In the last decade, the ‘Big Four’ technologies have emerged with the promise to revolutionize the world as we know it by reshaping the global economy – Big Data, AI, Blockchain, and IoT. Although IoT has faced many adoption challenges, which by the way, still exist, it was among the first to prove its value with the successful solutions and implementations ranging from healthcare, manducating, agriculture, and smart home devices, to smart cities.
On the other hand, there is blockchain – technology that is likely to change all aspects of digital business. Blockchain technology has been attracting the attention of leading corporations since 2009 when bitcoin had made its public debut. This form of currency has become increasingly mainstream over the past few years, with more and more organizations and companies supporting this payment method. While the story about bitcoin is undoubtedly captivating, what may end up even more revolutionary is the blockchain technology that the currency has helped to popularize.
The merger of blockchain and IoT has ducked out as one of the most promising use cases for blockchain. The number of IoT devices is growing exponentially by the minute, and it’s estimated that by 2020, there will be 50B IoT connected devices. However, managing all of these devices could pose a great challenge, and that’s where blockchain technology kicks in.
Many business leaders in medicine, finance, and other industries have already acknowledged that blockchain could be a potential game changer. Before we see what the benefits of the merging trending duo are, let’s go over some of the basics about bitcoin, and blockchain.
Blockchain and Bitcoin
Bitcoin boasts of being a peer-to-peer cryptocurrency, meaning that this form of payment is decentralized and it isn’t controlled by any government or authority. Instead, the bitcoin community itself manages the transactions.
Governments back national currencies, and the central bank controls the supply. Such a bank has the power to either increase or reduces the money supply, thus changing the overall value of the currency itself. These banks can also set interest rates that can impact national currencies significantly.
The situation is different with bitcoin as it doesn’t submit to any authority. Instead, the whole bitcoin community monitors transactions, controls the supply, and maintains the currency itself. The blockchain technology plays an integral role in this collaborative management.
Basically, every bitcoin transaction is tracked by a ‘public ledger’. Ledger is a principal virtual book or a computer file that records economic transactions. As you can imagine, the ledger that tracks bitcoin transactions is quite massive and it only keeps growing. The blockchain maintains this financial ledger by allowing people to expand and add ‘blocks’ to the chain constantly.
Bitcoin ‘miners’ approve new transactions and record them on the blockchain, and in exchange, they are rewarded with newly created bitcoins. Every transaction needs to be processed and validated by miners before they are added to the ledger. Although the public ledger is anonymous, it is also – public. That means that anyone can access transaction records, while the identities of the people carrying out the transactions remain hidden.
Blockchain and IoT
The blockchain is both brilliant and simple. Just imagine how many bitcoin transactions are being conducted, and how difficult it is to track those transactions. In fact, over 400,000 transactions are being processed every single day. If we were talking about regular transactions, it would take a large bank, or central monetary authority to keep tabs on all of these transactions. In the bitcoin community, there is no centralized authority to monitor transactions, and no centralized processing center either. Nevertheless, the bitcoin community manages to process and document almost half a million transactions early.
The blockchain enables distributed processing by providing incentives to miners for bringing their processing power to the network. Distributed computing powered by the blockchain technology could prove essential in the future, and with the blockchain, it’s also efficient. As IoT proliferates, more data will be pilling up from countless sources. With IoT solutions up and running, that processing power will be distributed across a vast number of devices. At times, a ‘portion’ of that processing power will be on standby and might go unused, while at other times, the network will lack the processing power to perform necessary actions.
For example, take your personal computer, smartphones, and other smart devices. When we are not actively using these devices, almost all of their processing power becomes idle – a waster resource when sitting unused. On the other hand, in some situations you’ll find yourself trying to perform something processing-intensive – for example, creating a code for a software program you’re developing and might find that you lack the processing power to get the job done.
With the blockchain technology integrated into the network, it becomes easier to distribute processing power to where it is needed. Such flexible processing could come in especially handy for companies. Going back to IoT, the blockchain technology could be used for processing and tracking the vast amount of data that will be pouring in from everywhere. A blockchain could be optimized with a ledger for the data. Whenever the processing power is needed, end-users that support blockchain could redirect their processing power towards maintaining the network and in exchange, they would receive some type of reward.
Most IoT devices are equipped with processors. Even the smallest devices, like security cameras, employ multiple chips to capture, process, compress and store images and videos. However, processing capabilities are insufficient to handle the need of every device, all of the time. That’s where blockchain comes in useful as IoT processing power could potentially get a massive boost, when needed.