Will the Blockchain be the Enabler for the Machine-to-Machine Economy?

Internet of Things

The Internet of Things (IoT) is a vision being talked about for some years now. The idea consists of connected devices acting autonomously, communicating amongst themselves on a global scale, making our lives more comfortable. It indeed is an intriguing concept. However, so far this vision has failed to convert itself into reality. Interoperability issues, untrusted communication paths, data protection concerns, and cybersecurity issues have so far put a break onto the IoT developing its full potential. Blockchain technology and its decentralized nature are often mentioned as the savior of the original IoT vision.

Blockchain is much more than a decentralized ledger. In fact, a blockchain network is a highly secure data bus. Participants in a blockchain network can trust the data transmitted through the blockchain. Transaction signing allows verification of the source and the same cryptographic properties also ensure the integrity of the data. This means that we can be sure where data comes from and that it has not been modified in transit.

Furthermore, blockchains usually have built-in cryptocurrencies. This means they provide a way for participants to engage in economic transactions while also incentivizing participants. Thus, the blockchain should provide the ideal backbone for connected IoT devices to securely exchange data and interact autonomously in a machine-to-machine (M2M) economy. So where are these applications in the real world?

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Image Credit: jeferrb/Pixabay

Some Barriers

Like most things that sound too good to be true, there are some caveats. First of all, the IoT vision calls for billions of devices to stream data and interact continuously. Current blockchain technology cannot deal with this type of transaction throughput. Scalability at this level is one of the blockchain’s most significant challenges.

Somewhat related to this, but also slightly different, is the cost of emitting transactions on a blockchain. Transaction fees make many blockchains unsuitable for the type of continuous micropayments that are typical in M2M communication.

 

However, let’s not trash the idea of blockchain-based IoT just yet. An intensive amount of research focuses on making high-throughput trusted decentralized data buses a reality.  Scalability solutions, ranging from second layers that work at a higher level and only use the blockchain as a settlement layers to high transaction throughput consensus optimizations are being trialed on test networks and are slowly making it into production.

Specialized IoT-focused networks are also in development. IOTA is an ambitious project replacing the blockchain data structure with a directed acyclic graph, doing away with blocks and having no transaction fees. Whether this will work in praxis remains to be seen. Currently, IOTA’s security relies on a centralized coordinator which is supposed to be switched off at some stage.

Skynet is a recently announced project providing an end-to-end solution that includes not only a highly-optimized and scalable blockchain network, but also specific hardware, which has on-chip support for cryptography and artificial intelligence applications.

As with all new technology the IoT and blockchain integration has to cope with unrealistic expectation. Some healthy realism has replaced initial hype. Nevertheless, emerging platforms make us look forward to a promising future of secure and efficient M2M interconnectivity.

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Dr. Stefan Beyer
Dr. Stefan Beyer is editor-at-large at BlockTelegraph and a Blockchain consultant and smart contract auditor. He graduated from the University of Manchester in 2001 with a degree in Computer Science and obtained a Ph.D. in 2004 from the same university with the title “Dynamic Configuration of Embedded Operating Systems”. Since then he has worked in computer science research in distributed systems, fault tolerance, ubiquitous computing and cyber security. He is currently working as head of research and development for a medium-sized cyber security company in Spain.

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