Blockchain Demystified
We meet hundreds of people online through social media, but how do we validate that they are who they say they are? We buy groceries with fair trade labels, but how do we make sure of their origins?
To be in a position to obtain answers to questions like these, we need a system where records can be stored and then verified by the users of that same platform, so that security is guaranteed. Furthermore, as everyone using the system would be watching the same, no one could cheat the system by editing or corrupting the records. Systems designed in this manner are on the horizon, and the software that powers them is called a blockchain. Blockchains tend to store information across a network of personal computers, making them decentralised as well as distributed; this means that even though everyone can use and help run it, no single person or company owns the system.
The significance of this arrangement lies in the fact that no individual can corrupt the networks or take down the system. The people that run such systems hold boxes of records called “blocks” across a logical chain. These blockchains use cryptography and formal math to make sure that the records cannot be tarnished or changed by anyone else. Hence, blockchains provide cryptographic security with zero downtime and high resistance to collusion.
The first significant production from blockchains is bitcoin, which is online currency that can be sent to anyone; this is different from credit cards, Paytm, or other ways of sending money because there is no involvement of a bank or any other kind of a financial third-party.
Blockchain and IoT
The possibilities of IoT or smart devices are endless. For instance, imagine having a refrigerator that sets its own temperature, contacts the technician when it malfunctions, schedules its own defrost cycles, and evaluates its usage for the sake of optimization. There will be multiple scenarios like these in the future; also, with the new trend of merging technologies, the world could soon be well connected by linking objects, networks, and processes.
According to a recent study, it is estimated that there will be 8.4 billion connected devices installed worldwide by the end of 2017, up by 31% from 2016. Approximately 37% of these devices will be used by businesses and the rest by consumers. By 2020, there will be more than 20 billion connected devices.
Yet, there are some challenges in the IoT industry. For instance, all smart devices will have to be connected through the cloud based on the client/server model; this means that all devices will have to be connected through the Internet, no matter how close or far they are. Furthermore, no matter how big or small the objects are—the large network of connections among these IoT devices and their dependency on centralised clouds will increase maintenance costs.
There is also a need to eliminate these cloud servers, which can act as bottlenecks to avoid the entire network failing due to a single server. One solution to this problem is to decentralise the network. A peer-to-peer or one-to-one communication model would go a long way to reduce the infrastructure and maintenance costs while also removing single-node redundancy.
However, another challenge with one-to-one communication would be security; this is where blockchain with its distributed and decentralised approach can solve the above problem.
Blockchains are expected to bring about a disruption in transport, supply chain, sharing economy, advertising, real estate, energy, and smart cities. As these factors are the intersection of almost everything we use in our digital society, it means that we can link the blocks of the blockchain with physical objects and give these objects the ability to run code and inherit all the properties of the blockchain. These objects can then be fully autonomous, own themselves, and even sell themselves
Decentralised system architecture would provide defined and standard protocols for IoT devices to find and connect with each other without the need for high-cost centralised IT infrastructure. The system can not only receive and send communication but also exchange assets. Furthermore, as security is the biggest challenge for IoT, merging with blockchain technology can help create a mesh of sensor networks and automated devices to reduce this risk.
The combination of IoT and blockchain technology would be highly beneficial in supply chain networks. Using blockchain technology, one can ensure that all elements or businesses in a supply chain can have access to the same product information or IoT object without a base system monitoring, controlling, and constantly checking on the product moving through different stages of the supply chain.
The proven cryptography used in blockchains will also help prevent data breaching of the IoT object; this in turn, will prevent the device from causing problems in the network by sharing misleading information. Each device at the time of manufacturing can be connected to the blockchain and this combination would also give rise to database redundancy.
Blockchains are giving rise to the monetisation of data. This means that IoT device owners can filter data from their IoT devices; this data in turn could be stored in their devices and be bought and sold for digital currency. This would give rise to a world where devices sell and share data, run by themselves, interact with neighbouring devices, and find a solution to all their problems themselves. This would also lead to the high usage of digital contracts, also known as smart contracts. These contracts can be applied to the data stored in IoT devices.
Using blockchain technology in connected devices will transform the way we function; in the near future, we can expect driverless vehicles, where each vehicle would serve as a huge smart app with an understanding of how to manoeuvre around road blocks, traffic, traffic signals, locate the best routes, and find solutions to both vehicular maintenance and emergency issues on its own. We can also look forward to having smart homes, smart public transport, and smart cities. Innovations such as these are sure to change the face of our lives forever.
