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Blockchain for IoT extends beyond ensuring security

Put the words 'blockchain' and 'IoT' together and most people think of security for IoT, but blockchain for IoT can do much more than that.

Blockchain, the technology that made Bitcoin possible, has been getting a lot of attention in the IoT world, often because of its role in security. However, experts and practitioners said the potential of blockchain for IoT is deeper and broader than just keeping the bad guys out.

Ian Hughes, analyst of IoT at 451 Research, sees a role for blockchain that goes deeper, enabling authentication of devices -- especially when they are connected infrequently, as the case might be with, say, agricultural systems that may shut down for large parts of the year. Having a blockchain distributed ledger can provide a tidy way to account for and recognize the return of long-lost network participants as trusted members. Similarly, Hughes explained, blockchain for IoT can make micro-transactions for various kinds of billing possible.

Equally upbeat, John Wilmes, director of IoT projects at TM Forum, a member association for digital business based in Morristown, N.J., said that the organization's communities have identified a number of areas where blockchain can support the growth and development of IoT, including fraud management, identity management, authentication, authorization, settlements and audits.

Wilmes explained that the sheer scale of IoT creates management problems that have never been faced with existing systems. "Automation of many, if not all, aspects of operations will be essential, and blockchain is well-positioned to fill critical roles," he said. For example, many IoT use cases involve the rapid establishment of relationships between multiple business entities. Those connections must include legal and financial ramifications and often service-level agreements (SLAs). Blockchain can provide the foundation for a trust-based relationship by preventing fraud and preserving identity, he said. Furthermore, Wilmes added, by using smart contracts over the blockchain, triggered by trusted sources that provide objective information, "participants in a business relationship or ecosystem can be assured that SLAs are continuously monitored and that rewards and penalties are immediately and fairly applied."

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Blockchain for IoT gets real

A number of companies are exploring blockchain for IoT, and some are even applying it in a range of roles.

At Factom, a blockchain-as-a-service company based in Austin, Texas, Abhi Dobhal, vice president of business development, said the primary use cases for blockchain for IoT would be device identity and data integrity. Factom creates blockchain software to help organizations secure data. Described by the company as an open source project, for a "small fee" Factom allows users to write data to its ledger from which it cannot be erased. One of the special features about Factom is that it allows users to chain together important data and ignore other data; this means data can be "proved" efficiently without invoking all data.

Burlington, Mass.-based data protection company Acronis introduced what it claims is a first-to-market product providing blockchain capabilities to consumers through its Acronis Notary and Acronis ASign. Acronis Notary uses blockchain to ensure backed-up data is authentic and unchanged, which is particularly relevant for documents such as wills, agreements and medical records. Acronis ASign lets one or more individuals fix and certify an agreement -- essentially an electronic handshake -- with secure and auditable digital signatures. Because of the characteristics of blockchain, this eliminates the need for a separate certifying authority.

The problem of counterfeit products is on the mind of Dan Harple, CEO of Context Labs, a Cambridge, Mass. -based company that has developed an enterprise blockchain platform for data management and security. He said his company is focused on the "internet of everything" (IoE) and aims to apply blockchain to combat piracy, improve supply chain efficiency, protect brands and develop closer customer relationships. Earlier this year Dan co-founded the Open Music Initiative as an industry-wide effort to establish open source protocols that assure proper compensation for music creators, performers and rights holders, using distributed ledger technology.

Context Labs' platform integrates secure distributed and shared ledgers, network graph analytics and visualizations, data interoperability, trusted identity management and micro-payment enablement. The IoE focus comes from Harple's conviction that interconnectivity must involve objects and people, too. "With blockchain we see an ability to track the connections between people, places and things, allowing all of them to come together within blockchain, almost like a spinal column," he added.

Meanwhile, Siemens and the New York-based startup LO3 Energy announced a collaboration in the field of microgrids -- local electrical systems designed to serve as more manageable and energy-efficient "chunks" of the existing electrical distribution system. Their goal is to jointly develop microgrids that enable local energy trading based on blockchain technology. LO3 Energy is currently supported by Siemens Digital Grid and next47 units in developing a blockchain-based microgrid in the New York borough of Brooklyn -- the first of its kind in the world.

Future outlook of blockchain for IoT

Martha Bennett, an analyst at Forrester Research, said all of the activity around blockchain for IoT is an indication of its enormous potential to transform the connected world. However, she warned, it remains a new and immature technology. For instance, Bennett said the only truly successful blockchain application in use today, Bitcoin, operates on an overhead-rich business model that is not sustainable for most use cases. It simply costs too much. She said enthusiasts "want the best of both worlds," namely an incorruptible, mathematical system that is almost cost free.

"Yes, there are projects that have gone beyond proof of concept, but they are with very limited number of parties -- sometimes only two," Bennett noted. "That's not to say they don't have value, but we won't really learn about blockchain until there is more experience."

Next Steps

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