises, Ecosystems and Economies with Blockchains” states that a number of frictions — such as participants of a transaction not having access to the same information or the high price of intermediaries — add costs and complexity that drags on global business and trade. Blockchain technology — which creates a permanent and transparent record of transactions — will reduce or eliminate these frictions, recasting our institutions and economy in new form with far greater efficiency and far less risk.
Block chain transforming ecosystem
Current IoT ecosystems rely on centralized, brokered communication models, otherwise known as the server/client paradigm. All devices are identified, authenticated and connected through cloud servers that sport huge processing and storage capacities. Connection between devices will have to exclusively go through the internet, even if they happen to be a few feet apart.
Many of the industries that historically did not fit well with computers have been transformed by billions of IoT devices connected to the internet; other industries are in suit as billions more enter the fray.
Since existing IoT solutions are expensive because of the high infrastructure and maintenance cost associated with centralized clouds, large server farms and networking equipment. The sheer amount of communications that will have to be handled when IoT devices grow to the tens of billions will increase those costs substantially.
According to the report, supply chains are prime examples of blockchain’s potential for transformation needed in industries. Initial blockchain efforts could have quick impact by transforming even a small portion of the supply chain, such as the information used during importing. If import terminals received data from bills of lading earlier in the process, terminals could plan and execute more efficiently and without privacy concerns.
Blockchain technology could make appropriate data visible in near real-time – for example, the departure time and weight of containers – while making inaccessible the information about the owners and value of the cargo or value. Costly delays and losses due to missing paperwork would be avoided.
How block chain is approaching IoT?
Blockchains could also enable a robust and secure exchange for shared logistics, coordinating a vast array of activities from sharing spare space in a warehouse to optimizing truck fleets and shipping containers. Retailers and manufacturers could greatly improve demand forecasting and stock replenishment. Financial institutions, armed with a detailed track record of a supplier’s reliability, could extend much needed credit to fuel the trading industry. Regulators could trace the origin of goods from raw materials, making it easier to identify counterfeit items, as well as sources of tainted materials.
Tech firms are now mulling over porting the usability of blockchain to the realm of IoT.
The concept can directly be ported to IoT networks to deal with the issue of scale, allowing billions of devices to share the same network without the need for additional resources. Blockchain also addresses the issue of conflict of authority between different vendors by providing a standard in which everyone has equal stakes and benefits.
This helps unlock M2M communications that were practically impossible under previous models, and allows for the realization of totally new use cases.
How Leaders are Approaching IoT Decentralized Program
The IoT and blockchain combination has huge opportunity in the market and is gaining momentum, and will be endorsed by both startups and tech giants. IBM and Samsung introduced their proof-of-concept system, ADEPT, which uses blockchain to support next-generation IoT ecosystems that will generate hundreds of billions of transactions per day.
According to the first papers to describe the use of blockchain in IoT, IBM’s Paul Brody () describes how new devices can be initially registered in a universal blockchain when assembled by the manufacturer, and later transferred to regional blockchains after being sold to dealers or customers, where they can autonomously interact with other devices that share the blockchain.
The combination of IoT and blockchain is also creating the possibility of a circular economy and liquefying the capacity of assets, where resources can be shared and reused instead of purchased once and disposed after use. An IoT hackathon hosted by blockchain platform leader Ethereum put the concept of blockchain-powered IoT to test, in which some interesting ideas were presented, including in the domain of energy sharing and electricity and gas billing.
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