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How can Blockchain Technology benefit IoT projects? By Joseph Pindar, Director for Strategy, CTO Office, at Gemalto.

Since the technology first emerged in 2008, blockchain has quickly become synonymous with the digital currency bitcoin and the financial sector. Blockchain’s association with bitcoin stems from its role as a foundational concept in the original bitcoin paper authored by Satoshi Nakamoto. In his paper, Nakamoto proposed a peer-to-peer electronic payment system, and the blockchain is used to secure bitcoin transactions without the need for a centralised governing body or trusted intermediary, such as the Monetary Authority of Singapore (MAS), or a bank.

But blockchain technology has potential outside the realms of the financial services industry. In the simplest terms, blockchain is a distributed database that provides a secure, yet transparent way to make, record, and verify any type of transaction – it can be financial or data-based. It is simply any kind of transfer between two parties that typically requires a third party for authentication and to broker the exchange.

For example, Singapore is experimenting with blockchain technology for education certificates. In 2017, the local Ngee Ann Polytechnic (NP) has partnered the United Overseas Bank’s (UOB) blockchain startup – Attores – to deploy the school’s Diploma Plus Certificates directly to the students’ LinkedIn profiles. This move helps prospective employers or university admission offices validate the authenticity of the certificates easily and securely. The plan is to extend this to all NP’s Diploma Certificates, making them accessible via a blockchain browser online.

Blockchain Ushers IoT Potential

But there is no use case where this will have such game-changing impact as with the Internet of Things (IoT), as blockchain creates an easier way for devices to verify one another. Like so many other transaction types, financial, the Public Key Infrastructure (PKI) or otherwise, IoT communication has historically required a trusted third party.

Blockchain changes that dynamic, distributing the trust model, recording the transaction on a shared ledger, cutting out the central authority and making the transaction cheaper and faster.

Think of a connected car ‘speaking’ with smart parking meters to help you park faster, or to local coffee shops to figure out which one makes the most sense for your route to work. That smart car might even place the order for you.

In the future, we may also see IoT devices at home, such as heating systems or entertainment systems using a private blockchain to make decisions. More companies may begin to use private blockchains to work with their partners and suppliers. These could provide selective data to a public blockchain that is used to collect economic data (supply chain usage) and consumer data (entertainment systems).

Creating these types of closed-loop systems that give our lives new conveniences or make cities more livable will require public and private IoT networks to trust in one another’s networks and devices.

Blockchain Strengthens IoT Security

This new design will also benefit the security of IoT, since it eliminates the restrictions imposed by the traditional central authority trust model which have made IoT vulnerable – most notably the Mirai-style botnets, which facilitated hackers in taking over thousands of IoT devices only protected with default passwords and using them to launch distributed denial-of-service attacks.

In providing a distributed trust model, blockchain removes the ‘single point of failure’, in turn enabling device networks to protect themselves in other ways, such as allowing the nodes within a given network to quarantine any nodes that start behaving unusually.

Public Versus Private Blockchain

It is important to realise, however, that blockchain comes in two varieties – public and private. The main difference is that data on a public blockchain can be accessed by anyone, while a private blockchain is closed, and individuals or businesses need permission to see the data. Public blockchain is commonly associated with cryptocurrencies, while private blockchains are utilised by businesses due to their control over access to the data.

One of the main characteristics of public blockchain is that it is easily accessible, and can be anonymous. It enables individuals to come together, conduct transactions, and disperse again – without ever knowing the identity of each counterparty. For certain transactions, anonymity and accessibility will continue to be attractive qualities. One common example would be the process of reporting criminals to law enforcement, through services such as Crimestoppers in the US. Another interesting example could be high-value art auctions where bidders often refrain to have their identities known but the auction house knows the purchase is made and the buyer.

Despite this, the vast majority of future blockchains are likely to be private. For most business use cases and applications, it is necessary to know the individuals involved. This means that blockchains need to be ‘permissioned’, and a central authority – or committee – needs to run an identity and authentication service to verify the users.

But It Is Still A Work In Progress

However, among the various blockchain networks in development, none have been rigorously vetted from a security standpoint. In 2018, we will see more blockchain networks going through extensive security testing. We will also see continued efforts to standardise how these networks communicate with one another.

There are a number of companies currently working together to try to make this happen. A consortium of them recently met in Berkeley and have launched a collaborative effort to create a shared blockchain-based IoT protocol. Companies involved represent fields ranging from security to banking, logistics supply chains, energy, pharmaceuticals, and health records.

All of these companies share the belief that blockchain has the power to give us new and exciting IoT use cases, but also that we need to create a common protocol to make it easier for IoT to fully realise the benefits of the blockchain.

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