Blockchain: The Glue That Binds the Internet of Things
One of the hottest emerging technology topics surrounds the Internet of Things (IoT), or as some have characterized it, the Internet of Everything. A McKinsey Global Institute report estimates that by 2025, the global financial impact of the IoT could reach between $3.9 trillion to $11.1 trillion a year.
Every industry will potentially benefit from this technology that relies on small sensors communicating among themselves and providing data that will drive exceptionally huge big data.
Smart sensors integrated into buildings could monitor and collectively control environmental conditions. Miniature medical sensors could keep healthcare workers informed and alerted about patients in hospitals or as they go about their normal activities. Manufacturing processes could self-control production providing instantaneous correction as sensors collaborate throughout the production of a product. Our self-driving cars will communicate with other vehicles and the roadway, navigating safe and quick transit to a desired location while providing city-wide information about traffic patterns to city planners.
IoT has the potential to dramatically change how things are done while significantly enhancing the quality of life for everyone. Our small experiments with home automation and building control are nothing compared to the automation we will see integrated into daily life and work.
The concept behind the IoT seems relatively simple. Multitudes of minuscule sensors will collect specific information, share information with neighboring devices, and communicate data to a repository where control can be coordinated or information massaged, giving never-before-seen insights. While this description is the basis for the IoT, it is not clear how devices will communicate and coordinate. It is not clear how innovative thinking could evolve new uses and business models around IoT that will result in significant levels of market disruption.
The most promising intra-device communication and data record among devices could well be blockchain. Blockchain is essentially a secure, distributed, peer-to-peer implementation of a ledger system that is most often associated with bitcoin monetary transactions.
The truth is that the blockchain ledger can contain any information, including heath records, identity, and non-financial transactions. A really interesting use is developing smart contracts using blockchain as the organizing infrastructure. Smart contracts could bind individuals, or for IoT, sensors that share information, and when a certain condition is met that is a metric included in the e-contract, a pre-programmed response is initiated. This could be a payment in the case of business-to-business relationships.
Between devices, smart e-contracts could be associated with carbon credits, power creation and consumption, or any number of other device-to-device activities. At an even higher level of organization, IoT sensors could be implemented within a Distributed Autonomous Organization (DAO) to achieve some end result but governed completely within the smart contract that established the DAO.
The genius of the IoT is not that there are multitudes of small sensors creating terabytes of data, but that there is a system of devices sharing information in an intelligent and controlled manner that achieve a result within a self-governing structure. The thing that binds these sensors, providing both governing and the ability to act intelligently, will come from the blockchain.