Blockchain in IoT

According to a research of Gartner company, the following will be the main trends of information technology development in 2018:

    1. Development of ecosystems of smartphones and wearable devices
    2. Cloud computing

    3. "Uberization" of everything, business on social networks and social platforms.
    4. The Artificial Intelligence (AI) on the basis of "Big Data" online.

    5. IoT/IIoT Internet of Things and the industrial Internet for the Industry 4.0: the integrated supply chain online, resource planning of the enterprises (ERP), operational and industrial digital assistants (digital twins).
    6. Blockchain: digital assets and "currencies", business interactions without trust of the parties (trustless interactions), "smart contracts" and the Decentralized Autonomous Organizations (DAO).

All these trends are interconnected and interdependent, and often happens that the advantage of one trend is shown only in the presence of another, as in case of Blockchain and IoT.

According to Gartner company, all advantages of artificial intelligence of AI (AI, Artificial Intelligence), Internet of Things (IoT/IIoT), and technologies of the distributed register of Blockchain will be most effective only at their synergy. It will lead to emergence of "intellectual entities" (Intelligent Entities), both hardware, and program which can interact among themselves.

Synergy of AI, IoT and Blockchain (source: Gartner)

Transition from centralization to decentralization

Until recently, the world was arranged by the principle of centralization of management, centralization of resource allocation, centralization of currency circulation, centralization of supervisory and regulating authorities. It concerns as well information technology field.

History knows many examples of inefficiency and fragility of the centralized model of state system. Case even not in "a corruption component" (though, and it is always present at any centralized power), and just in banal inefficiency of centralization in the conditions of long-term stable development. Centralization can be very effective at the solution of urgent, critical, short-term tasks, however, in the long-term plan, it is ineffective as it badly gives in to upgrade processes, requests for which go, as a rule, from below.

For example, Veliky Novgorod dynamically developed at 12-16 centuries because of the absence of centralized to the power and the system existing in it "controls and counterbalances" fulfilled for centuries. "Interlocker" Ivan the Terrible destroyed this system and Novgorod fell into decay.

The centralized Peter the Great's upgrade at 17-18 centuries at first very effectively was carried out, however quickly came to naught after her physical death of "the central body" – Peter. The Russian economy after government of "the effective manager" Peter I was included into a stage of crisis and technology backwardness, despite many progressive acts made at the end of the 18th century by Catherine II again. The subsequent board of new "interlocker" of Nicholas I was led to stagnation of economy and development of the country in general.

Rise in the Russian economy at the end of the 19th - the beginning of the 20th century, was in many respects caused by hostless system of territorial management as a result of Alexander II's reforms. The centralized Bolshevist power which won in 1917 broke the ridge to economic growth in Russia. Bolsheviks were again forced to enter decentralization of economy (New Economic Policy) as a measure for its stabilization.

Stable and high economic growth of the USA in many respects is explained by hostless system of management. Each state of the USA regarding legislative and executive power differs from the states of Europe little, in each of them own laws and, in fact, the independent, but mutually integrated economies work.

Even China which is often mistakenly perceived as centralization top in economic sense is very similar to the USA, especially after the beginning of reforms Deng Xiaoping who began them with decentralization of management of economy.

It is possible to find the mass of other examples in economy and history which I demonstrate inefficiency of centralization and, on the contrary, efficiency of decentralization.

Thus, on historical examples we see that the hostless system works well, and centralized – quickly becomes a development brake, despite short-term progress.

For IT siyo it is also fair. Let's give a number of examples.

Long time data centers were under construction, generally in the form of the big buildings containing a lot of engineering infrastructure (a power supply, cooling) expected a large number of the computing equipment. Was considered that it is so possible to reduce costs and to increase efficiency. However, the effect of "hospital for doctors" was shown here (but not for patients). What was convenient for IT engineers appeared not really conveniently for users. For example, the large data center needs to be reserved according to the scheme of disaster tolerance. So costs need to be multiplied by two. And even on three as the scheme of reservation "2 + 1" is often applied, two mutually-supporting data centers locally, and one reserve – far off. It leads to growth of costs and high cost of cloud services. And also to an overload of operator networks through which it is necessary "to drive" large volumes of traffic from the periphery to the center and vice versa.

However, the architecture of the configured data center of SDDC (Software Defined Distributed Data Center) consisting of many geographically distributed data centers which are united in one logical data center distributed program appeared. Such distributed data center reserves itself, and and is more effective, than the schemes DR (Disaster Recovery) for the centralized data centers.

In 2018 a trend of development of a telecom is the MEC technology (Mobile Edge Computing – for mobile networks, and MultiAccess Edge Computing – for convergent networks). This technology provides installation of a set of small modular and container data centers on network edge where the virtualized modules of management of base stations move. The architecture of the centralized cloud data centers of it does not allow to do, or, in any case, leads to high costs and technical difficulties.

As we see, the slogan "from centralization to decentralization" is fair in many areas.

For what the blockchain in IoT is necessary

The majority of cloud services, including the IoT applications, have the centralized control system, for example, a photohosting, cloud storage systems, monetary transactions (banking system) and many others.

The main obstacle of development of Internet of Things is centralization of cloud services. Huge data arrays, collected from sensors and IoT sensors, it is necessary to transfer, first, to the central cloud (an overload of transport networks of communication), secondly, to process in the centralized cloud (huge capacities of servers and storage systems are required), thirdly, it is necessary to transfer back received results (delays at management online).

Therefore, there was a new technology – Fog Computing (so-called "fog computing") which eliminates the specified defects.

Thus, decentralization of calculations – an inevitable trend of development of Internet of Things.

On the other hand – the blockchain is also based on the principle of decentralization. Therefore, he very organically fits into architecture of Internet of Things.

In the conditions of significant growth in IoT, there were several critical problems which need to be decided that the solutions IoT could be scaled without problems and to adapt to rapid growth of the connected things. Besides, security concerns and data protection are also rather sharp both concerning IoT devices, and concerning data which they collect. Here some of these problems:

1. Scaling: in the centralized cloud platforms of IoT very dense traffic of transmission of messages is observed. Here "bottleneck" in scaling of the solutions IoT for a large number of devices is.
2. Security: the large volume of the data collected from millions of devices sharply asks information security both for certain users, and for the enterprises and the organizations. As showed the happening^[1] DoS-attacks^[2] on IoT devices, a large number of the inexpensive devices connected to the Internet directly is the main problem of security in IoT.
3. Insufficient study of standards for data and standardization of data: the world goes to open standards of data, but there is no unified approach yet. There is a number of protocols, but there is no single platform for connection among themselves devices from all possible producers. Unit-to-unit compatibility is a main objective which needs to be solved, for universal distribution of the solutions IoT.
4. Cost: the solutions IoT as a rule provide a set of attached devices and the network equipment connecting them and also analytical platforms which process data of IoT. All this already costs quite much and the subsequent growth will only increase this cost.
5. Architecture: the centralized cloud platforms remain "bottleneck" in the complete solutions IoT. Any fault or an error in this place can influence all network.

In spite of the fact that according to different forecasts of growth of number of the attached devices IoT will reach 100 billion to 2025, 2022, or even by 2020^[3], the real number of IoT devices – approximately 10 times less^[4].

The IBM company^[5] selects the following scale-up problems of IoT:

• Not debugged business models
• Lack of functionality
• Lack of perspectives
• Lack of data protection
• High cost

IoT scale-up problems (Source: IBM)

According to IBM, the world of information technologies passes from the closed isolated models of interaction of devices, to the cloud centralized models working by the principle of confidence and authentication and further – to completely distributed models working by the principle of total absence of confidence where each transaction should be confirmed individually by community of the distributed nodes. In fact, it is also model a blockchain.

Transformation of models of interaction of devices (source: IBM)

Creation of completely decentralized IoT network, and its global scaling on condition of support of the protected, safe and not confidential (trustless) transactions will be the biggest problem not just. So the global network of IoT will consist of billions and tens of billions of interconnected (peer-to-peer) of devices, not all from which can be trusted, and many of them can be even harmful. So some model of confirmation and consensus is required. The blockchain just is also capable to provide such model.

The blockchain is capable to provide structure for transaction processing and coordination of the interacting devices where each device executes an own role, creating "The Internet of the Decentralized and Autonomous Things". The blockchain in such structure will execute a role of the universal digital register (universal digital ledger), for accomplishment of transactions of different types between devices, such as:

• Registration of new devices
• Authentication of remote users
• Interaction on electric power distribution between home devices
• Check of safety of vehicles
• And many other things

Blockchain as universal digital register (source: IBM)

How it works

The existing network of the distributed register of the Bitcoin cryptocurrency based on a blockchain already covers practically all planet, and has one thousand nodes (nodes) for check of validity of transactions (mining). It is the interconnected network (peer-to-peer) which allows software applications to exchange transactions among themselves using infrastructure the Internet and almost instantly. On statistical data the average speed of transactions of bitcoin in 55% of infrastructure of network is from 400 to 800 ms (without using the selected logical network FIBRE for fast exchange bitcoin transactions where their speed does not exceed 50 ms).

The blockchain, except financial transactions, has an opportunity to process and so-called "smart contracts" (smart contract), as which the following transaction types can act:

• Assignment of rights of property
• Automatic purpose (settlement) of financial derivatives
• Assignments on intellectual property
• Interbank interaction
• Collective online games
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For example, it is possible to consider transaction ("smart contract") when the owner of car A wants to sell it to the owner In and at the same time to re-register this car on the owner In, without the appeal to the centralized authorized organizations (GIBBD, insurance companies and other intermediaries). At the same time the following operations are performed:

• The car with cryptographic key (now this role is executed by VIN), has strictly coded public key which is activated when obtaining the message signed with the corresponding private key which is under authority of the owner A.
• The public key is automatically updated using the mechanism a blockchain, and the new owner In transfers to the owner A a certain quantity of bitcoins, also through a blockchain.
• Transaction (smart contract) in which there is an updating of a public key of the car (a re-registration on the owner V) and payment of cost of the car in bitcoins, is fixed in network of nodes a blockchain and entered in its register. Now all know that the car belongs to the owner In, and money is paid for it to the owner A.

It is not necessary to think that the above-stated process excludes the existing process of registration of the car in traffic police, or contradicts it. They can coexist with each other, and process of registration in traffic police will be significantly simplified if this organization accepts entry in the distributed register a blockchain as the basis for a car re-registration with And on In in own databases.

Examples of application

Together with Internet of Things, the concept of a blockchain paves the way for various innovations. For example, the technology of a blockchain can be used for studying of history of ownership and use of personal devices. It can be used for transactions and coordination of devices in a system. The technology of a blockchain leads to independence of IoT devices, writing in the distributed register data exchange between devices, applications and users, giving them the chance to perform transactions.

Many well-known companies and startups develop different cases of use of a blockchain together with IoT. One of main goals of cases is connection of home devices to a cloud and devices of power supply (house automation).

Some of these firms:

IBM

IBM – one of the very first companies which announced blockchain opportunities for Internet of Things. She created various partnership in this area. In 2015 it published the report on the research project under the name ADEPT (Autonomous Decentralized Peer-to-Peer Telemetry) for IoT using technology of a blockchain.

IBM also cooperates with the company Samsung regarding development of the trial proof-of-concept system for the next generation of Internet of Things. The ADEPT platform consists of three elements Etherium, Telehash^[6] and BitTorrent. By means of this platform, the device can automatically inform on problems in work and load updates of programs for their decision without intervention of the person. And, these devices also have a possibility of communication with nearby devices to optimize an expense of a charge of batteries and to increase energy efficiency.

Filament

The Filament company^[7] developed the touch device under the name TAP which gives the chance of deployment of a safe wireless multirange network within several seconds. These devices are intended for creation of a wireless network for Internet of Things on LoRa technology, and allow to collect data from sensors and IoT sensors on the scale of the big city, performing data transmission from a node on a node, before achievement of the end device where storage and data processing, or reduction in operations of the actuator on the end device IoT is performed.

Tap node of Filament company

The device can communicate directly with other TAR device at distance up to 15 km and can directly be connected to phone, the tablet or the computer. The blockchain allows devices of Filament company to perform interaction by means of smart contracts, with independent confidence of transactions. The company received more than 5 million dollars of investments from Bullpen Capital, Verizon Ventures and Samsung Ventures venture funds.

Blockchain of Things

The Blockchain of Things company developed the Catenis Enterprise IoT system for the enterprises, with full-meshed architecture of devices which excludes emergence of uniform points of failure and the directed (vector) attacks on devices^[8].

Catenis Enterprise IoT (Source: Blockchain of Things)

Outputs

It is impossible to call implementation of a blockchain in the field of IoT fast. The majority of technology qualities of a blockchain are still not too known, and integration into the cryptographic distributed registers represents technical difficulties so far. However, creation of numerous scientific and practical startups in this area, such as Blockchain of Things Catenis, suggests that application of a blockchain for Internet of Things expects fast development in the near future.

You look also the Blockchain and cryptocurrency

Notes