Can IoT and Blockchain applications be the ultimate solution to trust issues in the digital economy?


In Blog

With the growing role of digital transactions and personal data in our daily lives, it’s no wonder that the global economy has been recently caught in the crossfire of privacy concerns, digital vulnerabilities, and trust issues. As a result, the road ahead for cutting-edge technologies, including IoT, currently looks like a narrow causeway across a treacherous sea of sensitive data. New capabilities for transactions run by intelligent IoT-powered devices introduce new loopholes and complexities into business operations. For the past few years, we’ve seen that security remains a huge concern for data-driven digital transformation across all prominent industries, such as manufacturing, healthcare, aerospace, finance, etc.


In this situation, companies are looking into the combined power of IoT and Blockchain in order to set up the new architecture for enterprise transactions and security. Apparently, this new paradigm is gaining ground.


According to industry observers, the expectations for IoT and Blockchain applications are at very high levels. In their survey on Blockchain adoption for 2020, Gartner revealed that the majority of companies adopting IoT technology in the U.S. are also adopting Blockchain and combining it with their IoT networks. According to Gartner, 75% of IoT technology adopters in the U.S. have already adopted Blockchain or were planning to adopt it by the end of 2020. Among the Blockchain adopters, 86% are implementing the two technologies together in various projects.


That doesn’t mean Blockchain is a silver bullet for all IoT-related issues, but it is practical, scalable, versatile, and it is the best we’ve got. Let’s see how it can help modern companies build new architectures for their digital security, compliance, and trustful operations.


Security and regulation in the age of IoT


The advent of IoT has dramatically expanded the amount of data collected by organizations as well as the surface area for potential cyberattacks. Now, every electronics device can be connected to the Internet and communicate with other devices and applications from across the globe. On one hand, this allows companies to introduce a new generation of services allowing devices to automatically execute transactions without human intervention, such as a smart car paying for fuel at the gas station or a smart shelf creating a replenishment order as soon as the last item is gone.


On the other hand, ensuring end-to-end security for such transactions can be quite an undertaking due to the fast-paced and often disruptive nature of IoT innovations. It gets even more difficult when it comes to meeting different compliance requirements and government regulations. In most cases, device data collected by IoT involves several parties at once - a company operating the device, the device vendor, a cloud storage provider, an industry regulator, and an end user. It means that the security architecture of device-to-device transactions can be highly complicated from both technological and legal standpoints. That’s why the real solution should address both sides of the problem.


Also, there’s an integration issue within the IoT ecosystems that consist of several companies using different technology stacks, security standards, and data access policies. Since there’s no single approach to ensuring IoT data security, such integrations can create additional vulnerabilities for all parties, thus undermining trust in large-scale IoT projects.


Can Blockchain be trusted?


Even though we hear regular reports about companies, institutions – and even governments – abusing personal data, this problem is only the tip of the iceberg. On a bigger scale, the digital economy requires trustful, reliable means of doing business. When different processes and workflows become highly automated, it is impossible to keep an eye on everything and ensure all the data is correct. Technology should come with embedded tools to establish trust between people as well as devices.


Before Blockchain, this was rather hard to achieve. Not only data could be stolen, but also lost, altered, or exploited. With the entire economy adopting IoT at scale and moving towards autonomous device operations and transactions, such a lack of trust in technology could be a major roadblock. For example, we know that Covid vaccines should be stored and transported at certain low temperatures. Now, as a medical center licensed for the vaccination program, can we be sure there were no incidents during their delivery? Who’s there to ensure trust and take responsibility? Or, as a Telecom operator, how can we ensure transparent and reliable payment solutions for our customers’ smart devices?


For these and many other use cases, Blockchain offers an elegant solution that relies on multiple parties sharing a distributed digital ledger that stores all their data transactions and - because it is shared and validated by multiple parties - it cannot be tampered with and modified on any end. This key capability of Blockchain essentially allows every participant in the given IoT ecosystem to keep track and validate their data in an automated way, in real time, and with in-detail logging. This is probably as close to establishing trust in the digital economy as we can get right now.


The benefits of Blockchain for IoT


Excessive amounts of information records, digital transactions, and data transfers originating in modern IoT networks create a strong need for Blockchain implementation. Here’s how the combination of IoT and Blockchain can help resolve security and trust issues while reducing complexity of digital innovations:


  • Blockchain is straightforward to use and implement; there’s no complexity in its architecture or technology stack nor does it require excessive investment or engineering effort to integrate with IoT
  • Blockchain establishes trust for every stakeholder in the IoT ecosystem in the same straightforward manner by storing data on the tamper-proof distributed ledger that no single party can control
  • Blockchain supports the same elastic scalability as IoT by taking advantage of the common cloud-based infrastructure, so you can be sure that - however great the number of devices you have - all the transactions are securely logged with no impact on performance
  • Blockchain keeps track of all the historical data on its ledger so that it can be accessed anytime for analysis and verification in case there are any incidents on the IoT network
  • Blockchain enhances security of data by adding an extra security level on top of IoT encryption
  • In addition to its distributed ledger technology, Blockchain provides a mechanism of smart contracts that allow you to automatically execute business logic upon collected and shared data to ensure reliable and transparent transactions between smart IoT devices

With a large list of Blockchain benefits for IoT applications, we expect that their adoption will further accelerate and unlock new great use cases for every industry. If you’d like to learn more about how Kaa can be used with Blockchain, contact us and we’ll help you discover more.



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