IoT Applications for Blockchain
Blockchain has been in the news a lot recently given the meteoric rise in the price of Bitcoin and other cryptocurrencies during 2017. But while the cryptocurrency craze may turn out to be a bubble that could burst, the underlying blockchain technology will not. It has implications that go far beyond financial transactions: there is a raft of IoT applications that could be enabled by the secure transaction management blockchain enables.
But before we take a look at the potential opportunities, let’s first consider what blockchain is and what it does. Blockchain is an open decentralised digital ledger technology that creates a secure way for the exchange of data. A blockchain is a continuously growing list of records (‘blocks’), which are linked and secured using cryptography to create a chain. Each transaction between organisations consists of a block that holds the data from the current transaction, a timestamp and a hash linking to the previous block. Every transaction is documented and, once recorded, the data in any given block cannot be altered without all later blocks being altered. The result is an open electronic ledger which provides a secure, trusted, tamper-proof, definitive and verifiable record of who owns what and when.
A common misconception about blockchain is that it is highly energy-intensive. There are indeed some frightening statistics about – Bitcoin is estimated to consume enough energy in a year to power 11.3% of the UK’s energy use* – and that’s just one, albeit the most prevalent, of many cryptocurrencies around. Furthermore, much of the energy is created by unsustainable coal-fired plants in areas like China, resulting in an extreme carbon footprint for each Bitcoin transaction.
However, this energy usage only relates to the mining aspect of Bitcoin. Professor of Energy and the Built Environment at UCL David Shipworth, who is leading the PETRAS project into The Internet of Energy Things (P2P – IoET), explains: “It’s important to stress that you can’t generalise Bitcoin’s energy use to other blockchain applications. Bitcoin ‘mining’ is based on ‘proof of work,’ which requires miners to compete to solve ‘brute force’ cryptographic puzzles and therefore needs lots of computing power, hence the energy usage. Using a different consensus mechanism like ‘proof of stake’ or ‘proof of authority’ can cut energy use by over 1000x. And, a ‘consortium’ or ‘permissioned’ blockchain doesn’t need much energy to achieve consensus, comparable to the energy used to run a database structure.”
Because it is open, blockchain can simplify business operations and hence cut costs. Because no central body has to verify a transaction, it speeds up the process. There are seemingly no limits to the potential use cases, from managing confidential files and contracts to protecting intellectual property, speeding up back office financial settlement systems, validating the ownership of property, helping assess an applicant’s eligibility for insurance… Estonia’s national ID card is based on blockchain and enables citizens to order prescriptions, vote, apply for benefits and use a whole gamut of other services – some 3,000 in total for citizens and businesses.
At the heart of blockchain is the secure exchange of data and the validation of data across multiple stakeholders with distance no object. This makes it a compelling proposition for IoT applications in every sector imaginable. One potential use case is in healthcare IoT applications that share patient and clinical data, including that collected from wearables and other devices. The PETRAS P2P – IoET project is laying the groundwork for the use of blockchain technologies to authenticate and track energy units in the UK as we move towards local trading of energy. Manufacturers, carmakers and airlines can use blockchain to securely track and share the reams of performance and maintenance data collected from IoT devices on the factory floor and in cars and airplanes for IoT applications such as predictive maintenance and product improvement that feed into the 4th Industrial Revolution.
Asset tracking is a key IoT application, and one example of blockchain use would be in the logistics industry to track shipments and coordinate with customs. Perhaps the most progress has been made in ‘chain of custody’ applications, where blockchain can quickly and accurately track a product. Blockchain can be used to track virtually anything, and pretty much any product is a ‘thing’ in the IoT that can be tagged and tracked to deliver a variety of services. Tracking livestock and agricultural produce can improve consumer health, prevent disease and reduce food spoilage: in a trial of the technology in 2017, US retail giant Walmart tracked the shipping history of two mangos in two seconds – a process that took nearly a week using standard methods. Blockchain and IoT allow suppliers to guarantee to their consumers that their tuna has been sustainably fished, their coffee beans organically grown or their diamonds are from ethical sources. The ability to verify the provenance of anything from fine art to fine wines can help prevent fraud and counterfeiting and ensure the customer knows they are buying the real deal.
Although blockchain is not a new technology – Bitcoin launched in 2009 – it is not yet standardised and commercial IoT applications using blockchain are still thin on the ground. However, that is starting to change as more real world use cases emerge, alongside blockchain platforms that enable SMEs to develop and deliver services. Many global cloud service providers offer ‘blockchain-as-a-service’ while the Hyperledger open source blockchain platform now has over 180 members. It was announced by the Linux Foundation in late 2015 with a host of big tech and financial services companies on board, and its membership has broadened to encompass IoT, supply chain and manufacturing.
While there are commercial and technology hurdles to be overcome, the applications for blockchain in IoT are seemingly endless, and so too are the opportunities for UK SMEs and entrepreneurs.
You can learn more about blockchain and its applications in our case study The Block Exchange.