Blockchain and IoT: Technologies Paired to Ensure Valid and Secure Transactions

The Internet of Things (IoT) offers a level of convenience which is set to revolutionize the world, for consumers and businesses alike. Yet, in terms of security and operability, this technology is still far from perfect.

Although a great deal of research is still required, it is widely believed that IoT’s flawed elements can be accounted for with blockchain. IoT devices often lack the proper memory and computing power necessary to run breach-proof security protocols. Blockchain provides these features through the use of a decentralized ledger and encrypted data. Such features of blockchain IoT security aid in providing a balance to current IoT security protocols, especially when dealing with the storage of data and payment procedures.

The Benefits of Applying Blockchain to IoT

Many IoT devices are made rather small to be more user-friendly and convenient think of a smartwatch or a thermo sensor. Due to this, however, they often lack memory as well as proper processing power, which makes it difficult to ensure the appropriate security level for the data these devices are capable of tracking.

Interaction with these devices is often somewhat limited, therefore, users may be totally unaware if their device has been accessed from an outside source. Meanwhile, these devices may track health, financial data, and other potentially useful personal details for cyber criminals. This signifies the need for greater security measures implemented into IoT devices.

Integrating blockchain technology with IoT devices, blockchain IoT companies create solutions that track data in a more secure way. Using an unmodifiable distributed digital ledger, blockchain can provide a decentralized system for IoT devices, making transactions, financial or not, much more insured against hacking.

The Perks of Decentralized Irreversible Transaction History

In a business-to-business setting, blockchain can improve security as well as transparency in relation to IoT devices and services. When integrated with a private blockchain, such IoT device data will be accessible to selected parties only, granting certain members a series of permissions. When pairing IoT with blockchain to conduct transactions between businesses, a distributed digital ledger would bring all the parties together.

Blockchain improves the security aspects in two ways. It provides an enhanced, consensus-based security mechanism compared to current IoT security protection measures. This makes gaining access to information through illegal channels much more difficult, if not impossible altogether. Secondly, the use of a distributed ledger gives everyone in the chain an unmodifiable list of data transactions conducted through the entire history of the chain. This would allow businesses to keep a truly decentralized and legitimate account of payments made between businesses, thereby ensuring trust between the parties.

Improved Transaction Automation through Smart Contracts

Ethereum, released in 2015, is the product of Vitalik Buterin and a small team of developers that first introduced the concept of smart contracts. According to the report conducted by the University of Malaga, In general terms, a smart contract refers to the computer protocols or programs that allow a contract to be automatically executed/enforced taking into account a set of predefined conditions.

Smart contracts are made up of code kept on a blockchain and function based on the pre-set rules that activate the contract once all the requirements are satisfied by the parties. Smart contracts can be implemented into IoT services to automate certain purchases. Say, a necessary part in a vehicle has aged and soon needs to be replaced. In order for the smart contract to be initiated, the part needs to reach a certain amount of shelf life or undergo some form of stress resulting in its inability to continue to operate. Once this condition set by the smart contract is met, the IoT device can automate the ordering of a necessary part.

Although various IoT devices already have the ability to automate services, referring again to the University of Malaga report, Smart contracts introduce a set of advantages such as cost reduction, speed, precision, efficiency, and transparency that have fostered the appearance of many new applications in a wide variety of areas. Operating over blockchain, smart contracts also add an extra layer of security when conducting automated tasks.

Security and Convenience of IoT with Blockchain

It’s estimated that at least 50 billion IoT connected devices will be there by 2020. At the moment, data concerning these devices is generally kept in centralized databases. This establishes the major problem of a single point of failure. Breaking through the security protocols set by the establishments hoarding this information could result in a severe data breach.

Not only are the current methods of data management and transaction history in relation to IoT lacking in security, but they are also unsustainable. The increase in IoT devices is happening so quickly that it will be immensely difficult to track all the data associated with these devices. Blockchain provides a suitable system for managing information by spreading it through various nodes, and in doing so addresses the single point of failure problem.

The Future of IoT and Blockchain

These two emerging technologies work hand in hand to simplify transactions while ensuring security. Blockchain, designed for the transaction of cryptocurrencies, can now be paired with IoT to improve data and monetary transactions to make up for IoT’s security flaws.

As IoT devices become more common, blockchain is the solution to the problems concerning scalability and the increasing volume of transactions over IoT networks. Ethereum, with its use of smart contracts, at the moment seems to be the platform best suited for the cause, yet other developments are being made throughout the blockchain industry.

For example, HyperLedger, a product of the Linux Foundation, has made substantial strides in developing blockchain technology, which is sure to come in handy with the further development of IoT. Nonetheless, it is clear that IoT devices are continuing to increase, and blockchain technology holds the keys necessary to ensure the success of this newly valuable technology.