Bitcoin was one of the most hotly debated topics in tech in 2017. It has been around for nearly a decade now, having come into existence back in 2009. Since then, the cryptocurrency has enjoyed strong support from a loyal and dedicated user base. Over the past few years, bitcoin has become increasingly mainstream, with more companies and organizations accepting it as payment.
Yet, while bitcoin itself certainly is interesting, what may end up being even more revolutionary is the blockchain technology that the currency helped to popularize. Blockchain development could have a wide range of implications for the growing Internet-of-Things, payment processing, security, and other fields.
Blockchain technology could prove especially vital as the Internet-of-Things continues to proliferate. A growing number of devices are now being connected to the Internet, allowing for remote control, increased data gathering, and various other activities. However, actually managing all of these IoT devices and the data they generate is a challenge. Blockchain could provide a solution.
Many business leaders in finance, medicine, and other industries have already cited blockchain as a potential game changer. So what is blockchain anyways, and what does it have to do with IoT? It helps to first understand some basics about bitcoin.
Bitcoin and the Blockchain
Bitcoin hails itself as a peer-to-peer cryptocurrency. When we say “peer-to-peer”, what we’re really saying is that bitcoin is decentralized and not controlled by any government or authority. Instead, the community itself manages the currency.
A national currency is backed by governments and supply is controlled by a central bank. Such a bank can either reduce or increase the money supply, thus affecting the overall value of the currency itself. Central banks can also set interest rates and make other decisions that have broad impacts on national currencies.
With bitcoin, there is no central authority. Instead, the community as a whole controls the supply of bitcoin, monitors transactions, and otherwise maintains the currency itself. The blockchain plays a vital role in this community-driven management.
Basically, there is a “public ledger” that tracks every bitcoin transaction ever conducted. As you can imagine, this ledger is quite massive and is also constantly growing. The blockchain maintains this budget ledger by allowing the community to expand and confirm additions of “blocks” to the chain.
“Miners” mine bitcoin blocks, which are blocks of transactions. In exchange, these miners are rewarded with newly minted bitcoins. This means the miners are driven by incentives to mine new bitcoins. Every transaction is confirmed by the miners, and only when transactions are verified are they added to the ledger. While the public ledger is anonymous, it’s also “public.” Anyone can see any transaction, although the identities of the people carrying out the transactions are hidden.
Blockchain IoT: The Blockchain in the Wild
The blockchain is both simple and brilliant. Think of how many transactions are now occurring with bitcoin and how difficult it is to track and process those transactions. In fact, over 400,000 transactions are currently conducted per day. It would take a large bank, credit processing company, or central monetary authority to process and track all of these transactions. Yet there is no centralized authority like this in bitcoin, and no centralized processing center either. Regardless, the community is able to process and document nearly a half million transactions daily.
The blockchain allows for distributed processing by rewarding miners for bringing their processing power to bear. Distributed processing could prove vital, and with the blockchain it’s also efficient. As the Internet of Things grows, more data will be pouring in from more sources. With IoT, processing power will also be distributed across countless devices. At times, processing power might go unused. At other times, you might find yourself lacking enough processing power to do what you want.
Think about your personal computer, smartphone, and other smart devices. When you’re not actively using these devices, most if not all of their processing power is sitting unused. It becomes a wasted resource when not put to use. Yet if you find yourself trying to do something processing-intensive, say compiling code for a software program you’re building, you might find that you lack the resources to get the job done.
With the blockchain technology, it’s easier to distribute processing power to where it is needed. Going back to bitcoin, there are actually mining guilds that people can join with their personal computers. Once you join one of these mining groups, they can use your computer’s processing power in coordination with other PCs to mine bitcoin. So instead of shutting down your PC for the night, you might loan it to a mining guild so they can mine bitcoin.
For companies, such flexible processing could come in especially handy. With the Internet-of-Things, the blockchain technology could be put to work tracking and processing the massive flow of data that will be pouring in. A blockchain could be set up with a ledger for the data. When processing power is needed, those parties that support the blockchain, potentially meaning end-users, could direct their processing power towards maintaining the blockchain in exchange for some type of reward.
Many IoT devices are being equipped with processors. Even small devices, like security cameras, are being equipped with embedded chips. However, on-board processing capabilities may not be enough to handle every need, all of the time. With blockchain, IoT processing power could potentially be redistributed when needed.
Blockchain Could Be Huge For IoT Security
The Internet has been an amazing and powerful tool for sharing information, spreading knowledge, and otherwise enabling fast, reliable communication. However, the Internet comes with its own risks, and especially security concerns – email scams, viruses, hacked accounts, you name it.
As the Internet-of-things grows, so too will the security risks. Soon, many of our devices will be enabled with sensors, such as cameras and microphones. What if unscrupulous parties were able to hack these devices to spy on you, steal personal information, or otherwise harm you? This makes security is a major challenge for IoT.
Many security experts believe that blockchain can be used as a security solution. Blockchains are excellent for tracking and verifying data. Equipped with various encryption methods and verification keys, blockchains can be made immensely secure. Distributing processing and multi-step verification makes blockchains difficult to hack. So could blockchain methods be put to work to verify identities and determine control? Security experts believe so.
As the Internet-of-Things grows, verifying data, transactions, access, control, and various other aspects will become vital. For companies selling IoT devices, that might mean setting up huge servers and advanced authentication and security systems. However, doing so can get expensive and unwieldy. Further, the more data is gathered in one place, the higher the risks of security breaches. Consider the massive Equifax breach and other notorious cases.
The solution to this would be to set up blockchain systems that can gather data, verify access, and process transactions, among other things. Security experts are just starting to explore the full potential for blockchain. So far, however, the Internet security industry is upbeat, with many thought-leaders wondering if blockchain is the next big thing.
There are risks and challenges, though. For example, blockchain works somewhat like a voting mechanism. A bunch of computers process information, compare, and then compile the data. In theory, if a hacker can gain control of at least 51% of the processing power, they could essentially hijack the entire blockchain. With bitcoin, for example, if someone secured 51%, they could simply steal all the bitcoins.
The bitcoin community solves this challenge by distributing processing power to a much, much larger number of users. It would be difficult, near impossible in fact, for hackers to secure 51% of the processing power that currently runs bitcoin. However, what about smaller networks and blockchains?
Let’s say, a community sets up a blockchain to process various banking transactions. The blockchain is then distributed among users. If there are only a few hundred people processing the blockchain, it might be possible for hackers to gain control over it. Security experts are currently working out the solutions, but the risk of 51% attacks remains high and real.
Conclusion: Blockchain & IoT Will Likely Merge
Blockchain IoT applications are being fully explored just now. Blockchain is still a relatively new method and major companies are just starting to understand and invest in blockchain. Major companies, including Google, Goldman Sachs, and various venture capital firms, are already investing heavily in the blockchain technology.
Exact blockchain applications for IoT security and distributed processing are being worked out. Yet the growth of the Internet-of-Things and blockchain’s ability to handle huge amounts of data and to flexibly allocate processing power to where it’s needed makes the two concepts a perfect fit for each other. In the future, blockchain IoT applications may be both common and revolutionary.