Blockchains and Smart Contracts for the IoT

Alexander Pirlya - 27 October 2018 - 0 comments

Blockchain in the Internet of things

The annual Gartner Top 10 Technology Trends report predicts the next big thing to dominate the headlines in the coming year. For the better half of the last decade, blockchain and IoT were a looming presence on Gartner’s chart as well as everyone else’s. With both concepts progressing considerably over the years, it looks like we are heading towards real-world application and some interesting combinations of the two. Smart contracts play a key role in this evolution step as they facilitate the interactions within the Internet of Things projects. Let’s figure out what the two  technologies do today, and how they are changing the world around us.

Blockchain and Smart Contracts

A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Basically, it’s a digitized set of terms that allows participants to achieve an agreement without involving any intermediaries. In case of dispute, there’s no need to pay a fee to a bank or a lawyer. The terms of a smart contract are written in computer code, so it can’t be misinterpreted.


The blockchain is already a disruptive technology, and the potential behind smart contracts is another facet to be excited about. Partly because of smart contract functionality, the value of Ethereum skyrocketed by 3,425% in 2017 (not a typo, folks). Per MarketsAndMarkets estimation, the blockchain industry will grow to $2.3 billion by 2021. At the same time, as devices connected to the IoT are predicted to reach 75 billion by 2025, smart contracts will play a crucial role in governing how ‘things’ work and connect across the board.


Internet of Things

The Internet of Things is a collection of billions of physical devices around the world that are not only connected to the internet, but also collect and share data. Pretty much any physical object, from a pill to a car, can become part of the IoT thanks to network coverage and relatively cheap price of outfitting devices with a processor. This adds a level of digital intelligence to devices, enabling them to communicate without a human being involved.


Single devices like lightbulbs, fitness trackers, or smart pills have sensors that capture and transmit data to enable some sort of control and functionality. On a big scale, smart cities projects are filling entire regions with sensors to help us understand and control the environment.


The term IoT is mainly used for devices that are not expected to have an internet connection (i.e. smart teapot, juicer, wine opener) and that can communicate with the network independently of human action. For this reason laptops, modern smartphones, or tablets aren’t generally considered IoT devices.


Potential usage of smart contracts & IoT

With smart contracts being extremely versatile in application, there are plenty of options for their use with both IoT and as a stand-alone technology. We described lots of smart contract applications in our previous blog posts, so here’s a quick snapshot of general use case.

  • Digital value exchange – one party sends currency to another via IoT devices
  • Smart rights and obligations – user buys a digital content stream
  • Basic smart contract – landlord automatically locks doors of a non-paying apartment guest
  • Autonomous business unit – a corporation unit/department issues own bonds, and all parties who participate can monitor interactions via a shared ledger
  • Autonomous organization – upon smart contract execution, autonomous trucks make P2P deliveries while automatically paying for road tolls, fuel, etc.

Commercial use cases of IoT

To understand the combo use cases of IoT and the blockchain, it’s important to know the primary utilization of IoT and how it feeds into the larger concept of augmentation with smart contracts.


Wearables. IoT is the key concept powering wearables – from fitness trackers to smartwatches. Elite athletes elevate their performance, health, and progression with technology, which in turn paves the way for IoT in devices in healthcare. Monitoring blood pressure and heart rate has become commonplace with smartwatches and even smartphones. More advanced systems automatically alert emergency personnel when they detect problematic readings – or even send paramedics when a critical case is about to occur. In the future, smart pills carry a promise of advanced diagnostics shared from inside the patient’s body.


Transportation. This is the most adopted and successful case across a single industry. Connected cars use IoT to get a single view of your vehicle starting from engine diagnostics to GPS data and infotainment systems.


Supply chain. Tracking items in warehouses, shipping depots and fleet in transit has been another staple of the IoT tech. More advanced sensors allow monitoring temperature, vibration and container openings for quality control and insurance purposes.


Smart homes. The trend of connecting all your home appliances to the internet has been gaining momentum for quite some time. Devices like that include TVs, refrigerators, lights, thermostats, security systems and much more. Hotels have pioneered using IoT for room keys long ago, and Hilton is now expanding that concept to allow guests to check into their rooms using smartphones – no cards required.


Cities. Once a science fiction and now a reality, certain cities embrace such pioneering technologies as smart lighting grids, more efficient transportation and parking systems, including smart traffic lights that adapt to traffic conditions in real time. Utility companies are moving past smart meters to leverage IoT to enable on-demand services like trash pickup.

IoT x Blockchain

Blockchain technology promises to be the missing link enabling P2P contractual behavior. It answers the challenge of scalability, time stamping, privacy, trust and reliability in a very consistent way. You can easily come up with several lists of applications where IoT and blockchain play a major role where it matters to record autonomous, machine-to-machine transactions.


Smart buildings and energy

Among the main building management innovations in recent years is energy saving via alternative energy sources. Leveraging IoT and microgrids in the scope of energy efficiency and facility optimization has become a staple of progressive organizations, and recording of autonomous, machine-to-machine transactions regarding electricity use is another blockchain application which shows how far some companies are willing to go in pursuit of efficiency. As energy becomes an increasingly digital, decentralized and IoT-enabled commodity, excess renewable energy could be sold and bought via the blockchain. This is already a reality, as certain countries like Germany produce renewables in excess – it’s time to monetize it in a safe and secure way.


Manufacturing and security

The combination of AI, IoT and blockchain matters when we talk about next-gen security systems and manufacturing safety. With the convergence of operational, manufacturing technologies and IoT/blockchain tech, decision-making will increasingly revolve around data. Data can be captured, analyzed, leveraged for either immediate purposes or within a broader ecosystem producing autonomous decisions based upon profound analysis.


In this context, the combination of IoT and blockchain will enable the Industry 4.0 and its end-to-end data approach. This includes the evolution of logistics and smart decisions. Things like next-generation security systems will cover all aspects of threat prevention starting with cybersecurity and going all the way down to the floor level of an industrial plant environment. Both are critical infrastructures with very different approaches to security – unless you add tech like robotics, AI systems, smart sensors and 360 degree ERP to the mix. All of this is already supported by IoT and blockchain – the next challenge will be to integrate it all into one smart ecosystem.


The future of blockchain applications in IoT is exceptionally bright. IDC estimates that by 2019 as much as 20 percent of IoT deployments will include blockchain technology. Having said that, there are still questions about security and longevity for both solutions. Want to discuss some of those concerns? Reach out to us anytime to discuss some of the broader challenges of IoT and blockchain application.

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