About fifteen years ago, the number of devices connected to the Internet exceeded the number of Internet users. It was a turning point in the history of humanity - the Internet of people turned into the Internet of things. In this post, I want to look at the main problems of this phenomenon, as well as the opportunities to solve them using blockchain technology.

The concept of IoT was formed back in the 20th century, but few people could imagine how difficult it would be to integrate smart devices into everyday life. As capabilities of gadgets, machines, and other equipment increase, their functional requirements also increase. We want them to independently create networks, exchange information, and coordinate actions with users.

For example, when ordering clothes in an online store, we start a complex process that involves a fashion designer, a supplier of materials, a logistics company, a bank, and dozens of other participants. If each of them could receive information about the purchase in real-time, then they could optimize their work and provide the consumer with better goods and services. 

Unfortunately, the formation of such networks is full of problems. The inconsistency of the quality and availability of information is one of such problems. Devices are manufactured by different vendors, using different software and protocols. In addition, the Internet of Things is still very vulnerable, and network participants may have different intentions.

Many experts believe that blockchain technology can be the solution to the problem. A decentralized network could establish the validation for incoming information, regulate access, and provide autonomous operation through smart contracts. At the same time, blockchain technology must meet several technical and economic requirements, as well as consider the legal context.

Technical requirements

The information generated by the Internet of Things is outside the blockchain - it is ambiguous and non-deterministic. This presents several new requirements for blockchain technology.

Requirement #1: No anonymity.

Most blockchain interactions are anonymous. However, many people still use the best VPN services when dealing with blockchain. But in regards to IoT the origin of information, including the identity and reputation of the source, is critical.

For example, blockchain can transfer the rights to a piece of information that claims a product has been sent, but it will not be able to confirm the accuracy of the GPS data. IoT requires some form of verification of the identity of participants so that they can trust the information entered.

Some believe that the solution lies in the creation of a special certification system for devices. Such a hybrid blockchain model will allow participants to identify themselves without restricting their rights.

Requirement #2: Controlled access to information.

One of the main advantages of blockchain technology is the transparency of all transactions. Any member of the network can check them. At the same time, this creates a potential vulnerability for disclosure of confidential information.

Requirement #3: Processing and storing information.

The growth of the Internet of Things creates the problem of redundant computation and storage of information. Each participant in the network needs to process all transactions, while most smart devices have extremely limited memory and processing power. Thus, blockchain will have to recognize devices and their capabilities, as well as use a variety of consensus mechanisms that do not require significant computing power.

Requirement #4: Discontinuous connection.

Until now, the main aspect of IoT has been continuous connectivity, but now we see a trend towards finding trade-offs between connectivity, battery life, infrastructure costs, transmission costs, etc. This is quite logical as many devices participating in the network receive and send data not often and in small quantities.

Requirement #5: Reversibility of actions.

The immutability of blockchain can be very convenient when transferring property rights and similar operations. However, when it comes to the IoT, things become complicated. Malfunctioning devices or hacker attacks can have negative consequences. For example, a faulty RFID reader could report the existence of a shipment that did not actually arrive at the warehouse and initiate an incorrect transfer of funds.

This problem is typical not only for IoT - immutability can play a cruel joke when personal data, illegal content (e.g. child pornography), and other things enter blockchain.

Economic requirements

The introduction of blockchain into the IoT world is hampered not only by technical problems but also by many economic obstacles. Most large enterprises are accustomed to centralized systems that have stood the test of time. Also, they have no economically justified reasons for decentralization.

Despite the obvious advantages of blockchain (e.g. in micro-transactions), its implementation in the IoT will be slow, at least until a clear and convincing business model emerges.

About the author: Alex Vakulov, a cybersecurity researcher with over 20 years of experience in virus analysis. Author of numerous security-related publications.